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REGISTRATION NO. 333-9963
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PIERCE LEAHY CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 4226 23-2588479
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
631 PARK AVENUE
KING OF PRUSSIA, PENNSYLVANIA 19406
(610) 992-8200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DOUGLAS B. HUNTLEY
CHIEF FINANCIAL OFFICER
631 PARK AVENUE
KING OF PRUSSIA, PENNSYLVANIA 19406
(610) 992-8200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
RICHARD J. BUSIS, ESQUIRE
COZEN AND O'CONNOR
1900 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19103
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 3, 1996
PROSPECTUS
[LOGO OF PIERCE LEAHY CORP. APPEARS HERE]
PIERCE LEAHY CORP.
OFFER TO EXCHANGE ITS 11 1/8% SENIOR SUBORDINATED NOTES DUE 2006,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, FOR ANY
AND ALL OF ITS OUTSTANDING 11 1/8% SENIOR SUBORDINATED NOTES DUE 2006
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1996,
UNLESS EXTENDED
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Pierce Leahy Corp., a New York corporation ("Pierce Leahy" or the "Company"),
hereby offers to exchange (the "Exchange Offer"), upon the terms and subject to
the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), up to $200,000,000 in aggregate
principal amount of the Company's new 11 1/8% Senior Subordinated Notes due
2006 (the "Exchange Notes"), for $200,000,000 in aggregate principal amount of
the Company's outstanding 11 1/8% Senior Subordinated Notes due 2006 (the
"Original Notes"). The Original Notes and the Exchange Notes are sometimes
referred to herein collectively as the "Notes."
The terms of the Exchange Notes are substantially identical in all respects
(including principal amount, interest rate and maturity) to the terms of the
Original Notes for which they may be exchanged pursuant to this Exchange Offer,
except that (i) the Exchange Notes will be freely transferable by holders
thereof (other than as provided in the next paragraph) and issued free of any
covenant restricting transfer absent registration and (ii) holders of the
Exchange Notes will not be entitled to certain rights of holders of the
Original Notes under the Registration Rights Agreement (as defined herein),
which rights will terminate upon the consummation of the Exchange Offer. The
Exchange Notes will evidence the same debt as the Original Notes (which they
replace) and will be entitled to the benefits of an Indenture dated as of July
15, 1996 governing the Original Notes and the Exchange Notes (the "Indenture").
For a complete description of the terms of the Exchange Notes, see "Description
of the Notes." There will be no cash proceeds to the Company from the Exchange
Offer.
The Notes are redeemable at the option of the Company, in whole or in part,
at any time on or after July 15, 2001, at the redemption prices set forth
herein, plus accrued and unpaid interest to the date of redemption. In
addition, the Company, at its option, may redeem in the aggregate up to 35% of
the original principal amount of the Notes at any time and from time to time
prior to July 15, 1999 at 110% of the aggregate principal amount so redeemed,
plus accrued and unpaid interest thereon to the redemption date, with the Net
Proceeds (as defined herein) of one or more Public Equity Offerings (as defined
herein), provided that at least $130,000,000 of the principal amount of the
Notes originally issued remain outstanding immediately after the occurrence of
any such redemption and that any such redemption occurs within 90 days
following the closing of any such Public Equity Offering. See "Description of
the Notes--Optional Redemption."
Upon a Change of Control (as defined herein), each holder of the Notes will
be entitled to require the Company to purchase such holder's Notes at 101% of
the principal amount thereof, plus accrued and unpaid interest to the purchase
date. See "Description of the Notes--Change of Control Offer." There can be no
assurance that in the event of a Change of Control, the Company will have, or
will have access to, sufficient funds or will be contractually permitted under
the terms of outstanding indebtedness to pay the required purchase price for
all Notes tendered by holders upon a Change of Control. In addition, the
Company is obligated in certain instances to make an offer to repurchase the
Notes at a purchase price in cash equal to 100% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of repurchase with the
net cash proceeds of certain asset sales. See "Description of the Notes--
Certain Covenants--Limitation on Certain Asset Sales."
The Exchange Notes will bear interest from the most recent date to which
interest has been paid on the Original Notes, or if no interest has been paid
on the Original Notes, from July 23, 1996. Holders whose Original Notes are
accepted for exchange will not receive any payment in respect of interest on
such Original Notes otherwise payable on any interest payment date the record
date for which occurs on or after consummation of the Exchange Offer. See "The
Exchange Offer--Terms of the Exchange Offer."
The Notes will be general unsecured obligations of the Company subordinate in
right of payment to all existing and future Senior Indebtedness (as defined
herein) of the Company and senior in right of payment to any subordinated
indebtedness of the Company. As of August 31, 1996, after giving effect to the
offering of the Original Notes and the application of the net proceeds
therefrom, the Transactions (as defined herein) and the Pending Acquisitions
(as defined herein), the Company would have had $1,104,000 of Senior
Indebtedness outstanding and its Canadian subsidiary would have had $2,857,000
of outstanding indebtedness (including trade payables) which was structurally
senior to the Notes.
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SEE "RISK FACTORS" COMMENCING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS OF THE NOTES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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The date of this Prospectus is , 1996
<PAGE>
The Original Notes were sold on July 23, 1996, in a transaction not
registered under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance upon an exemption provided in the Securities Act.
Accordingly, the Original Notes may not be offered, resold or otherwise
pledged, hypothecated or transferred in the United States unless registered
under the Securities Act or unless an exemption from the registration
requirements of the Securities Act is available. The Exchange Notes are being
offered to satisfy the obligations of the Company under the Registration
Rights Agreement relating to the Original Notes. See "The Exchange Offer--
Purposes and Effects of the Exchange Offer." Each holder receiving Exchange
Notes, other than a broker-dealer, will represent that the holder is not
engaging in or intending to engage in a distribution of such Exchange Notes.
Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Original Notes may be offered for resale, resold or otherwise transferred by
the holders thereof (other than any holder that is an affiliate of the Company
within the meaning of Rule 405 under the Securities Act), without compliance
with the registration and prospectus delivery requirements of the Securities
Act, provided that such Exchange Notes are acquired in the ordinary course of
such holders' business and such holders have no arrangement or understanding
with any person to participate in the distribution of such Exchange Notes.
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. See "The Exchange Offer--Purposes and Effects of the
Exchange Offer" and "Plan of Distribution." Broker-dealers may use this
Prospectus, as amended or supplemented, in connection with resales of the
Exchange Notes received in exchange for the Original Notes where such Original
Notes were acquired by such broker-dealer as a result of market making
activities or other such trading.
The Exchange Offer is not conditioned on any minimum aggregate principal
amount of Original Notes being tendered for exchange. The Company will accept
for exchange any and all validly tendered Original Notes not withdrawn prior
to 5:00 p.m., New York City time, on , 1996 unless extended by the
Company, in its sole discretion (the "Expiration Date"). Tenders of Original
Notes may be withdrawn at any time prior to the Expiration Date. The Exchange
Offer is subject to certain customary conditions. See "The Exchange Offer--
Conditions." Original Notes may be tendered only in integral multiples of
$1,000. The Company will pay all expenses incident to the Exchange Offer.
The Notes constitute securities for which there is no established trading
market. Any Original Notes not tendered and accepted in the Exchange Offer
will remain outstanding. The Company does not currently intend to list the
Exchange Notes on any securities exchange. To the extent that any Original
Notes are tendered and accepted in the Exchange Offer, a holder's ability to
sell untendered Original Notes could be adversely affected. No assurances can
be given as to the liquidity of the trading market for either the Original
Notes or the Exchange Notes.
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AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the Exchange Notes offered
hereby. As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information, exhibits and undertakings contained in
the Registration Statement. For further information with respect to the
Company and the Exchange Notes offered hereby, reference is made to the
Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof. The Registration
Statement (and the exhibits and schedules thereto), as well as the periodic
reports and other information filed by the Company with the Commission, may be
inspected and copied at the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the regional offices of the Commission located at Room 1400, 75 Park Place,
New York, New York 10007 and Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such materials may be
obtained from the Public Reference Section of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and its
public reference facilities in New York, New York and Chicago, Illinois at
prescribed rates. Such information can also be reviewed through the
Commission's Electronic Data Gathering, Analysis and Retrieval System which is
publicly available through the Commission's Web Site (http: www.sec.gov).
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and in each instance reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified by such reference.
Pursuant to the Indenture, the Company has agreed to furnish to the Trustee
and to registered holders of the Notes, without cost to the Trustee or such
registered holders, copies of all reports and other information that would be
required to be filed by the Company with the Commission under the Exchange
Act, whether or not the Company is then required to file reports with the
Commission. As a result of the Exchange Offer, the Company will become subject
to the periodic reporting and other informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
has agreed that, whether or not the Company is subject to filing requirements
under Section 13 or 15(d) of the Exchange Act, and so long as any Notes remain
outstanding, it will file with the Commission (but only if the Commission at
such time is accepting such voluntary filings) and will send the Trustee
copies of the financial information, documents and reports that would have
been required to be filed with the Commission pursuant to the Exchange Act.
The principal address of the Company is 631 Park Avenue, King of Prussia,
Pennsylvania 19406, telephone number 610-992-8200.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements contained elsewhere in this Prospectus. Except as otherwise
indicated by the context, references to "Pierce Leahy" and the "Company"
include Pierce Leahy Corp. and its consolidated subsidiary. Unless otherwise
indicated, the market information in this Prospectus includes the information
with respect to the Pending Acquisitions described under "Business--Pending
Acquisitions."
THE COMPANY
Pierce Leahy is the largest archive records management company in North
America, as measured by its approximately 38 million cubic feet of records
currently under management. The Company operates a total of 118 records
management facilities of which 105 are in the United States, serving 48 local
markets, including the 15 largest U.S. markets. In addition, the Company
operates 13 records management facilities in five of Canada's six largest
markets. The Company provides records management services to a diversified
group of over 15,000 customer accounts in a variety of industries including
financial services, manufacturing, transportation, healthcare and law. The
Company believes it is the most technologically advanced records management
company in the industry by virtue of its Pierce Leahy User Solution(R)
(PLUS(R)) computer system. The PLUS(R) system fully integrates the Company's
records management, data retrieval and billing functions on a centralized basis
through the use of proprietary, real time software. Management believes the
PLUS(R) system allows the Company to efficiently manage records in multiple
markets for national customers, rapidly integrate acquisitions of records
management companies and maintain a low-cost operating structure.
Pierce Leahy is a full-service provider of records management and related
services, enabling customers to outsource their data and records management
functions. The Company offers storage for all major media, including paper
(which has typically accounted for approximately 95% of the Company's storage
revenues), computer tapes, optical discs, microfilm, video tapes and X-rays. In
addition, the Company provides next day or same day records retrieval and
delivery, allowing customers prompt access to all stored material. The Company
also offers a wide range of other data management services, including customer
records management programs, imaging services and records management consulting
services. The Company's storage and related services are typically provided
pursuant to annual or multi-year contracts that include recurring monthly
storage fees, which continue until such records are permanently removed (for
which the Company charges a fee), and additional charges for services such as
retrieval on a per unit basis. In 1995, revenues from storage and from service
and storage material sales accounted for 58% and 42% of the Company's total
revenues, respectively.
The Company's pro forma revenues and operating income for the year ended
December 31, 1995 were $128.8 million and $24.5 million, respectively. Pro
forma 1995 EBITDA (as defined herein) was $37.2 million. From 1991 to 1995,
Pierce Leahy's revenues, operating income and EBITDA grew at compound annual
growth rates of 14.4%, 25.6% and 19.4%, respectively, as a result of internal
growth in cubic feet from new and existing customers (which averaged 13.9% per
annum, net of permanent removals of existing customer records) and acquisitions
of other records management companies. The Company's productivity has
concurrently improved as measured by (i) cubic footage under management per
employee increasing from 18,702 at the end of 1991 to 24,521 at the end of 1995
and (ii) EBITDA as a percentage of total revenues increasing from 21.2% in 1991
to 24.8% in 1995. The Company believes that growth through acquisitions results
in operating improvements as redundant operating expenses are eliminated. This
is evidenced by the Company's pro forma 1995 operating income as a percentage
of total revenues which equalled 19.0% as compared to 15.7% on an actual basis,
while pro forma 1995 EBITDA as a percent of total revenues was 28.9% compared
to 24.8% on an actual basis.
2
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The Company believes that EBITDA is an important tool for measuring the
performance of records management companies (including potential acquisition
targets) in several areas, such as liquidity, operating performance and
leverage. In addition, lenders use EBITDA as a criterion in evaluating records
management companies, and substantially all of the Company's financing
agreements contain covenants in which EBITDA is used as a measure of financial
performance. However, EBITDA should not be considered an alternative to
operating or net income (as determined in accordance with generally accepted
accounting principles ("GAAP")) as an indicator of the Company's performance or
to cash flow from operations (as determined in accordance with GAAP) as a
measure of liquidity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview" and "--Liquidity and Capital
Resources" for discussions of other measures of performance determined in
accordance with GAAP and the Company's sources and applications of cash flow.
The Company believes that it benefits from several positive industry
fundamentals, including (i) the diversified and recurring nature of storage and
service revenues, (ii) the ability of larger records management companies to
achieve economies of scale in both labor and real estate costs, (iii) the
continued trend toward corporate outsourcing of records management functions,
(iv) low maintenance capital expenditure requirements, (v) the historically
non-cyclical nature of the records management industry and (vi) the ongoing
consolidation of records management companies. The Company derives the majority
of its revenues from monthly fees charged for the storage of records. The
recurring nature of these revenues, which are derived from a diversified,
stable customer base (none of which accounted for more than 3% of total
revenues during 1995) and require relatively little direct ongoing labor and
marketing expenses, contributes significantly to the Company's operating income
and EBITDA. As the Company's volume of records under management grows, the
substantial investments made in its PLUS(R) system and centralized support
functions are amortized over a larger base of business, creating economies of
scale. These operating efficiencies, coupled with the Company's entry into new
markets, allow the Company to take advantage of the trend by larger companies
with multiple locations to outsource their records management functions. The
Company's capital expenditures are primarily growth related and are comprised
substantially of new shelving and other expenditures related to storing and
servicing new records. Pierce Leahy has not experienced a reduction of its
business as a result of economic downturns, in fact, management believes that
the outsourcing of records management may accelerate during such times as a
result of increased customer focus on noncore operating costs. Finally,
management believes the Company is well positioned to continue to participate
in the industry consolidation due to its ability to rapidly and efficiently
integrate in-market and new market acquisitions as a result of its PLUS(R)
system and centralized corporate administrative functions.
The Records Management Industry
According to a 1994 study by the Association of Commercial Record Centers
(the "ACRC"), an industry trade group with over 500 members, approximately
2,800 companies offer records storage and related services in North America.
The Company believes that only 25% of the potential market outsources its
records management functions and that approximately 75% is still "unvended," or
internally managed. The Company estimates that the North American vended
records management industry generates annual revenues in excess of $1.0
billion. Management believes that only four companies offer records storage and
services on a national basis in the United States and only two companies do so
in Canada. Other industry participants operate regionally, or more typically,
in single markets.
According to industry sources, an estimated four trillion documents are
created each year in the United States, many of which must be retained and
remain accessible for many years. Saved documents, or records, generally fall
into two categories: active and inactive. Active records refer to information
that is frequently referenced and usually stored on-site by the originator.
Inactive records are not needed for frequent access, but must be retained for
future reference, legal requirements or regulatory compliance. Inactive
records, which the Company estimates comprise approximately 80% of all records,
are the principal focus of the records management industry. Management is not
aware of any definitive information about the size or nature of the North
American market (vended and unvended, active and inactive). Estimates of such
numbers and percentages
3
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contained in this Prospectus have been developed by the Company from internal
sources and reflect the Company's current estimates; however, no assurance can
be given regarding the accuracy of such estimates.
The Company believes that the records management industry is characterized by
the following trends:
. Increasing Production of Paper. Increasingly widespread technologies such
as facsimiles, copiers, personal computers, laser printers and advanced
software packages have enabled organizations to create, copy and distribute
documents more easily and broadly. In spite of new "paperless" technologies
(including the Internet and "e-mail"), information remains predominantly
paper based, and such technologies have actually promoted the desire for
hard copies of such electronic information.
. Expanded Record Keeping Needs. While technology has augmented the growth
of paper generation, several external forces and concerns have played an
important role in organizations' decisions to store and retain access to
records. For example, the continued growth of regulatory requirements
and the proliferation of litigation has resulted in increased volumes
and lengthened holding periods of documents. Retained records are also
remaining in storage for extended periods of time because the process of
determining which records to destroy is time consuming and often more
costly in the short-term than continued storage.
. Movement Towards Outsourcing. Outsourcing of internal records management
functions represents the largest single source of new business for
records management companies. The Company believes that as more
organizations become aware of the advantages of professional records
management, such as net cost reductions and enhanced levels of service,
the records management industry will continue to gain a growing portion
of the unvended segment.
. Industry Consolidation. The records management industry is undergoing a
period of consolidation as larger, better capitalized industry
participants acquire smaller regional or single-market participants.
Management believes that this trend is driven by larger records
management companies' desire to add to their revenue base quickly and
cost effectively, achieve broader market presence and realize economies
of scale, especially with respect to labor, real estate and management
information expenses. Industry consolidation also provides private
owners of smaller records management companies the ability to obtain
liquidity.
Business Strategy
Pierce Leahy's business strategy is to become the preferred provider of
records management services in each of its markets by offering premium services
while maintaining a low-cost operating structure. The Company seeks to expand
its business in current and new markets through increased business from
existing customers, the addition of new customers and acquisitions of other
records management companies. The Company expects to continue its growth and
enhance its market position by implementing its strategy based on the following
elements:
. Pursuing National and Unvended Customers. The Company focuses its sales
and marketing efforts on pursuing large regional and national accounts,
typically through multi-year contracts, where the Company believes its
national presence and sophisticated systems provide it with a
competitive advantage. The greatest source of potential business is from
large organizations which are currently managing their records
internally. These organizations are increasingly outsourcing such
noncore activities, enabling their management to focus on their core
business and to reduce capital requirements.
. Remaining a Low-Cost Operator. The Company strives to offer premium
services to its customers while remaining a low-cost operator through
achieving economies of scale in real estate, labor, transportation,
management information and administrative expenses. The Company believes
that it is one of the few records management companies with the size and
resources to realize significant economies of scale in these areas.
4
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. Using Sophisticated Centralized Systems. The Company believes that its
proprietary PLUS(R) system is the most technologically advanced computer
system in the industry. The PLUS(R) system coordinates the storage of
records and related services in each of its facilities on a real time
basis. PLUS(R), in tandem with a centralized customer service
organization and local field support personnel, enables the Company to
provide a high and consistent level of service (24 hours a day, seven
days a week) to its customers in a cost-effective manner.
. Enhancing Facility Efficiency. The PLUS(R) system allows the Company to
enhance the efficiency of its facilities while reducing fixed and
operating costs and maintaining high customer service levels. PLUS(R)
provides the Company with a real time inventory tracking system, using
sophisticated bar-coding technology, designed to pinpoint the exact
location of any individual customer's records within any facility in
North America. This system eliminates the need to designate permanent
locations for an individual customer's records within a facility,
enabling records to be stored wherever space is available and to be
positioned within the Company's facilities based on retrieval frequency,
thereby reducing labor costs.
Acquisition and Growth Strategy
Pierce Leahy believes that the consolidation trend occurring in the North
American records management industry will continue and that acquisitions will
remain an important part of the Company's growth strategy. Acquisitions provide
the Company with the ability to expand and achieve additional economies of
scale. Since 1991, the Company has successfully completed and integrated 21
acquisitions, totaling approximately 8.9 million cubic feet of records at the
time of acquisition. From July 1994 through December 31, 1995, approximately
$45.2 million (including purchase price, capital expenditures and related
integration costs) was invested in eight acquisitions, which produced an
incremental $11.0 million of EBITDA on a full-year or annualized basis during
the first year following acquisition. In each of these acquisitions, staffing
levels were immediately reduced with further reductions typically taking place
in the following months as general and administrative functions were integrated
into the Company's corporate organization.
The Company's centralized organizational structure and management information
systems are essential elements for both the successful integration of acquired
records management operations and the ability of the Company to achieve
economies of scale. The rapid conversion of an acquired company's records into
the PLUS(R) system and the integration of all corporate functions (order
processing, accounting, payroll, etc.) into Pierce Leahy's corporate
organization in an efficient, standardized process allows the Company to
realize immediate cost savings as a result of reduced labor and overhead costs
and improved facility utilization.
The Company targets potential acquisitions in both its existing markets (in-
market) and in new markets which it is not yet servicing. In-market
acquisitions typically provide the highest degree of operating leverage since
in addition to eliminating redundant overhead, such as overlapping delivery
runs, an acquired company's storage facility can, when possible, be
consolidated into an existing Company facility within the same market area. New
market acquisitions allow the Company to both expand its business generally and
enhance its ability to serve national customer accounts.
In order to accommodate its growth strategy, the Company has made significant
new facility investments during the last twelve months, substantially
increasing the Company's available storage capacity in its Northeast region.
During 1995, the Company purchased a storage facility in New Jersey with 12
million cubic feet of storage capacity and leased (with an option to purchase)
a storage facility in Massachusetts with five million cubic feet of storage
capacity. The addition of these facilities provides the Company with
substantial excess storage capacity and is expected to satisfy the Company's
facility expansion requirements in its Northeast region for several years.
5
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Ownership and Management
Pierce Leahy is the successor company to L. W. Pierce Co., Inc., which was
founded in 1957 by Leo W. Pierce, Sr. The Company is headquartered in King of
Prussia, Pennsylvania, and is a closely held corporation owned by members of
the Pierce family. Since 1984, the Company has been led by its President, J.
Peter Pierce, the son of the Company's founder. The members of the Company's
management team who are not current shareholders participate in a stock option
plan.
THE TRANSACTIONS
In connection with the offering of the Original Notes, the Company effected a
series of transactions to (i) repay its existing credit facility ($146.1
million) and enter into the Credit Facility (as defined herein),
(ii) consummate the purchase of a records management company in the San Diego
market for $3.5 million, (iii) purchase certain real estate interests in
properties currently leased or subleased by the Company from entities
affiliated with the Pierce family for $14.8 million (including the assumption
of a mortgage for $1.1 million) and (iv) redeem 100 shares of the Company's
Class A Common Stock from Leo W. Pierce, Sr. for $1.45 million. In addition,
the Company has recently purchased two additional records management companies
with proceeds of the Original Notes for an aggregate purchase price of $6.3
million (such acquisitions, together with the transactions referred to above
are collectively referred to as the "Transactions"). See "The Transactions."
The principal purposes of the Transactions were to (i) provide the Company
with a capital structure that will facilitate the continued growth of the
Company's records management operations, (ii) enhance the Company's financial
flexibility and (iii) eliminate certain related party real estate transactions.
6
<PAGE>
THE EXCHANGE OFFER
Purpose of the Exchange
Offer.................. The Original Notes were sold in a transaction exempt
from the registration requirements of the Securities
Act by the Company on July 23, 1996 to CIBC Wood
Gundy Securities Corp. (the "Initial Purchaser"). In
connection therewith, the Company executed and deliv-
ered, for the benefit of the holders of the Original
Notes, an Exchange Offer Registration Rights Agree-
ment dated July 23, 1996 (the "Registration Rights
Agreement"), which is filed as an exhibit to the Reg-
istration Statement of which this Prospectus is a
part, providing for, among other things, the Exchange
Offer so that the Exchange Notes will be freely
transferable by the holders thereof without registra-
tion or any prospectus delivery requirements under
the Securities Act, except that a "dealer" or any of
its "affiliates" as such terms are defined under the
Securities Act, who exchanges Original Notes held for
its own account will be required to deliver copies of
this Prospectus in connection with any resale of the
Exchange Notes issued in exchange for such Original
Notes. See "The Exchange Offer--Purposes and Effects
of the Exchange Offer" and "Plan of Distribution."
The Exchange Offer...... The Company is offering to exchange $1,000 principal
amount of Exchange Notes for each $1,000 principal
amount of Original Notes that are properly tendered
and accepted. The Company will issue Exchange Notes
on or promptly after the Expiration Date. There is
$200,000,000 aggregate principal amount of Original
Notes outstanding. The Original Notes and the Ex-
change Notes are collectively referred to herein as
the "Notes." The terms of the Exchange Notes are sub-
stantially identical in all respects (including prin-
cipal amount, interest rate and maturity) to the
terms of the Original Notes for which they may be ex-
changed pursuant to the Exchange Offer, except that
(i) the Exchange Notes are freely transferable by
holders thereof (other than as provided herein), and
are not subject to any covenant restricting transfer
absent registration under the Securities Act and (ii)
holders of the Exchange Notes will not be entitled to
certain rights of holders of the Original Notes under
the Registration Rights Agreement, which rights will
terminate upon the consummation of the Exchange Of-
fer. See "The Exchange Offer."
The Exchange Offer is not conditioned upon any mini-
mum aggregate principal amount of Original Notes be-
ing tendered for exchange.
Based on an interpretation by the staff of the Secu-
rities and Exchange Commission (the "Commission") set
forth in no-action letters issued to third parties,
the Company believes that the Exchange Notes issued
pursuant to the Exchange Offer in exchange for Origi-
nal Notes may be offered for resale, resold and oth-
erwise transferred by a holder thereof (other than
(i) a broker-dealer who purchases such Exchange Notes
directly from the Company to resell pursuant to Rule
144A under the Securities Act or any other available
exemption under the Securities Act or (ii) a person
that is an affiliate (as defined in Rule 405 under
the Securities Act) of the Company), without compli-
ance with the registration and prospectus delivery
provisions of the Securities Act, provided that the
holder is acquiring the Exchange Notes in the ordi-
nary course of its business and is not partici-
7
<PAGE>
pating, and had no arrangement or understanding with
any person to participate, in the distribution of the
Exchange Notes. Each broker-dealer that receives the
Exchange Notes for its own account in exchange for
the Original Notes, where such Notes were acquired by
such broker-dealer as a result of market-making ac-
tivities or other trading activities, must acknowl-
edge that it will deliver a prospectus in connection
with any resale of such Exchange Notes.
Registration Rights
Agreement.............. The Original Notes were sold by the Company on July
23, 1996 to the Initial Purchaser pursuant to a Pur-
chase Agreement dated as of July 17, 1996 by and be-
tween the Company and the Initial Purchaser (the
"Purchase Agreement"). Pursuant to the Purchase
Agreement, the Company and the Initial Purchaser en-
tered into a Registration Rights Agreement dated as
of July 23, 1996 (the "Registration Rights Agree-
ment") which grants the holders of the Original Notes
certain exchange and registration rights. See "The
Exchange Offer--Termination of Certain Rights." This
Exchange Offer is intended to satisfy such rights,
which terminate upon the consummation of the Exchange
Offer. The holders of the Exchange Notes are not en-
titled to any exchange or registration rights with
respect to the Exchange Notes.
Expiration Date......... The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1996, unless the Exchange Offer is
extended by the Company in its reasonable discretion,
in which case the term "Expiration Date" shall mean
the latest date and time to which the Exchange Offer
is extended.
Accrued Interest on the
Exchange Notes and
Original Notes......... Interest on the Exchange Notes will accrue from (A)
the later of (i) the last interest payment date on
which interest was paid on the Notes surrendered in
exchange therefor or (ii) if the Notes are surren-
dered for exchange on a date in a period which in-
cludes the record date for an interest payment date
to occur on or after the date of such exchange and as
to which interest will be paid, the date of such in-
terest payment date, or (B) if no interest has been
paid on the Notes, from July 23, 1996. Holders whose
Original Notes are accepted for exchange will be
deemed to have waived the right to receive any inter-
est accrued on the Original Notes.
Conditions to the
Exchange Offer......... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer--Conditions. The Exchange Offer
is not conditioned upon any minimum aggregate princi-
pal amount of Original Notes being tendered for ex-
change. The Company reserves the right to terminate
or amend the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such con-
ditions.
Procedures for
Tendering Original
Notes.................. Each holder of Original Notes wishing to accept the
Exchange Offer must complete, sign and date the Let-
ter of Transmittal, or a facsimile thereof, in accor-
dance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with the
Original Notes and any other required documentation
to the ex-
8
<PAGE>
change agent (the "Exchange Agent") at the address
set forth herein. Original Notes may be physically
delivered, but physical delivery is not required if a
confirmation of a book-entry transfer of such Origi-
nal Notes to the Exchange Agent's account at The De-
pository Trust Company ("DTC" or the "Depository") is
delivered in a timely fashion. By executing the Let-
ter of Transmittal, each holder will represent to the
Company that, among other things, the Exchange Notes
acquired pursuant to the Exchange Offer are being ob-
tained in the ordinary course of business of the per-
son receiving such Exchange Notes, whether or not
such person is the holder, that neither the holder
nor any such other person is engaged in, or intends
to engage in, or has an arrangement or understanding
with any person to participate in, the distribution
of such Exchange Notes and that neither the holder
nor any such other person is an "affiliate," as de-
fined under Rule 405 of the Securities Act, of the
Company. Each broker or dealer that receives Exchange
Notes for its own account in exchange for Original
Notes, where such Original Notes were acquired by
such broker or dealer as a result of market-making
activities or other trading activities, must acknowl-
edge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "The Ex-
change Offer--Procedures for Tendering" and "Plan of
Distribution."
Special Procedures for
Beneficial Owners...... Any beneficial owner whose Original Notes are regis-
tered in the name of a broker, dealer, commercial
bank, trust company or other nominee and who wishes
to tender should contact such registered holder
promptly and instruct such registered holder to ten-
der on such beneficial owner's behalf. If such bene-
ficial owner wishes to tender on such owner's own be-
half, such owner must, prior to completing and exe-
cuting the Letter of Transmittal and delivering his
Original Notes, either make appropriate arrangements
to register ownership of the Original Notes in such
owner's name or obtain a properly completed bond
power from the registered holder. The transfer of
registered ownership may take considerable time. See
"The Exchange Offer--Procedures for Tendering."
Guaranteed Delivery
Procedures............. Holders of Original Notes who wish to tender their
Original Notes and whose Original Notes are not imme-
diately available or who cannot deliver their Origi-
nal Notes, the Letter of Transmittal or any other
documents required by the Letter of Transmittal to
the Exchange Agent prior to the Expiration Date, must
tender their Original Notes according to the guaran-
teed delivery procedures set forth in the "Exchange
Offer--Guaranteed Delivery Procedures."
Acceptance of the
Original Notes and
Delivery of the
Exchange Notes......... Subject to the satisfaction or waiver of the condi-
tions to the Exchange Offer, the Company will accept
for exchange any and all Original Notes which are
properly tendered in the Exchange Offer prior to the
Expiration Date. The Exchange Notes issued pursuant
to the Exchange Offer will be delivered on the earli-
est practicable date following the Expiration Date.
See "The Exchange Offer--Terms of the Exchange Of-
fer."
9
<PAGE>
Withdrawal Rights....... Tenders of Original Notes may be withdrawn at any
time prior to the Expiration Date. See "The Exchange
Offer--Withdrawal of Tenders."
Certain Federal Income
Tax Considerations..... For a discussion of certain federal income tax con-
siderations relating to the exchange of the Exchange
Notes for the Original Notes, see "Certain Federal
Income Tax Considerations."
Exchange Agent.......... United States Trust Company of New York is serving as
the Exchange Agent in connection with the Exchange
Offer. See "The Exchange Offer--Exchange Agent."
Effect on Holders of
the Original Notes..... As a result of the making of, and upon acceptance for
exchange of all validly tendered Original Notes pur-
suant to the terms of this Exchange Offer, the Com-
pany will have fulfilled one of the covenants con-
tained in the Registration Rights Agreement and, ac-
cordingly, there will be no increase in the interest
rate on the Original Notes pursuant to the applicable
terms of the Registration Rights Agreement due to the
Exchange Offer. Holders of the Original Notes who do
not tender their Original Notes will be entitled to
all the rights and limitations applicable thereto un-
der the Indenture dated as of July 15, 1996, among
the Company and United States Trust Company of New
York, as trustee (the "Trustee"), relating to the
Original Notes and the Exchange Notes (the "Inden-
ture"), except for any rights under the Indenture or
the Registration Rights Agreement, which by their
terms terminate or cease to have further effective-
ness as a result of the making of, and the acceptance
for exchange of all validly tendered Original Notes
pursuant to, the Exchange Offer. All untendered Orig-
inal Notes will continue to be subject to the re-
strictions on transfer provided for in the Original
Notes and in the Indenture. To the extent that Origi-
nal Notes are tendered and accepted in the Exchange
Offer, the trading market for untendered Original
Notes could be adversely affected.
Use of Proceeds......... There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer.
THE NOTES
The Exchange Notes...... The Exchange Offer applies to $200,000,000 aggregate
principal amount of the Original Notes. The form and
terms of the Exchange Notes are the same as the form
and terms of the Original Notes except that (i) the
exchange will have been registered under the Securi-
ties Act and, therefore, the Exchange Notes will not
bear legends restricting their transfer pursuant to
the Securities Act, and (ii) holders of the Exchange
Notes will not be entitled to certain rights of hold-
ers of the Original Notes under the Registration
Rights Agreement, which rights will terminate upon
consummation of the Exchange Offer. The Exchange
Notes will evidence the same debt as the Notes (which
they replace) and will be issued under, and be enti-
tled to the benefits of, the Indenture. See "Descrip-
tion of the Notes" for further information and for
definitions of certain capitalized terms used below.
10
<PAGE>
Issuer.................. Pierce Leahy Corp.
Maturity Date........... July 15, 2006.
Interest Rate........... The Notes will bear interest at a rate of 11 1/8% per
annum.
Interest Payment Interest will be payable semiannually on each January
Dates.................. 15 and July 15, commencing January 15, 1997 and will
accrue from July 23, 1996, the issue date of the
Original Notes.
Ranking................. The Notes will be general unsecured obligations of
the Company subordinate in right of payment to all
existing and future Senior Indebtedness of the Com-
pany and senior in right of payment to all subordi-
nated indebtedness of the Company. As of June 30,
1996, after giving effect to the offering of the
Original Notes and the application of the net pro-
ceeds therefrom, the Transactions and the Pending Ac-
quisitions, the Company would have had $1,124,000 of
Senior Indebtedness outstanding. As of August 31,
1996, the Company had $1,190,000 of outstanding in-
debtedness ranked pari passu with the Notes, and its
Canadian subsidiary had $2,857,000 of outstanding in-
debtedness (including trade payables) which was
structurally senior to the Notes.
Guarantees by Future
Subsidiaries........... The Notes will be unconditionally guaranteed, on an
unsecured senior subordinated basis, as to the pay-
ment of principal, premium, if any, and interest,
jointly and severally (the "Guarantees"), by all fu-
ture direct and indirect domestic Restricted Subsidi-
aries of the Company having either assets or share-
holders' equity in excess of $5,000 (the "Guaran-
tors"). Any such Guarantees will be subordinated to
all Senior Indebtedness of the respective Guarantors.
No Guarantees will be effective on the date of issu-
ance of the Notes. The Notes will be secured by a
pledge of 65% of the capital stock of the Company's
Canadian subsidiary, PLC Command (as defined herein).
See "Description of the Notes--Certain Covenants--
Limitation on Creation of Subsidiaries." The pledge
is subordinate to a pledge of such shares in favor of
the lenders and the administrative agent under the
Credit Facility. See "Description of the Notes--Gen-
eral."
Mandatory Redemption.... There will be no mandatory redemption requirements
with respect to the Notes.
Optional Redemption..... The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after
July 15, 2001, at the redemption prices set forth
herein, plus accrued and unpaid interest to the date
of redemption. In addition, the Company, at its op-
tion, may redeem in the aggregate up to 35% of the
original principal amount of the Notes at any time
and from time to time prior to July 15, 1999 at a re-
demption price equal to 110% of the principal amount
thereof plus accrued interest to the redemption date
with the Net Proceeds of one or more Public Equity
Offerings, provided that at least $130,000,000 prin-
cipal amount of Notes issued remain outstanding imme-
diately after the occurrence of any such redemption
and that
11
<PAGE>
any such redemption occurs within 90 days following
the closing of any such Public Equity Offering.
Change of Control....... In the event of a Change of Control, the Company will
be required to make an offer to purchase all out-
standing Notes at a price equal to 101% of the prin-
cipal amount thereof plus accrued and unpaid interest
to the date of repurchase. See "Description of the
Notes--Change of Control Offer." There can be no as-
surance that the Company will have sufficient funds
or will be contractually permitted by outstanding Se-
nior Indebtedness to pay the required purchase price
for all Notes tendered by holders upon a Change of
Control.
Asset Sale Proceeds..... The Company will be obligated in certain instances to
make offers to repurchase the Notes at a purchase
price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to
the date of repurchase with the net cash proceeds of
certain asset sales. See "Description of the Notes--
Certain Covenants--Limitation on Certain Asset
Sales."
Certain Covenants....... The Indenture contains covenants for the benefit of
the holders of the Notes that, among other things,
restrict the ability of the Company and any Re-
stricted Subsidiaries (as defined herein) to: (i) in-
cur additional Indebtedness; (ii) pay dividends and
make distributions; (iii) issue stock of subsidiar-
ies; (iv) make certain investments; (v) repurchase
stock; (vi) create liens; (vii) enter into transac-
tions with affiliates; (viii) enter into sale and
leaseback transactions; (ix) merge or consolidate the
Company or any Guarantors; and (x) transfer and sell
assets. These covenants are subject to a number of
important exceptions, including the allowance of Per-
mitted Tax Distributions (as defined herein) as a re-
sult of the Company's status as a Subchapter S corpo-
ration. See "Description of the Notes--Certain Cove-
nants."
RISK FACTORS
Prospective purchasers of the Notes should consider carefully the information
set forth under the caption "Risk Factors," and all other information set forth
in this Prospectus, in evaluating the Notes and the Company.
12
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following summary historical and pro forma financial data, insofar as it
relates to each of the five years in the period ended December 31, 1995, has
been derived from the audited consolidated financial statements, including the
consolidated balance sheets at December 31, 1994 and 1995 and the related
consolidated statements of operations for each of the three years in the period
ended December 31, 1995 and the notes thereto appearing elsewhere in this
Prospectus. The summary historical and pro forma consolidated statement of
operations and balance sheet data as of and for the six months ended June 30,
1996 and summary historical statement of operations data for the six months
ended June 30, 1995 have been derived from unaudited consolidated financial
statements, which, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results for the unaudited interim periods. Results for the
six months ended June 30, 1996 are not necessarily indicative of results that
may be expected for the entire year.
The following summary pro forma statement of operations data and other data
give effect to, among other things, the Transactions and the Pending
Acquisitions, as if they had occurred on January 1, 1995. The following
unaudited pro forma condensed consolidated balance sheet data give effect to,
among other things, the Transactions and the Pending Acquisitions, as if they
had occurred on June 30, 1996. The Transactions, the Pending Acquisitions and
certain management assumptions and adjustments are described in the
accompanying notes hereto. The pro forma information should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto, as of December 31, 1995 and for the three years in the period ended
December 31, 1995, appearing elsewhere in this Prospectus. This pro forma
information is not necessarily indicative of the results that would have
occurred had the Transactions and the Pending Acquisitions been completed on
the dates indicated or the Company's actual or future results or financial
position. The summary historical and pro forma consolidated statement of
operations, balance sheet and other data should be read in conjunction with the
information contained in the Company's consolidated financial statements and
the notes thereto, "Management's Discussion and Analysis of Financial Condition
and Result of Operations," "Selected Historical and Pro Forma Consolidated
Statement of Operations, Balance Sheet and Other Data" and "Pro Forma Financial
Data" included elsewhere herein.
13
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------------------- -------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(A) 1995 1996 1996(A)
------- ------- ------- ------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues
Storage................ $33,195 $37,633 $42,122 $47,123 $55,501 $79,580 $25,965 $35,485 $39,869
Service and storage ma-
terial sales.......... 22,437 25,202 31,266 35,513 39,895 49,216 18,599 25,837 28,832
------- ------- ------- ------- ------- ------- ------- ------- -------
Total revenues......... 55,632 62,835 73,388 82,636 95,396 128,796 44,564 61,322 68,701
Cost of sales, excluding
depreciation and
amortization........... 37,145 39,702 45,391 49,402 55,616 70,699 25,937 35,189 37,147
Selling, general and
administrative......... 6,693 9,012 11,977 15,882 16,148 20,919 7,815 9,911 11,330
Depreciation and amorti-
zation................. 5,783 5,734 6,888 8,436 8,163 12,170 4,304 5,612 6,740
Consulting payments to
related parties(b)..... -- -- -- 500 500 500 250 -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income....... 6,011 8,387 9,132 8,416 14,969 24,508 6,258 10,610 13,484
Interest expense........ 6,677 6,388 6,160 7,216 9,622 23,684 4,156 5,953 11,842
------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before
extraordinary loss.... (666) 1,999 2,972 1,200 5,347 824 2,102 4,657 1,642
Extraordinary loss(c)... -- -- 9,174 5,991 3,279 -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)....... (666) 1,999 (6,202) (4,791) 2,068 824 2,102 4,657 1,642
Accretion (cancellation)
of redeemable
warrants............... -- -- (746) 16 889 -- 445 1,560 --
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)
applicable to Common
shareholders .......... $ (666) $ 1,999 $(5,456) $(4,807) $ 1,179 $ 824 $ 1,657 $ 3,097 $ 1,642
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30, 1996
------------------------------------------------ ------------------------
PRO FORMA
1991 1992 1993 1994 1995 ACTUAL AS ADJUSTED(D)
-------- -------- -------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equiva-
lents.................. $ 332 $ 461 $ 528 $ 358 $ 722 $ 860 $ 2,341
Working capital (defi-
cit)................... (10,402) (11,656) (9,143) (5,202) (8,139) (4,602) (1,969)
Total assets............ 59,726 65,869 74,621 79,746 131,328 162,796 208,546
Total debt.............. 52,695 55,027 69,736 77,683 120,071 147,139 201,780
Net debt (net of cash
balance)............... 52,363 54,566 69,208 77,325 119,349 146,279 199,439
Shareholders' deficit... (11,006) (9,028) (14,508) (19,341) (18,201) (15,105) (26,903)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------- -----------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(A) 1995 1996 1996(A)
------- ------- -------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Ratio of earnings to
fixed charges(e)....... -- 1.21x 1.30x 1.11x 1.37x 1.03 1.33x 1.53x 1.11
Cash flows from opera-
tions.................. $ 7,088 $ 8,599 $ 8,019 $ 11,000 $ 17,522 -- $ 7,171 $ 6,629 --
Cash flows used in
investing activities... (3,541) (6,803) (13,784) (13,933) (51,315) -- (14,317) (32,120) --
Cash flows provided by
(used in) financing
activities............. (3,331) (1,667) 5,832 2,763 34,157 -- 7,030 25,629 --
EBITDA(f)............... 11,794 14,121 16,020 17,352 23,632 $37,178 10,812 16,222 $20,224
EBITDA margin........... 21.2% 22.5% 21.8% 21.0% 24.8% 28.9% 24.3% 26.5% 29.4%
Capital
expenditures(g)........ $ 3,521 $ 5,565 $ 5,827 $ 6,352 $ 16,288 -- $ 4,790 $ 7,657 --
Cubic feet of storage
under management at end
of
period (000s).......... 13,858 16,248 19,025 22,160 29,523 32,264 23,549 34,347 37,890
</TABLE>
(see footnotes on the following page)
14
<PAGE>
NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(a) Gives effect to (i) acquisitions completed in 1995 and 1996 year to date
and (ii) the offering of the Original Notes, the Transactions, the Pending
Acquisitions and the application of the net proceeds from the sale of the
Original Notes, as if each had occurred as of January 1, 1995. See "Use of
Proceeds" and "Pro Forma Financial Data." In connection with the
Transactions, the Company incurred non-recurring charges of approximately
$5.3 million in the third quarter of 1996, the quarter in which the
offering of the Original Notes was consummated. Such charges are not
reflected in the Pro Forma Condensed Consolidated Statement of Operations.
See "Risk Factors--Non-Recurring Charges; Expected Loss in Third Quarter of
1996."
(b) Represents aggregate payments made to eight Pierce family members.
(c) Represents loss on early extinguishment of debt due to refinancings in
1993, 1994 and 1995. Amounts include write-off of unamortized deferred
financing costs and discount, along with prepayment penalties and other
costs. A similar charge of approximately $2.0 million occurred in the third
quarter of 1996, the quarter in which the debt was repaid, which has not
been reflected in the Pro Forma Condensed Consolidated Statement of
Operations. See "Risk Factors--Non-Recurring Charges; Expected Loss in
Third Quarter of 1996."
(d) Gives effect to the offering of the Original Notes, the Transactions, the
Pending Acquisitions and the application of the net proceeds from the sale
of the Original Notes, as if they each had occurred as of June 30, 1996.
See "Use of Proceeds" and "Pro Forma Financial Data."
(e) The earnings for the year ended December 31, 1991 were inadequate to cover
fixed charges by $0.7 million.
(f) "EBITDA" is defined as net income (loss) before interest expense, taxes,
depreciation and amortization, consulting payments to related parties and
extraordinary items. EBITDA is not a measure of performance under GAAP and
may not be comparable to other similarly titled measures of other
companies. While EBITDA should not be considered in isolation or as a
substitute for net income, cash flows from operating activities and other
income or cash flow statement data prepared in accordance GAAP, or as a
measure of profitability or liquidity, management understands that EBITDA
is customarily used as a criterion in evaluating records management
companies. Moreover, substantially all of the Company's financing
agreements contain covenants in which EBITDA is used as a measure of
financial performance. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a discussion of other
measures of performance determined in accordance with GAAP and the
Company's sources and applications of cash flows.
(g) Capital expenditures for 1995 are comprised of $7.2 million for new
shelving, $5.1 million for new facility purchases and related improvements,
$1.6 million for data processing, $1.5 million for leasehold and building
improvements and $0.9 million for the purchase of transportation, warehouse
and office equipment. Of the total 1995 capital expenditures, approximately
$2.5 million was for upgrading and restructuring of existing facilities to
accommodate growth or for maintenance capital expenditures.
15
<PAGE>
RISK FACTORS
Prospective purchasers of the Notes should consider carefully the following
risk factors, in addition to the other information set forth in this
Prospectus, before making an investment in the Notes.
HIGH LEVEL OF INDEBTEDNESS AND LEVERAGE
The Company is highly leveraged due to the substantial indebtedness it has
incurred primarily to finance acquisitions and expand its operations. The
Company and its Canadian subsidiary had approximately $201.8 million of pro
forma debt as of June 30, 1996 after giving effect to the Transactions, the
offering of the Original Notes and the Pending Acquisitions. Moreover, as of
June 30, 1996, the Company had pro forma shareholders' deficit of $26.9
million after giving effect to the Transactions, the Pending Acquisitions and
the offering of the Original Notes. Subject to the restrictions in the
Indenture and the Credit Facility and any other indebtedness that may be
incurred in the future, the Company expects to incur additional indebtedness
from time to time to finance acquisitions or capital expenditures or for other
purposes.
The Company experienced net losses in three of the last five fiscal years,
although it has generated cash flow from operations in excess of debt service
requirements in each of such years. Management believes, based upon current
operations and internal growth at historical rates, that the Company's cash
flow from operations and available borrowings under the Credit Facility will
be sufficient to meet its anticipated requirements for capital expenditures,
working capital and future debt service requirements during the term of the
Notes. There can be no assurance, however, that the Company will continue to
generate cash flows at levels sufficient to meet these requirements. The
Company's ability to meet its debt service obligations will be dependent upon
its future performance (including the performance of any acquired businesses)
which, in turn, will be subject to general economic conditions and to
financial, business and other factors affecting the operations of the Company,
many of which are beyond its control. If the Company is unable to generate
sufficient cash flows to service its indebtedness, it may be forced to adopt
an alternative strategy that may include actions such as slowing or
terminating the Company's acquisition program, reducing or delaying capital
expenditures, selling assets, refinancing all or a portion of its existing
indebtedness or obtaining additional financing. There can be no assurance that
such actions would be possible or successful, particularly in view of the
Company's high level of indebtedness.
The level of the Company's indebtedness could have important consequences to
holders of the Notes, including: (i) a substantial part of the Company's cash
flow from operations must be dedicated to debt service and will not be
available for other purposes; (ii) the Company's ability to obtain needed
additional financing in the future may be limited; (iii) the Company's
leveraged position and covenants contained in the Indenture and the Credit
Facility (or any replacement thereof) could limit its ability to expand and
make capital improvements and acquisitions; and (iv) the Company's level of
indebtedness could make it more vulnerable to economic downturns, limit its
ability to withstand competitive pressures, and limit its flexibility in
reacting to changes in its industry and economic conditions generally. Certain
of the Company's competitors currently operate on a less leveraged basis and
have significantly greater operating and financing flexibility than the
Company.
SUBORDINATION OF THE NOTES; NO GUARANTEES
The Notes will be subordinated in right of payment to all existing and
future Senior Indebtedness of the Company. The Notes will also be structurally
subordinated to all existing and future liabilities of the Company's
subsidiaries, other than non-Senior Indebtedness of any subsidiaries of the
Company that may in the future become Guarantors. Substantially all of the
Company's assets (including the stock of the Company's subsidiary) are pledged
to secure the Company's obligations under the Credit Facility. In addition,
under the Indenture, provided certain incurrence tests are met, the Company
will be able to borrow additional Senior Indebtedness. In the event of a
bankruptcy, liquidation or reorganization of the Company or in the event that
any default in payment of, or the acceleration of, any debt occurs, holders of
Senior Indebtedness will be entitled to payment in full from the proceeds of
all assets of the Company prior to any payment of such proceeds to the holders
of the
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Notes. In addition, the Company may not make any principal or interest
payments in respect of the Notes if any payment default exists with respect to
Senior Indebtedness or any other default on Designated Senior Indebtedness (as
defined in the Indenture) occurs and the maturity of such indebtedness is
accelerated, or in certain circumstances prior to such acceleration for a
specified period of time, unless, in any case, such default has been cured or
waived, any such acceleration has been rescinded or such indebtedness has been
repaid in full. Consequently, there can be no assurance that the Company will
have sufficient funds remaining after such payments to make payments to the
holders of the Notes. See "Description of the Notes--Subordination" and
"Description of the Notes--Certain Covenants--Limitation on Additional
Indebtedness."
The Company's operations in Canada are conducted through a subsidiary in
which the Company has a 99% equity interest. See "The Company." The Notes are
obligations exclusively of the Company. The Canadian subsidiary is a separate
and distinct legal entity which has not guaranteed the Notes. However, the
Notes will be secured by a subordinated pledge of a portion of the capital
stock of such subsidiary. The subsidiary has no obligation, contingent or
otherwise, to pay amounts due pursuant to the Notes or to make any funds
available therefor. Moreover, the payment of dividends and the making of loan
advances to the Company by its Canadian subsidiary is contingent upon the
earnings of such subsidiary.
NON-RECURRING CHARGES; EXPECTED LOSS IN THIRD QUARTER OF 1996
In connection with the Transactions and the establishment of a pension for
Leo W. Pierce, Sr. and his spouse, the Company incurred non-recurring charges
of approximately $5.3 million in the third quarter of 1996. These charges
relate to the accounting for the Real Estate Transactions, as hereinafter
defined (approximately $2.8 million), the acceleration of certain deferred
financing charges currently being amortized in connection with the Company's
previous credit facility which was refinanced (approximately $2.0 million) and
the establishment of an annual pension for Leo W. Pierce, Sr. and his spouse
(approximately $0.5 million). As a result of these charges, the Company
expects to incur a net loss for the third quarter of 1996.
RISKS ASSOCIATED WITH ACQUISITIONS
The Company has pursued and intends to continue to pursue acquisitions of
records management businesses as a key component of its growth strategy.
Certain risks are inherent in an acquisition strategy, such as increasing
leverage and debt service requirements, diversion of management time and
attention and combining disparate company cultures and facilities, which could
adversely affect the Company's operating results. The success of any
acquisition will depend in part on the Company's ability to integrate
effectively the acquired records management business into the Company. The
process of integrating such acquired businesses may involve unforeseen
difficulties and may utilize a substantial portion of the Company's financial
and other resources. No assurance can be given that additional suitable
acquisition candidates will be identified, financed and purchased on
acceptable terms, or that the Pending Acquisitions or other future
acquisitions, if completed, will be successful. See "Business--Pending
Acquisitions."
The size, timing and integration of possible future acquisitions may cause
substantial fluctuations in operating results from quarter to quarter. As a
result, operating results for any quarter may not be indicative of results
that may be achieved for any subsequent quarter or for a full fiscal year.
RESTRICTIVE DEBT COVENANTS
The Credit Facility contains a number of covenants that, among other things,
limit the Company's ability to incur additional indebtedness, pay dividends,
prepay subordinated indebtedness, dispose of certain assets, create liens,
make capital expenditures, make certain investments or acquisitions and
otherwise restrict corporate activities. The Credit Facility also requires the
Company to comply with certain financial ratios and tests, under which the
Company will be required to achieve certain financial and operating results.
The ability of the Company to comply with such provisions may be affected by
events beyond its control. A breach of any of these covenants would result in
a default under the Credit Facility. In the event of any such default,
depending on the
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actions taken by the lenders under the Credit Facility, the Company could be
prohibited from making any payments on the Notes. In addition, such lenders
could elect to declare all amounts borrowed under the Credit Facility,
together with accrued interest, to be due and payable. As a result of the
priority and security afforded the Credit Facility, there can be no assurance
that the Company would have sufficient assets to pay indebtedness then
outstanding under the Credit Facility and the Notes. Any refinancing of the
Credit Facility is likely to contain similar restrictive covenants. See
"Description of Credit Facility."
COMPETITION
The Company faces competition from one or more competitors in all geographic
areas where it operates. The Company believes that competition for customers
is based on price, reputation for reliability and quality and scope of
service. As a result of this competition and the decline in the commercial
real estate market in the early 1990s, the records management industry has for
the past several years experienced downward pricing pressures. Should a
further downward trend in pricing occur or continue for an extended period of
time, it could have a material adverse effect on the Company's results of
operations. The Company also competes for acquisition candidates. Some of the
Company's competitors possess greater financial and other resources than the
Company. If any such competitor were to devote additional resources to the
records storage business and/or such acquisition candidates or to focus its
strategy on the Company's markets, the Company's results of operations could
be adversely affected.
The Company also faces competition from the internal document handling
capability of its current and potential customers. There can be no assurance
that these organizations will outsource more of their document management
needs or that they will not bring in-house some or all of the functions they
currently outsource. See "Business--The Records Management Industry" and
"Business--Competition."
ALTERNATIVE TECHNOLOGIES
The substantial majority of the Company's revenues have been derived from
the storage of paper documents and from related services. Such storage
requires significant physical space. Alternative technologies for generating,
capturing, managing, transmitting and storing information have been developed,
many of which require significantly less space than paper. Such technologies
currently include computer media, imaging, microfilming, audio/video tape,
film, CD-Rom and optical disc. None of these technologies has replaced paper
as the principal means for storing information. However, there can be no
assurance that one or more non-paper-based technologies (whether now existing
or developed in the future) may not in the future reduce or supplant the use
of paper as a preferred medium, which could in turn adversely affect the
Company's business.
CHANGE OF CONTROL
In the event of a Change of Control, the Company will be required to offer
to repurchase all of the outstanding Notes at 101% of the principal amount
thereof plus any accrued and unpaid interest thereon to the date of the
purchase. A Change of Control under the Indenture will result in a default
under the Credit Facility. The exercise by the holders of the Notes of their
right to require the Company to repurchase the Notes upon a Change of Control
could also cause a default under other indebtedness of the Company, even if
the Change of Control itself does not, because of the financial effect of such
repurchase on the Company. The Company's ability to pay cash to the holders of
the Notes upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that in the event of a Change
of Control, the Company will have, or will have access to, sufficient funds or
will be contractually permitted under the terms of outstanding indebtedness to
pay the required purchase price for all Notes tendered by holders upon a
Change of Control. See "Description of the Notes--Change of Control";
"Description of Credit Facility."
DEPENDENCE ON KEY PERSONNEL
The Company's business depends upon the efforts, abilities and expertise of
its executive officers and other key employees, including in particular, J.
Peter Pierce, the Company's President and Chief Executive Officer.
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The Company has no employment contracts with any of its executive officers.
There can be no assurance that the Company will be able to retain such
officers, the loss of any of whom could have a material adverse effect upon
the Company. See "Management."
FRAUDULENT CONVEYANCE CONSIDERATIONS
The incurrence by the Company of the indebtedness evidenced by the Notes to
finance the Real Estate Transactions and the Stock Redemption (as defined
herein) is subject to review under relevant federal and state fraudulent
conveyance statutes in a bankruptcy or reorganization case or a lawsuit by or
on behalf of creditors of the Company. Under these statutes, if a court were
to find that the payments were made with the intent of hindering, delaying or
defrauding creditors or that the Company received less than a reasonably
equivalent value or fair consideration for those payments and, at the time
they were made, the Company either (i) was insolvent or rendered insolvent by
reason thereof, (ii) was engaged in a business or transaction for which its
remaining unencumbered assets constituted unreasonably small capital or (iii)
intended to or believed that it would incur debts beyond its ability to pay
them as they matured or became due, the court could void those payments or
take other action detrimental to the holders of the Notes, such as possibly
reversing the Real Estate Transactions which would increase the Company's
annual rental expense by approximately $2.0 million. If a court were to
determine that the payments to be financed with the proceeds of the offering
of the Original Notes were incurred in a fraudulent transfer under the
foregoing standards, a fraudulent conveyance claim could also be asserted with
respect to the Notes.
The measure of insolvency for purposes of a fraudulent conveyance will vary
depending upon the law of the jurisdiction being applied. Generally, however,
a company will be considered insolvent at a particular time if the sum of its
debts at that time is greater than the fair market value of its assets at such
time or if the fair saleable value of its assets at that time is less than the
amount that would be required to pay its probable liability on its existing
debts as they become absolute and mature.
ENVIRONMENTAL MATTERS
The Company owns or leases approximately 7.9 million square feet of
facilities. Under various federal, state, local and foreign environmental
laws, regulations and ordinances ("environmental laws"), the Company's
properties and operations may subject it to liability for the costs of
investigation, removal or remediation of soil and groundwater, on or off-site,
contaminated by hazardous substances and other contaminants or hazardous
materials such as petroleum products ("hazardous materials"), as well as
damages to natural resources. Certain such laws impose cleanup responsibility
and liability without regard to whether the owner or operator of the real
estate or business thereon knew of or was responsible for the contamination,
and whether or not operations at the property have been discontinued or title
to the property has been transferred. In addition, the presence of such
materials, or the failure to properly remediate such property, may adversely
affect the current property owner's or operator's ability to sell, rent or use
such property or to borrow using such property as collateral. The owner or
operator of contaminated property also may be subject to statutory and common
law claims by third parties based on any damages and costs resulting from off-
site migration of the contamination.
Certain environmental laws govern the removal, encapsulation or disturbance
of asbestos-containing materials ("ACMs") in buildings. Such laws may impose
liability for improper handling and release of ACMs and third parties may seek
to recover from owners or operators of real estate for personal injury
associated with exposure to such materials. Certain facilities operated by the
Company contain ACMs.
Certain of the properties formerly or currently owned or operated by the
Company were previously used for industrial or other purposes that involved
the use or storage of hazardous materials or the generation and disposal of
hazardous wastes, and the use of underground storage tanks ("USTs") for
hazardous materials. The Company has from time to time conducted certain
environmental investigations, and remedial activities have been performed, at
certain of its former and current properties, but an in-depth environmental
review of each of the properties and related operations has not been conducted
by or on behalf of the Company. In connection with its
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former and current ownership or operation of certain properties and
businesses, the Company may be subject to environmental liability as discussed
above and as more specifically described under "Business--Environmental
Matters."
The Company has not received any written notice from any governmental
authority or third party asserting, and is not otherwise aware of, any
material environmental non-compliance, liability or claim relating to
hazardous materials or otherwise under any environmental laws applicable to
the Company in connection with any of its present or former properties or
operations other than as described under "Business--Environmental Matters."
However, no assurance can be given that there are no environmental conditions
for which the Company might be liable in the future or that future regulatory
action, or compliance with future environmental laws, will not require the
Company to incur costs with respect to its properties or operations that could
have a material adverse effect on the Company's financial condition or results
of operations.
CASUALTY
The Company currently maintains and intends to continue to maintain, to the
extent such insurance is available on commercially reasonable terms,
comprehensive liability, fire, flood and earthquake (where appropriate) and
extended coverage insurance with respect to the properties that it now owns or
leases or that it may in the future own or lease, with customary limits and
deductibles. Certain types of loss, however, may not be fully insurable on a
cost-effective basis. In the future, should uninsured losses or damages occur,
the Company could lose both its investment in and anticipated profits from the
affected property and may continue to be obligated on any leasehold
obligations, mortgage indebtedness or other obligations related to such
property. As a result, any such material loss could materially adversely
affect the Company. See "Business--Insurance."
ABSENCE OF PUBLIC MARKET
There is no existing trading market for the Notes, and the Company does not
intend to list any Notes on any securities exchange. Although the Company has
been advised that the Initial Purchaser currently intends to make a market in
the Notes, the Initial Purchaser is not obligated to do so and may discontinue
any such market making at any time without notice. In addition, any market
making activities in the Original Notes may be limited during the pendency of
the Exchange Offer. There can be no assurance that an active trading market
for the Notes will develop, or, if it develops, that it will continue. Future
trading prices for the Notes will depend on many factors, including, among
other things, the Company's operating results, the market for similar
securities and changes in prevailing interest rates.
PROCEDURES FOR TENDER OF ORIGINAL NOTES
The Exchange Notes will be issued in exchange for Original Notes only after
timely receipt by the Exchange Agent of such Original Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Original Notes desiring to tender such
Original Notes in exchange for Exchange Notes should allow sufficient time to
ensure timely delivery. Neither the Exchange Agent nor the Company is under
any duty to give notification of defects or irregularities with respect to
tenders of Original Notes for exchange. Any holder of Original Notes who
tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Notes, where such Original
Notes were acquired by such broker-dealer as a result of market-making
activities or any other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. See
"Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE ORIGINAL NOTES
The Original Notes have not been registered under the Securities Act and are
subject to substantial restrictions on transfer. Original Notes that are not
tendered in exchange for Exchange Notes or are tendered but
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not accepted will, following consummation of the Exchange Offer, continue to
be subject to the existing restrictions upon transfer thereof. The Company
does not currently anticipate that it will register the Original Notes under
the Securities Act. To the extent that Original Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Original Notes could be adversely affected. See "The Exchange--
Consequences of Failure to Exchange."
THE EXCHANGE OFFER
PURPOSES AND EFFECTS OF THE EXCHANGE OFFER
The Original Notes were sold by the Company on July 23, 1996 (the "Issue
Date") to the Initial Purchaser pursuant to a Purchase Agreement dated as of
July 17, 1996 (the "Purchase Agreement"). As a condition to the sale of the
Original Notes, the Company and the Initial Purchaser entered into the
Registration Rights Agreement on the Issue Date. Pursuant to the Registration
Rights Agreement, the Company agreed that, unless the Exchange Offer is not
permitted by applicable law or Commission policy, it would (i) file with the
Commission a Registration Statement under the Securities Act with respect to
the Exchange Notes within 45 days after the Issue Date, (ii) use its best
efforts to cause such Registration Statement to become effective under the
Securities Act within 135 days after the Issue Date and (iii) upon
effectiveness of the Registration Statement, commence the Exchange Offer, keep
the Exchange Offer open for at least 30 days (or a longer period if required
by law) and deliver to the Exchange Agent Exchange Notes in the same aggregate
principal amount at maturity as the Original Notes that were tendered by
holders thereof pursuant to the Exchange Offer. Under existing Commission
interpretations, the Exchange Notes would in general be freely transferable
after the Exchange Offer without further registration under the Securities
Act; provided, that in the case of broker-dealers, a prospectus meeting the
requirements of the Securities Act will be delivered as required. The Company
has agreed to make available a prospectus meeting the requirements of the
Securities Act to any broker-dealer for use in connection with any resale of
any such Exchange Notes acquired as described below for such period of 180
days after the Expiration Date. A broker-dealer that delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act, and will
be bound by the Registration Rights Agreement (including certain
indemnification rights and obligations). A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The Registration Statement of which this Prospectus
is a part is intended to satisfy certain of the Company's obligations under
the Registration Rights Agreement and the Purchase Agreement.
The Company is generally not required to file any registration statement to
register any outstanding Original Notes. Holders of Original Notes who do not
tender their Original Notes or whose Original Notes are tendered but not
accepted will have to rely on exemptions to registration requirements under
the securities laws, including the Securities Act, if they wish to sell their
Original Notes.
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder (other than (i) a broker-dealer
who purchases such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii)
any such holder which is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) who exchanges Original Notes for Exchange
Notes in the ordinary course of business and who is not participating, does
not intend to participate, and has no arrangement with any person to
participate, in the distribution of the Exchange Notes, will be allowed to
resell the Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes
a prospectus that satisfies the requirements of Section 10 of the Securities
Act. However, if any holder acquires the Exchange Notes in the Exchange Offer
for the purpose of distributing or participating in the distribution of the
Exchange Notes or is a broker-dealer, such holder cannot rely on the position
of the staff of the Commission enumerated in certain no-action letters issued
to third parties and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Each broker-
dealer that receives
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Exchange Notes for its own account in exchange for Original Notes, where such
Original Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of Exchange Notes received in exchange for
Original Notes where such Original Notes were acquired by such broker-dealer
as a result of market-making or other trading activities. Pursuant to the
Registration Rights Agreement, the Company has agreed to make this Prospectus,
as it may be amended or supplemented from time to time, available to broker-
dealers for use in connection with any resale for a period of 180 days after
the Expiration Date. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept any and
all Original Notes validly tendered and not withdrawn prior to the Expiration
Date. The Company will issue $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of outstanding Original Notes
surrendered pursuant to the Exchange Offer. Holders may tender some or all of
their Original Notes pursuant to the Exchange Offer; provided, however, that
Original Notes may be tendered only in integral multiples of $1,000. The
Exchange Offer is not conditioned upon any minimum aggregate principal amount
of Original Notes being tendered for exchange.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes except that (i) the Exchange Notes will be registered
under the Securities Act and, therefore, will not bear legends restricting
their transfer and (ii) holders of the Exchange Notes will not be entitled to
the certain rights of holders of Original Notes under the Registration Rights
Agreement, which rights will terminate upon the consummation of the Exchange
Offer. The Exchange Notes will evidence the same debt as the Original Notes
(which they replace) and will be issued under, and be entitled to the benefits
of, the Indenture, which also authorized the issuance of the Original Notes,
such that all outstanding Notes will be treated as a single class of debt
securities under the Indenture.
Interest on the Exchange Notes will accrue from the most recent date to
which interest has been paid on the Original Notes or, if no interest has been
paid, from July 23, 1996. Accordingly, registered holders of Exchange Notes on
the relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the
most recent date to which interest has been paid or, if no interest has been
paid, from July 23, 1996. Original Notes accepted for exchange will cease to
accrue interest from and after the date of the consummation of the Exchange
Offer. Holders whose Original Notes are accepted for exchange will not receive
any payment in respect of interest on such Original Notes otherwise payable on
any interest payment date, the record date for which occurs on or after
consummation of the Exchange Offer.
As of the date of this Prospectus, $200,000,000 aggregate principal amount
of the Original Notes are outstanding and registered in the name of Cede &
Co., as nominee for the Depository Trust Company (the "Depository" or "DTC").
Only a registered holder of the Original Notes (or such holder's legal
representative or attorney-in-fact) as reflected on the records of the Trustee
under the Indenture may participate in the Exchange Offer. There will be no
fixed record date for determining registered holders of the Original Notes
entitled to participate in the Exchange Offer.
Holders of the Original Notes do not have any appraisal or dissenters'
rights under the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the
Securities Act, the Exchange Act and the rules and regulations of the
Commission thereunder.
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The Company shall be deemed to have accepted validly tendered Original Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Original Notes for the purposes of receiving the Exchange Notes from the
Company.
If any tendered Original Notes are not accepted for exchange because of an
invalid tender, or due to the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Original Notes will
be returned without expense to the tendering holders thereof (or in the case
of Original Notes tendered by book-entry transfer, such Original Notes will be
credited to the account of such holder maintained at the Depository), as
promptly as practicable after the expiration or termination of the Exchange
Offer.
Holders who tender Original Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "The Exchange Offer--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; TERMINATION
The term "Expiration Date" shall mean 5:00 p.m., New York City time on ,
1996 unless the Company, in its sole discretion, extends the Exchange Offer,
in which case the term "Expiration Date" shall mean the latest date and time
to which the Exchange Offer is extended.
In order to extend the Exchange Offer the Company will notify the Exchange
Agent of any extension by oral (promptly confirmed in writing) or written
notice and will make a public announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
expiration date of the Exchange Offer. Without limiting the manner in which
the Company may choose to make a public announcement of any delay, extension,
amendment or termination of the Exchange Offer, the Company shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement, other than by making a timely release to an appropriate news
agency.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Original Notes, (ii) to extend the Exchange Offer, (iii) if any
conditions set forth below under "--Certain Conditions to the Exchange Offer"
shall not have been satisfied, to terminate the Exchange Offer by giving oral
or written notice of such delay, extension or termination to the Exchange
Agent or (iv) to amend the terms of the Exchange Offer in any manner. Any such
delay in acceptance, extension, termination or amendment will be followed as
promptly as practicable by oral or written notice thereof to the registered
holders. If the Exchange Offer is amended in a manner determined by the
Company to constitute a material change, the Company will promptly disclose
such amendment by means of a prospectus supplement that will be distributed to
the registered holders of Original Notes, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the amendment and the manner of disclosure to such registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business day period. The rights reserved by the Company in this paragraph are
in addition to the Company's rights set forth below under the caption "--
Certain Conditions of the Exchange Offer."
If the Company extends the period of time during which the Exchange Offer is
open, or if it is delayed in accepting for exchange of, or in issuing and
exchanging the Exchange Notes for, any Original Notes, or is unable to accept
for exchange of, or issue Exchange Notes for, any Original Notes pursuant to
the Exchange Offer for any reason, then, without prejudice to the Company's
rights under the Exchange Offer, the Exchange Agent may, on behalf of the
Company, retain all Original Notes tendered, and such Original Notes may not
be withdrawn except as otherwise provided below in "--Withdrawal of Tenders."
The adoption by the Company of the right to delay acceptance for exchange of,
or the issuance and the exchange of the Exchange Notes, for any Original Notes
is subject to applicable law, including Rule 14e-1(c) under the Exchange Act,
which requires that the
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Company pay the consideration offered or return the Original Notes deposited
by or on behalf of the holders thereof promptly after the termination or
withdrawal of the Exchange Offer.
PROCEDURES FOR TENDERING
Only a registered holder of Original Notes may tender such Original Notes in
the Exchange Offer. To tender in the Exchange Offer, a holder must complete,
sign and date the Letter of Transmittal, or facsimile thereof, have the
signature thereon guaranteed if required by the Letter of Transmittal and mail
or otherwise deliver such Letter of Transmittal or such facsimile to the
Exchange Agent at the address set forth below under "The Exchange Offer--
Exchange Agent" for receipt prior to the Expiration Date. In addition, either
(i) certificates for such Notes must be received by the Exchange Agent along
with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry
transfer of such Notes, if such procedure is available, into the Exchange
Agent's account at DTC pursuant to the procedure for book-entry transfer
described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below.
Any financial institution that is a participant in the Depository's Book-
Entry Transfer Facility system may make book-entry delivery of the Original
Notes by causing the Depository to transfer such Original Notes into the
Exchange Agent's account in accordance with the Depository's procedure for
such transfer. Although delivery of Original Notes may be effected through
book-entry transfer into the Exchange Agent's account at the Depository, the
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received or confirmed by the Exchange Agent at its addresses set forth
under "--Exchange Agent" below prior to 5:00 p.m., New York City time, on the
Expiration Date. DELIVERY OF DOCUMENTS TO THE DEPOSITORY IN ACCORDANCE WITH
ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute a binding agreement between such holder and the Company in
accordance with the terms and subject to the conditions set forth herein and
in the Letter of Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF
TRANSMITTAL OR NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR
RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO
EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner of the Original Notes whose Original Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Original Notes, either make
appropriate arrangements to register ownership of the Notes in such owner's
name (to the extent permitted by the Indenture) or obtain a properly completed
assignment from the registered holder. The transfer of registered ownership
may take considerable time.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Original Notes (which term includes any participants in DTC
whose name appears on a security position listing as the owner of
24
<PAGE>
the Original Notes) or if delivery of the Exchange Notes is to be made to a
person other than the registered holder, such Original Notes must be endorsed
or accompanied by a properly completed bond power, in either case signed by
such registered holder as such registered holder's name appears on such
Original Notes with the signature on the Original Notes or the bond power
guaranteed by an Eligible Institution (as defined below).
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution unless the Original Notes tendered pursuant thereto
are tendered (i) by a registered holder who has not completed the box entitled
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter
of Transmittal or a notice of withdrawal, as the case may be, are required to
be guaranteed, such guarantee must be made by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States, or another "Eligible Guarantor
Institution" within the meaning of Rule 17Ad-15 under the Exchange Act (any of
the foregoing, an "Eligible Institution").
If the Letter of Transmittal or any Original Notes or assignments are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act
must be submitted with the Letter of Transmittal.
The Exchange Agent and the Depository have confirmed that any financial
institution that is a participant in the Depository's system may utilize the
Depository's Automated Tender Offer Program to tender Original Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Original Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Original Notes not properly tendered or any Original Notes, the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including
the instructions in the Letter of Transmittal) will be final and binding on
all parties. Unless waived, any defects or irregularities in connection with
tenders of Original Notes must be cured within such time as the Company shall
determine. Although the Company intends to request the Exchange Agent to
notify holders of defects or irregularities with respect to tenders of
Original Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Original Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived.
While the Company has no present plan to acquire any Original Notes which
are not tendered in the Exchange Offer or to file a registration statement to
permit resales of any Original Notes which are not tendered pursuant to the
Exchange Offer, the Company reserves the right in its sole discretion to
purchase or make offers for any Original Notes that remain outstanding
subsequent to the Expiration Date or, as set forth below under "--Certain
Conditions to the Exchange Offer," to terminate the Exchange Offer and, to the
extent permitted by applicable law, purchase Original Notes in the open
market, in privately negotiated transactions or otherwise. The terms of any
such purchases or offers could differ from the terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the Exchange Notes to be acquired by the holder of the Original
Notes in connection with the Exchange Offer are being acquired by the holder
in the ordinary course of business of the holder, (ii) the holder has no
arrangement or understanding with any person to participate in the
distribution of Exchange Notes, (iii) the holder acknowledges and agrees that
any person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purpose of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on
the position of the staff of the Commission set forth in certain no-action
letters, (iv) the holder understands that a secondary resale transaction
described in clause (iii) above
25
<PAGE>
and any resales of Exchange Notes obtained by such holder in exchange for
Original Notes acquired by such holder directly from the Company should be
covered by an effective registration statement containing the selling
securityholder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission, and (v) the holder is not an "affiliate," as
defined in Rule 405 of the Securities Act, of the Company. If the holder is a
broker-dealer that will receive Exchange Notes for its own account in exchange
for Original Notes that were acquired as a result of market-making activities
or other trading activities, the holder is required to acknowledge in the
Letter of Transmittal that it will deliver a prospectus in connection with any
resale of such Exchange Notes; however, by so acknowledging and by delivering
a prospectus, the holder will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
RETURN OF NOTES
If any tendered Original Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Original Notes are
withdrawn or are submitted for a greater principal amount than the holders
desire to exchange, such unaccepted, withdrawn or non-exchanged Original Notes
will be returned without expense to the tendering holder thereof (or, in the
case of Original Notes tendered by book-entry transfer into the Exchange
Agent's account at the Depository pursuant to the book-entry transfer
procedures described below, such Original Notes will be credited to an account
maintained with the Depository) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Original Notes at the Depository for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depository's system may make book-
entry delivery of Original Notes by causing the Depository to transfer such
Original Notes into the Exchange Agent's account at the Depository in
accordance with the Depository's procedures for transfer. However, although
delivery of Original Notes may be effected through book-entry transfer at the
Depository, the Letter of Transmittal or facsimile thereof, with any required
signature guarantees and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at the address set forth
below under "--Exchange Agent" on or prior to the Expiration Date or pursuant
to the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original Notes
are not immediately available or (ii) who cannot deliver their Original Notes
(or complete the procedures for book-entry transfer), the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of such Original Notes (if
available) and the principal amount of Original Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or a facsimile thereof) together with the certificate(s)
representing the Original Notes in proper form for transfer (or a
confirmation of a book-entry transfer into the Exchange Agent's account at
the Depository of Original Notes delivered electronically), and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) such properly executed Letter of Transmittal (or facsimile thereof),
as well as the certificate(s) representing all tendered Original Notes in
proper form for transfer (or a confirmation of a book-entry transfer into
the Exchange Agent's account at the Depository of Original Notes delivered
electronically),
26
<PAGE>
and all other documents required by the Letter of Transmittal are received
by the Exchange Agent within five New York Stock Exchange trading days
after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Original Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Original Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Original Notes to be withdrawn (the "Depositor"), (ii) identify the
Original Notes to be withdrawn (including the certificate number or numbers
(if applicable) and principal amount of such Original Notes), and (iii) be
signed by the holder in the same manner as the original signature on the
Letter of Transmittal by which such Original Notes were tendered (including
any required signature guarantees). All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company in its sole discretion, whose determination shall be final and
binding on all parties. Any Original Notes so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offer and no Exchange
Notes will be issued with respect thereto unless the Original Notes so
withdrawn are validly retendered. Properly withdrawn Notes may be retendered
by following one of the procedures described above under "--Procedures for
Tendering" at any time prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the Exchange Notes for, any
Original Notes not theretofore accepted for exchange, and may terminate or
amend the Exchange Offer as provided herein before the acceptance of such
Original Notes, if any of the following conditions exist:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Company, might impair the ability
of the Company to proceed with the Exchange Offer or have a material
adverse effect on the contemplated benefits of the Exchange Offer to the
Company or there shall have occurred any material adverse development in
any existing action or proceeding with respect to the Company or any of its
subsidiaries; or
(b) there shall have been any material change, or development involving a
prospective change, in the business or financial affairs of the Company or
any of its subsidiaries which, in the reasonable judgment of the Company,
could reasonably be expected to materially impair the ability of the
Company to proceed with the Exchange Offer or materially impair the
contemplated benefits of the Exchange Offer to the Company; or
(c) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation which, in the judgment of the Company, could reasonably
be expected to materially impair the ability of the Company to proceed with
the Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company; or
(d) any governmental approval which the Company shall, in its reasonable
discretion, deem necessary for the consummation of the Exchange Offer as
contemplated hereby shall have not been obtained.
If the Company determines in its reasonable discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any
Original Notes and return all tendered Original Notes to the tendering
holders, (ii) extend the Exchange Offer and retain all Original Notes tendered
prior to the expiration of the
27
<PAGE>
Exchange Offer, subject, however, to the rights of holders to withdraw such
Original Notes (see "The Exchange Offer--Withdrawal of Tenders") or (iii)
waive such unsatisfied conditions with respect to the Exchange Offer and
accept all properly tendered Original Notes which have not been withdrawn. If
such waiver constitutes a material change to the Exchange Offer, the Company
will promptly disclose such waiver by means of a prospectus supplement that
will be distributed to the registered holders of the Original Notes, and the
Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the waiver and the manner of
disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
Holders may have certain rights and remedies against the Company under the
Registration Rights Agreement should the Company fail to consummate the
Exchange Offer, notwithstanding a failure of the conditions stated above. Such
conditions are not intended to modify those rights or remedies in any respect.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
condition or may be waived by the Company in whole or in part at any time and
from time to time in the Company's reasonable discretion. The failure by the
Company at any time to exercise the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time.
TERMINATION OF CERTAIN RIGHTS
All rights under Registration Rights Agreement (including registration
rights) of holders of the Original Notes eligible to participate in this
Exchange Offer will terminate upon consummation of the Exchange Offer except
with respect to the Company's continuing obligations (i) to indemnify the
holders (including any broker-dealers) and certain parties related to the
holders against certain liabilities (including liabilities under the
Securities Act), (ii) to provide, upon the request of any holder of a
transfer-restricted Original Note, the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Original Notes
pursuant to Rule 144A, (iii) to use its best efforts to keep the Registration
Statement effective to the extent necessary to ensure that it is available for
resales of transfer-restricted Notes by broker-dealers for a period of 180
days from the date on which the Registration Statement is declared effective
and (iv) to provide copies of the latest version of the Prospectus to broker-
dealers upon their request for a period of 180 days from the date on which the
Registration Statement is declared effective. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted pursuant to the
foregoing provisions, the Company has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
28
<PAGE>
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent
for the Exchange Offer. All questions and requests for assistance as well as
all correspondence in connection with the Exchange Offer and the Letter of
Transmittal should be addressed to the Exchange Agent, as follows:
<TABLE>
<S> <C>
By Facsimile: By Overnight Courier:
(212) 420-6152 United States Trust Company of New York
(For Eligible Institutions Only) 770 Broadway, 13th Floor
New York, NY 10003
Confirm by Telephone: Attention: Corporate Trust Services Window
(800) 548-6565
By Hand: By Mail:
United States Trust Company of New York (insured or registered recommended)
111 Broadway, Lower Level United States Trust Company of New York
New York, NY 10006 P.O. Box 843
Attention: Corporate Trust Peter Cooper Station
New York, NY 10276
Attention: Corporate Trust
</TABLE>
Requests for additional copies of this Prospectus, the Letter of Transmittal
or the Notice of Guaranteed Delivery should be directed to the Exchange Agent.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager or other soliciting agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptance of the Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$250,000. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Original Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes, or Original Notes for principal amounts not
tendered or acceptable for exchange, are to be delivered to, or are to be
issued in the name of, any person other than the registered holders of the
Original Notes tendered, or if tendered Original Notes are registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of
Original Notes pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment
of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder of Original Notes.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Original Notes as reflected in the Company's accounting records on the date of
the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized. The expenses of the Exchange Offer will be amortized over the term
of the Exchange Notes.
29
<PAGE>
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Original
Notes are urged to consult their financial and tax advisors in making their
own decisions on what action to take.
The Original Notes which are not exchanged for the Exchange Notes pursuant
to the Exchange Offer will remain restricted securities. Accordingly, such
Original Notes may be resold only (i) to a person whom the seller reasonably
believes is a qualified institutional buyer (as defined in Rule 144A under the
Securities Act) in a transaction meeting the requirements of Rule 144A, (ii)
in a transaction meeting the requirements of Rule 144 under the Securities
Act, (iii) outside the United States to a foreign person in a transaction
meeting the requirements of Rule 904 under the Securities Act, (iv) in
accordance with another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel if the Company so
requests), (v) to the Company or (vi) pursuant to an effective registration
statement and, in each case, in accordance with any applicable securities laws
of any state of the United States or any other applicable jurisdiction.
30
<PAGE>
THE COMPANY
Pierce Leahy is the largest archive records management company in North
America, as measured by its approximately 38 million cubic feet of records
currently under management in 118 facilities throughout North America. The
Company provides extensive records management services to a diversified group
of over 15,000 customer accounts in a variety of industries including
financial services, manufacturing, transportation, healthcare and law.
Pierce Leahy's operations date to 1957 when its predecessor company, L.W.
Pierce Co., Inc., was founded to provide filing systems and related equipment
to companies in the Philadelphia area. L. W. Pierce Co., Inc. expanded
primarily through internal growth until 1990 when it acquired Britannia
Security Group, Inc. (doing business as Leahy Business Archives), which
approximately doubled the size of the Company. The Company was formed at that
time from the consolidation of the predecessor company with Leahy Business
Archives.
Since its incorporation in 1990, the Company has elected to be taxed as a
corporation under Subchapter S (a "Subchapter S corporation") of the Internal
Revenue Code of 1986, as amended (the "Code"). The Company has made, and
intends to continue to make, distributions to its shareholders to pay their
tax obligations as a result of the Company's status as a Subchapter S
corporation. Such distributions will not be restricted by the terms of the
Notes.
The Company's Canadian business is operated by Pierce Leahy Command Company
("PLC Command"), a Nova Scotia unlimited liability company. As a result of the
Company's status as a Subchapter S corporation, all of the capital stock of
PLC Command is owned by two limited partnerships. Two separate corporations
owned by J. Peter Pierce are the general partner of each partnership,
respectively, and the Company has a 99% limited partnership interest in each
partnership. Accordingly, the Company has an indirect 99% equity interest in
PLC Command.
The principal executive offices of the Company are located at 631 Park
Avenue, King of Prussia, Pennsylvania 19406, and its telephone number is (610)
992-8200.
THE TRANSACTIONS
In connection with the offering of the Original Notes, the Company effected
a series of transactions described below:
(i) the repayment of the amounts outstanding under the Company's previous
credit facility ($146.1 million) and entering into the Credit Facility. See
"Description of Credit Facility";
(ii) the consummation of the purchase of a records management company in
the San Diego market for $3.5 million;
(iii) in order to eliminate or reduce certain related party rental
expenses, the Company purchased from two partnerships owned by members of
the Pierce family (the "Pierce Family Partnerships") six facilities located
in the following locations which are currently leased by the Company from
the Pierce Family Partnerships: Atlanta, Georgia; Chester, New York;
Folcroft, Pennsylvania; Sharon Hill, Pennsylvania (two properties); and
Midland, Texas. The purchase prices for five of these six properties were
based on independent valuations prepared by various subsidiaries of Cushman
& Wakefield, Inc. and the purchase price of the Midland, Texas property was
based on the recent acquisition price for such property. In addition, the
Company had been subleasing from one of the Pierce Family Partnerships 16
other facilities at a cost in excess of the amount being paid by such
Pierce Family Partnership to the owner of the property. The Company
purchased the leasehold interests from such Pierce Family Partnership,
thereby reducing the Company's rental expense. In addition, one of the
Pierce Family Partnerships had minority interests in five of the properties
currently leased by the Company, which interests were purchased by the
Company. The total purchase price for all of the above transactions (the
"Real Estate Transactions") was $14.8 million
31
<PAGE>
(including the assumption of a mortgage for $1.1 million), and the purchase
of the real property and leasehold interests from the Pierce Family
Partnerships will reduce the Company's annual rental expense by $2.0
million; and
(iv) the redemption of 100 shares of Class A Common Stock from Leo W.
Pierce, Sr. (representing 1% of the Company's Common Stock and approximately
19% of Mr. Pierce's beneficial holdings) for an aggregate price of $1.45
million (the "Stock Redemption").
In addition, the Company has recently purchased two additional records
management companies with proceeds of the Original Notes for an aggregate
purchase price of $6.3 million (such acquisitions, together with the
transactions referred to above are collectively referred to as the
"Transactions").
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<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange
Original Notes in like principal amount, the terms of which are substantially
identical to the Exchange Notes. The Original Notes surrendered in exchange
for Exchange Notes will be retired and cancelled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any increase in
the indebtedness of the Company.
The net proceeds to the Company from the sale of the Original Notes was or
will be used to finance the Transactions and the Pending Acquisitions and for
general corporate purposes. The anticipated sources and uses of funds from the
sale of the Original Notes are set forth below (dollars in thousands).
<TABLE>
<S> <C>
Source of proceeds:
Offering of Original Notes.................................... $200,000
Uses of proceeds:
Retirement of existing Credit Facility--U.S................... $123,988(a)
Retirement of existing Credit Facility--Canadian.............. 22,110(a)
Real Estate Transactions...................................... 13,717(b)
Stock Redemption.............................................. 1,450
Completed acquisitions........................................ 9,828
Pending Acquisitions.......................................... 18,053
General corporate purposes.................................... 2,354
Estimated fees and expenses................................... 8,500
--------
Total uses of proceeds...................................... $200,000
========
</TABLE>
- --------
(a) Based on actual outstanding indebtedness as of the closing of the sale of
the Original Notes.
(b) In connection with the Real Estate Transactions, the Company also assumed
a mortgage for $1.1 million.
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
June 30, 1996 and (ii) as adjusted to give effect to the sale of the Original
Notes, the Transactions, the Pending Acquisitions and the accrual of a pension
obligation for Leo W. Pierce, Sr. as if they had occurred as of June 30, 1996.
This table should be read in conjunction with the information contained in
"Use of Proceeds" as well as the Company's consolidated financial statements
and notes thereto included elsewhere herein (U.S. dollars in thousands):
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
Cash on hand........................................... $ 860 $ 2,341
======== ========
Existing Credit Facility--U.S.(a)...................... $124,888 $ --
Existing Credit Facility--Canadian(a).................. 21,595 --
Credit Facility--U.S................................... -- --
Credit Facility--Canadian.............................. -- --
Original Notes......................................... -- 200,000
Other indebtedness..................................... 656 1,780
-------- --------
Total debt........................................... 147,139 201,780
Shareholders' deficit.................................. (15,105) (26,903)
-------- --------
Total capitalization................................. $132,034 $174,877
======== ========
</TABLE>
- --------
(a) Does not include approximately $0.9 million of U.S. repayments and $0.5
million of additional Canadian borrowings after June 30, 1996 but prior to
repayment.
33
<PAGE>
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS,
BALANCE SHEET AND OTHER DATA
The following selected consolidated statement of operations, balance sheet
and other data as of December 31, 1991, 1992, 1993, 1994 and 1995, and for the
years then ended, have been derived from the Consolidated Financial Statements
of the Company which have been audited by Arthur Andersen LLP, independent
public accountants. The report of Arthur Andersen LLP with respect to the
Company's Consolidated Financial Statements for the years ended December 31,
1993, 1994 and 1995 appears elsewhere in this Prospectus. The selected
consolidated statement of operations, balance sheet and other data as of June
30, 1995 and 1996, and for the six months then ended, is derived from the
unaudited Consolidated Financial Statements of the Company which, in
management's opinion, includes all material adjustments (consisting only of
normal recurring adjustments) necessary for the fair presentation of the
information set forth therein. The results of operations for the six months
ended June 30, 1996 are not necessarily indicative of the results that may be
expected for a full year.
The following selected pro forma statement of operations data and other data
give effect to, among other things, the Transactions, the Pending Acquisitions
and the offering of the Original Notes, as if they had occurred on January 1,
1995. The following unaudited pro forma condensed consolidated balance sheet
data give effect to, among other things, the Transactions, the Pending
Acquisitions and the offering of the Original Notes, as if they had occurred
on June 30, 1996. The Transactions, the Pending Acquisitions and certain
management assumptions and adjustments are described in the accompanying notes
hereto. The pro forma information should be read in conjunction with the
Company's consolidated financial statements and the notes thereto, as of
December 31, 1995 and for the three years in the period then ended, appearing
elsewhere in this Prospectus. This pro forma information is not necessarily
indicative of the results that would have occurred had the Transactions, the
Pending Acquisitions and the offering of the Original Notes been completed on
the dates indicated or the Company's actual or future results or financial
position.
The information set forth below should be read in conjunction with the Pro
Forma Condensed Consolidated Financial Statements, the Company's Consolidated
Financial Statements and the related notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere in this Prospectus.
34
<PAGE>
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS, BALANCE
SHEET AND OTHER DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------- -------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(A) 1995 1996 1996(A)
------- ------- ------- ------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues
Storage................ $33,195 $37,633 $42,122 $47,123 $55,501 $79,580 $25,965 $35,485 $39,869
Service and storage
material sales........ 22,437 25,202 31,266 35,513 39,895 49,216 18,599 25,837 28,832
------- ------- ------- ------- ------- ------- ------- ------- -------
Total revenues......... 55,632 62,835 73,388 82,636 95,396 128,796 44,564 61,322 68,701
Cost of sales, excluding
depreciation and
amortization........... 37,145 39,702 45,391 49,402 55,616 70,699 25,937 35,189 37,147
Selling, general and
administrative......... 6,693 9,012 11,977 15,882 16,148 20,919 7,815 9,911 11,330
Depreciation and
amortization........... 5,783 5,734 6,888 8,436 8,163 12,170 4,304 5,612 6,740
Consulting payments to
related parties (b).... -- -- -- 500 500 500 250 -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income....... 6,011 8,387 9,132 8,416 14,969 24,508 6,258 10,610 13,484
Interest expense........ 6,677 6,388 6,160 7,216 9,622 23,684 4,156 5,953 11,842
------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before
extraordinary loss.... (666) 1,999 2,972 1,200 5,347 824 2,102 4,657 1,642
Extraordinary loss(c)... -- -- 9,174 5,991 3,279 -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)....... (666) 1,999 (6,202) (4,791) 2,068 824 2,102 4,657 1,642
Accretion (cancellation)
of redeemable
warrants............... -- -- (746) 16 889 -- 445 1,560 --
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income (loss
applicable to Common
shareholders........... $ (666) $ 1,999 $(5,456) $(4,807) $ 1,179 $ 824 $ 1,657 $ 3,097 $ 1,642
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30, 1996
------------------------------------------------ ---------------------
PRO FORMA
AS
1991 1992 1993 1994 1995 ACTUAL ADJUSTED(D)
-------- -------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 332 $ 461 $ 528 $ 358 $ 722 $ 860 $ 2,341
Working capital
(deficit).............. (10,402) (11,656) (9,143) (5,202) (8,139) (4,602) (1,969)
Total assets............ 59,726 65,869 74,621 79,746 131,328 162,796 208,546
Total debt.............. 52,695 55,027 69,736 77,683 120,071 147,139 201,780
Net debt (net of cash
balance)............... 52,363 54,566 69,208 77,325 119,349 146,279 199,439
Shareholders' deficit... (11,006) (9,028) (14,508) (19,341) (18,201) (15,105) (26,903)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------- ---------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(A) 1995 1996 1996(A)
------ ------ ------- ------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Ratio of earnings to
fixed charges(e)....... -- 1.21x 1.30x 1.11x 1.37x 1.03 1.33x 1.53x 1.11
Cash flows from
operations............. $7,088 $8,599 $ 8,019 $11,000 $17,522 -- $ 7,171 $ 6,629 --
Cash flows used in
investing activities... (3,541) (6,803) (13,784) (13,933) (51,315) -- (14,317) (32,120) --
Cash flows provided by
(used in) financing
activities............. (3,331) (1,667) 5,832 2,763 34,157 -- 7,030 25,629 --
EBITDA(f)............... 11,794 14,121 16,020 17,352 23,632 $37,178 10,812 16,222 $20,224
EBITDA margin........... 21.2% 22.5% 21.8% 21.0% 24.8% 28.9% 24.3% 26.5% 29.4%
Capital
expenditures(g)........ $3,521 $5,565 $ 5,827 $ 6,352 $16,288 -- $ 4,790 $ 7,657 --
Cubic feet of storage
under management at end
of period (000s)....... 13,858 16,248 19,025 22,160 29,523 32,264 23,549 34,347 37,890
</TABLE>
(see footnotes on the following page)
35
<PAGE>
NOTES TO SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS, BALANCE SHEET AND OTHER DATA
(a) Gives effect to (i) acquisitions completed in 1995 and 1996 year to date
and (ii) the offering of the Original Notes, the Transactions, the Pending
Acquisitions and the application of the net proceeds from the sale of the
Original Notes, as if each had occurred as of January 1, 1995. See "Use of
Proceeds" and "Pro Forma Financial Data." In connection with the
Transactions, the Company incurred non-recurring charges of approximately
$5.3 million in the third quarter of 1996, the quarter in which the
offering of the Original Notes was consummated. Such charges are not
reflected in the Pro Forma Condensed Consolidated Statement of Operations.
See "Risk Factors--Non-Recurring Charges; Expected Loss in Third Quarter
of 1996."
(b) Represents aggregate payments made to eight Pierce family members.
(c) Represents loss on early extinguishment of debt due to refinancings in
1993, 1994 and 1995. Amounts include write-off of unamortized deferred
financing costs and discount, along with prepayment penalties and other
costs. A similar charge of approximately $2.0 million occurred in the
third quarter of 1996, the quarter in which the debt was repaid, which has
not been reflected in the Pro Forma Condensed Consolidated Statement of
Operations. See "Risk Factors--Non-Recurring Charges; Expected Loss in
Third Quarter of 1996."
(d) Gives effect to: the offering of the Original Notes, the Transactions, the
Pending Acquisitions and the application of the net proceeds from the sale
of the Original Notes, as if they each had occurred as of June 30, 1996.
See "Use of Proceeds" and "Pro Forma Financial Data."
(e) The earnings for the year ended December 31, 1991 were inadequate to cover
fixed charges by $0.7 million.
(f) "EBITDA" is defined as net income (loss) before interest expense, taxes,
depreciation and amortization, consulting payments to related parties and
extraordinary items. EBITDA is not a measure of performance under GAAP and
may not be comparable to other similarly titled measures of other
companies. While EBITDA should not be considered in isolation or as a
substitute for net income, cash flows from operating activities and other
income or cash flow statement data prepared in accordance GAAP, or as a
measure of profitability or liquidity, management understands that EBITDA
is customarily used as a criterion in evaluating records management
companies. Moreover, substantially all of the Company's financing
agreements contain covenants in which EBITDA is used as a measure of
financial performance. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a discussion of other
measures of performance determined in accordance with GAAP and the
Company's sources and applications of cash flows.
(g) Capital expenditures for 1995 are comprised of $7.2 million for new
shelving, $5.1 million for facility purchases and related improvements,
$1.6 million for data processing, $1.5 million for leasehold and building
improvements and $0.9 million for the purchase of transportation,
warehouse and office equipment. Of the total 1995 capital expenditures,
approximately $2.5 million was for upgrading and restructuring of existing
facilities to accommodate growth or for maintenance capital expenditures.
36
<PAGE>
PRO FORMA FINANCIAL DATA
The pro forma condensed consolidated balance sheet as of June 30, 1996 gives
effect to, among other things, the Transactions and the Pending Acquisitions,
as if they occurred on June 30, 1996. The unaudited pro forma condensed
consolidated statement of operations and other data for the year ended
December 31, 1995 and the six months ended June 30, 1996 give effect to, among
other things, the Transactions and the Pending Acquisitions, as if they
occurred on January 1, 1995. The Transactions, the Pending Acquisitions and
certain management assumptions and adjustments are described in the
accompanying notes hereto. The pro forma condensed consolidated balance sheet
and statements of operations should be read in conjunction with the Company's
consolidated financial statements and notes thereto, as of December 31, 1995
and for each of the three years in the period ended December 31, 1995,
appearing elsewhere in this Prospectus.
37
<PAGE>
PIERCE LEAHY CORP.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED OFFERING AND PRO FORMA
AND PENDING PRO OTHER AS
ACTUAL ACQUISITION(A) FORMA TRANSACTIONS ADJUSTED
-------- -------------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.................. $ 860 $ 684 $ 1,544 $24,464 (b) $ 2,341
(8,500)(c)
(13,717)(d)
(1,450)(e)
Accounts receivable... 18,234 1,957 20,191 -- 20,191
Inventories........... 633 371 1,004 -- 1,004
Prepaid expenses and
other................ 2,091 47 2,138 -- 2,138
-------- ------- -------- ------- --------
Total current
assets............. 21,818 3,059 24,877 (797) 25,674
PROPERTY AND EQUIPMENT,
net.................... 88,541 4,452 92,993 7,008 (d) 100,001
OTHER ASSETS, primarily
intangibles............ 52,437 23,950 76,387 6,484 (c) 82,871
-------- ------- -------- ------- --------
$162,796 $31,461 $194,257 $14,289 $208,546
======== ======= ======== ======= ========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion of
long-term debt and
noncompete
obligations.......... $ 1,923 $ -- $ 1,923 $(1,684)(b) $ 239
Accounts payable...... 7,116 69 7,185 -- 7,185
Accrued expenses...... 8,706 2,206 10,912 499 (e) 11,411
Deferred revenues..... 8,675 133 8,808 -- 8,808
-------- ------- -------- ------- --------
Total current
liabilities........ 26,420 2,408 28,828 (1,185) 27,643
LONG-TERM DEBT AND
NONCOMPETE
OBLIGATIONS............ 145,216 29,053 174,269 26,148 (b) 201,541
1,124 (d)
DEFERRED RENT........... 2,899 -- 2,899 -- 2,899
DEFERRED INCOME TAXES... 3,366 -- 3,366 -- 3,366
SHAREHOLDERS' DEFICIT... (15,105) -- (15,105) (2,016)(c) (26,903)
(5,069)(d)
(2,764)(d)
(1,949)(e)
-------- ------- -------- ------- --------
$162,796 $31,461 $194,257 $14,289 $208,546
======== ======= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of this statement.
38
<PAGE>
PIERCE LEAHY CORP.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(DOLLARS IN THOUSANDS)
(a) Represents the balance sheets for the businesses acquired by the Company
after June 30, 1996 (Archives America of San Diego; Security Archives of
Denver; and Data Protection Services) and the Pending Acquisitions (see
"Business--Acquisition History and Growth Strategy" and "Business--Pending
Acquisitions"), after application of the purchase method of accounting.
Expected total cash purchase price of the completed acquisitions and the
Pending Acquisitions is $27,449, including transaction costs.
(b) Reflects the sale of $200,000 in Original Notes and the use of the
proceeds to repay existing indebtedness of $146,483 at June 30, 1996 and
debt of $29,053 incurred in connection with the completed acquisitions and
the Pending Acquisitions.
(c) Represents the payment of the estimated transaction costs and expenses of
$8,500 and the write-off of $2,016 of unamortized deferred financing costs
related to previous debt financing. This write-off of unamortized deferred
financing costs will be recorded in the third quarter of 1996, the period
in which the debt repayment occurred.
(d) Reflects the payment of $13,717 for the Real Estate Transactions and the
assumption of a $1,124 mortgage. Since the Real Estate Transactions
involved land, buildings and joint venture interests purchased from the
Pierce Family Partnerships, for financial reporting purposes, the assets
will be recorded at their depreciated cost of $7,008, and the $5,069
excess of the purchase price over the depreciated basis will be charged to
shareholders' deficit. In addition, payments to the Pierce Family
Partnerships of $2,764 for certain leases will be charged to expense in
the third quarter of 1996.
(e) Represents the accrual of a pension obligation due to Leo W. Pierce, Sr.
of $499 and the Stock Redemption of $1,450.
39
<PAGE>
PIERCE LEAHY CORP.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FROM
COMPLETED ADJUSTMENTS OFFERING PRO FORMA
AND PENDING FROM PRO AND OTHER AS
ACTUAL ACQUISITION(A) ACQUISITIONS FORMA TRANSACTIONS ADJUSTED
------- -------------- ------------ -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES................ $95,396 $33,400 $ -- $128,796 $ -- $128,796
------- ------- ------- -------- ------- --------
OPERATING EXPENSES:
Cost of sales, excluding
depreciation and amor-
tization............... 55,616 18,922 (1,823)(b) 72,715 (2,016)(f) 70,699
Selling, general and ad-
ministrative........... 16,148 8,975 (4,204)(c) 20,919 -- 20,919
Depreciation and amorti-
zation................. 8,163 2,575 1,176 (d) 11,914 256 (f) 12,170
Consulting payments to
related parties........ 500 -- -- 500 -- 500
------- ------- ------- -------- ------- --------
Total operating ex-
penses............. 80,427 30,472 (4,851) 106,048 (1,760) 104,288
------- ------- ------- -------- ------- --------
Operating income.... 14,969 2,928 4,851 22,748 1,760 24,508
INTEREST EXPENSE........ 9,622 735 5,675 (e) 16,032 7,652 (g) 23,684
------- ------- ------- -------- ------- --------
INCOME BEFORE
EXTRAORDINARY ITEM..... $ 5,347 $ 2,193 $ (824) $ 6,716 $(5,892) $ 824
======= ======= ======= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of this statement.
40
<PAGE>
PIERCE LEAHY CORP.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
COMPLETED ADJUSTMENTS FROM OFFERING PRO FORMA
AND PENDING FROM PRO AND OTHER AS
ACTUAL ACQUISITION(A) ACQUISITIONS FORMA TRANSACTIONS ADJUSTED
------- -------------- ------------ ------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES................ $61,322 $7,379 $ -- $68,701 $ -- $68,701
------- ------ ------- ------- ------- -------
OPERATING EXPENSES:
Cost of sales,
excluding
depreciation and
amortization......... 35,189 3,321 (354)(b) 38,156 (1,009)(f) 37,147
Selling, general and
administrative....... 9,911 2,230 (811)(c) 11,330 -- 11,330
Depreciation and
amortization......... 5,612 594 406 (d) 6,612 128 (f) 6,740
Consulting payments to
related parties...... -- -- -- -- -- --
------- ------ ------- ------- ------- -------
Total operating
expenses........... 50,712 6,145 (759) 56,098 (881) 55,217
------- ------ ------- ------- ------- -------
Operating income.... 10,610 1,234 759 12,603 881 13,484
INTEREST EXPENSE........ 5,953 186 1,778 (e) 7,917 3,925 (g) 11,842
------- ------ ------- ------- ------- -------
INCOME BEFORE
EXTRAORDINARY ITEM..... $ 4,657 $1,048 $(1,019) $ 4,686 $(3,044) $ 1,642
======= ====== ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
41
<PAGE>
PIERCE LEAHY CORP.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) Represents the historical results of operations of acquisitions completed
in 1995 and 1996 for periods prior to their acquisition by the Company and
the results of operations of the Pending Acquisitions. See "Business--
Acquisition and Growth Strategy" and "Business--Pending Acquisitions."
(b) Pro forma adjustments have been made to reduce cost of sales by $1,823 in
1995 and $354 for the six months ended June 30, 1996, to eliminate
specific expenses that would not have been incurred had the completed
acquisitions and the Pending Acquisitions occurred as of January 1, 1995.
Such cost savings relate to (i) the termination of certain employees due
to the integration and consolidation of the operations and (ii) a
reduction in warehouse rent expense related to facilities the Company has
or will vacate or negotiated changes in lease terms.
(c) Pro forma adjustments for the year ended December 31, 1995 and for the six
months ended June 30, 1996 have been made to reduce selling, general and
administrative expenses by $4,204 and $811, respectively, to eliminate
specific expenses that would not have been incurred had the completed
acquisitions and the Pending Acquisitions occurred as of January 1, 1995.
Such cost savings relate to the termination of certain employees and a
reduction in computer and certain other operating costs. Additional cost
savings that the Company expects to realize through the integration of the
acquisitions into the Company's operations have not been reflected.
(d) A pro forma adjustment has been made to reflect additional depreciation
and amortization expense based on the fair market value of the assets
acquired, as if the completed acquisitions and the Pending Acquisitions
had occurred as of January 1, 1995. Property and equipment are depreciated
over five to 40 years, goodwill is amortized over 30 years and covenants
not to compete are amortized over four to five years on a straight-line
basis. Such depreciation and amortization may change upon the final
appraisal of the fair market value of the net assets acquired. However,
management believes that any change in value will not materially impact
the amount of depreciation and amortization recorded.
(e) Represents interest expense on debt incurred to finance the completed
acquisitions and the Pending Acquisitions of $5,675 in 1995, using an
effective annual interest rate of 9.33%, and $1,778 for the six months
ended June 30, 1996, using an effective annual interest rate of 9.58%.
(f) Reflects the purchase of land and buildings as part of the Real Estate
Transactions from the Pierce Family Partnerships that previously leased
such facilities to the Company. In addition, the Company will pay $2,764
to one of the Pierce Family Partnerships to assume such Partnership's
position in certain leases with third-parties. These operating leases with
third-parties were "passed through" to the Company with a mark-up. Rent
expense of $2,016 in 1995 and $1,013 for the six months ended June 30,
1996 has been eliminated based on these transactions. Depreciation expense
of $256 in 1995 and $128 for the six months ended June 30, 1996 has been
recorded based on the depreciated cost of the buildings and improvements
acquired as part of the Real Estate Transactions for $6,382, using an
estimated remaining useful life of 25 years. The $2,764 payment to assume
leases will result in a one-time charge in the statement of operations in
the third quarter of 1996, the quarter in which the Real Estate
Transactions were consummated, and has not been reflected in the Pro Forma
Condensed Consolidated Statement of Operations. These pro forma statements
also do not include the accrual for a pension obligation due Leo W.
Pierce, Sr. See "Risk Factors--Non-Recurring Charges; Expected Loss in
Third Quarter of 1996."
(g) Reflects interest expense on the $200,000 proceeds from the sale of the
Original Notes and amortization of deferred debt issuance costs, which
costs are expected to be approximately $8,500, offset by the elimination
42
<PAGE>
of interest expense on the indebtedness that will be repaid with a portion
of the proceeds of the offering of the Original Notes. The repayment of
such indebtedness will result in the write-off of deferred financing costs
of approximately $2,016 in the statements of operations in the third
quarter of 1996, the quarter in which the repayment occurred and has not
been reflected in the Pro Forma Condensed Consolidated Statement of
Operations. See "Risk Factors--Non-Recurring Charges; Expected Loss in
Third Quarter of 1996." Pro forma adjusted interest expense represents the
interest on the $200,000 of Original Notes (including the amortization of
deferred financing costs) and the unpaid existing indebtedness which will
not be repaid, along with certain costs under the Credit Facility.
43
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Historical and Pro Forma Consolidated Statement of Operations, Balance Sheet
and Other Data" and the Consolidated Financial Statements and the Notes
thereto and the other financial and operating information included elsewhere
in this Prospectus.
GENERAL
The Company is the largest archive records management company in North
America, as measured by its approximately 38 million cubic feet of records
currently under management. The Company's operations date to 1957 when its
predecessor company, L.W. Pierce Co., Inc., was founded to provide filing
systems and related equipment to companies in the Philadelphia area. The
Company expanded primarily through internal growth until 1990, when it
acquired Leahy Business Archives which effectively doubled its size. Since
1991, the Company has pursued an expansion strategy combining growth from new
and existing customers with the completion and successful integration of 21
acquisitions.
The Company has experienced significant growth in its revenues and EBITDA as
a result of its successful expansion and acquisition strategy, which has been
facilitated by the implementation of the PLUS(R) system. During the four-year
period ended December 31, 1995, revenues increased from $55.6 million to $95.4
million, representing a compound annual growth rate of 14.4%. The Company has
also made substantial investments in its facilities and management information
systems, the benefits of which are now being realized through economies of
scale and increased operating efficiencies. The Company's EBITDA as a
percentage of total revenues improved from 21.2% in 1991 to 24.8% in 1995,
while EBITDA increased from $11.8 million to $23.6 million, over the same
period, representing a compound annual growth rate of 19.4%. As the Company's
volume of business grows, the Company believes its substantial investment in
infrastructure will be amortized over a larger base of business, creating
further economies of scale.
The following table illustrates the growth in stored cubic feet from
existing customers, new customers and acquisitions from 1991 through 1995 and
for the six-month period ended June 30, 1996:
NET ADDITIONS OF CUBIC FEET OF STORAGE BY CATEGORY
(CUBIC FEET IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------- JUNE 30,
1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Additions of Cubic Feet:
Existing Customer
Accounts(a)............ 950 1,101 1,166 1,657 722(b) 851(b)
New Customer
Accounts(c)............ 376 995 1,494 1,038 2,018 1,429
Acquisitions............ -- 294 117 440 4,623 2,544
------ ------ ------ ------ ------ ------
Total................... 1,326 2,390 2,777 3,135 7,363 4,824
% Increase.............. 11% 17% 17% 16% 33% *
Breakdown of % Increase:
Existing Customer
Accounts(a)............ 8% 8% 7% 9% 3% *
New Customer
Accounts(c)............ 3% 7% 9% 5% 9% *
Acquisition............. 0% 2% 1% 2% 21% *
------ ------ ------ ------ ------ ------
Total................... 11% 17% 17% 16% 33% *
Cubic Feet Under Manage-
ment:
Beginning of Period..... 12,532 13,858 16,248 19,025 22,160 29,523
End of Period........... 13,858 16,248 19,025 22,160 29,523 34,347
</TABLE>
- --------
* Not applicable
(a) Net of permanent removals.
(b) Includes effects of a records destruction program for a major customer
recommended by the Company pursuant to a consulting agreement.
(c) For the first twelve months after the establishment of an account,
records added to such account are classified as additions to new customer
accounts in the period in which they are received.
44
<PAGE>
Revenues
The Company's revenues consist of storage revenues (58.2% of total revenues
in 1995), and related service and storage material sales revenues (41.8% of
total revenues in 1995). The Company provides records storage and related
services under annual or multi-year contracts that typically provide for
recurring monthly storage fees which continue until such records are
permanently removed (for which the Company charges a service fee) and service
charges based on activity with respect to such records. The Company's current
average monthly storage rate is approximately $0.175 per cubic foot (or $2.10
per year). Permanent removal fees range from $2.00 to $5.75 per cubic foot.
Since there are relatively little direct on-going marketing, labor or capital
expenditures associated with storing a box of records, recurring storage fees
contribute significantly to EBITDA.
While the Company's total revenues have increased at a compound annual
growth rate of 14.4% from 1991 to 1995, total revenue per annual average cubic
foot during such period has declined 10.0% from $4.22 to $3.80.* The decline
is attributable to (i) increases in sales to large volume accounts under long-
term contracts with discounted rates, which generate lower revenue per cubic
foot, but typically generate increased operating income, (ii) renegotiation of
contracts with existing customers to provide for longer term contracts at
lower rates, and (iii) industry-wide pricing pressures (based in large part on
reductions related to the cost of commercial real estate since the late
1980s). Declines in revenues per cubic foot have been more than offset by
improvements in operating efficiencies and greater productivity as
demonstrated by the increase in EBITDA and EBITDA as a percentage of total
revenues over the same period.
Operating Expenses and Productivity
Operating expenses consist primarily of cost of sales, selling, general and
administrative expenses, and depreciation and amortization. Cost of sales are
comprised mainly of wages and benefits, facility occupancy costs, equipment
costs and supplies. The major components of selling, general and
administrative expenses are management, administrative, marketing and data
processing wages and benefits and also include travel, communication and data
processing expenses, professional fees and office expenses.
In recent years, the Company has undertaken several steps to reduce
operating expenses, particularly labor and facility occupancy costs, which are
its two highest cost components. From 1991 to 1995, annual operating expenses
(before depreciation, amortization and consulting payments) per average annual
cubic foot declined 13.9% from $3.32 to $2.86.*
The installation of the PLUS(R) system (which took approximately five years
and over $8 million to develop and implement) has significantly reduced the
Company's labor requirements by streamlining administrative and warehouse work
processes, thereby reducing the labor required to process customer orders. The
PLUS(R) system also has increased the speed at which the Company can obtain
labor efficiencies when acquiring new records management companies, which in
conjunction with the Company's centralized corporate administrative functions,
has generally enabled the Company to integrate several acquisitions sites
concurrently and to reduce the workforce of acquired businesses by at least
20%.
- --------
* For periods through 1994, average cubic feet is the average of cubic feet
at the beginning and the end of the period; for periods beginning on or after
January 1, 1995, average cubic feet is the average of the cubic feet at the
end of each month in such period.
45
<PAGE>
The following table illustrates the Company's improvement in labor
productivity from 1991 to 1995:
ANALYSIS OF LABOR PRODUCTIVITY
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------------
PRO FORMA
1991 1992 1993 1994 1995 1995(A)
------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cubic Feet Under Management
Per Employee(b)............ 18,702 19,961 23,033 24,405 24,521 25,353
EBITDA Per Employee(c)...... $15,916 $18,174 $19,537 $20,014 $22,379 $32,655
Number of Employees at End
of Period.................. 741 814 826 908 1,204 1,369
</TABLE>
- --------
(a) Pro forma cubic feet under management is equal to (i) cubic feet of
records under management as of December 31, 1995, plus (ii) cubic feet of
records under management on the closing of each acquisition consummated
during 1996, plus (iii) the number of cubic feet of records expected to
be added upon the closing of the Pending Acquisitions. Pro forma number
of employees equals (a) the actual number of employees as of the end of
1995, plus (b) the number of employees added as a result of the 1996
acquisitions, plus (c) the number of employees expected to be added upon
the closing of the Pending Acquisitions, less (d) the number of employees
from (b) and (c) that were eliminated in the Company's pro forma
calculations. See Note (2) to Notes to Pro Forma Condensed Consolidated
Statement of Operations. Pro forma EBITDA gives effect to the completed
1996 acquisitions, the Pending Acquisitions, the offering of the Original
Notes, the Transactions and the application of the net proceeds from the
sale of the Original Notes, as if each had occurred as of January 1,
1995. See "Use of Proceeds" and "Pro Forma Financial Data."
(b) Based on end of period cubic footage under management and end of period
number of employees.
(c) Based on the average of the number of employees at the beginning and end
of period.
The Company is consolidating certain individual warehouses into larger, more
efficient regional facilities, which generate economies of scale in both labor
and occupancy costs. The majority of the Company's available storage capacity
is in two new facilities located in Massachusetts and New Jersey. These
facilities have high storage densities (cubic feet of storage capacity divided
by square footage) which allow the Company to allocate its fixed real estate
costs over a larger revenue base and increase its storage capacity per
employee. The Massachusetts and New Jersey facilities, when fully occupied,
will have over 17 million cubic feet of combined storage capacity, and as a
result, warehouse utilization has declined to approximately 59% from
historical levels of between 70% and 80%. The added capacity is expected to
satisfy the Company's growth requirements in its Northeast region for several
years.
In addition to the reduction in rental expense expected to result from the
Real Estate Transactions, the Company has attempted to reduce administrative
expenses as it grows. During 1995, the Company implemented a new medical plan
which reduced its health care expenditures per employee by over 30% annually
while maintaining comparable coverage levels. The Company also reduced its
telephone rates through a competitive bid process and is reviewing other areas
for cost savings.
The Company's depreciation and amortization charges result primarily from
the capital-intensive nature of its business and the acquisitions the Company
has completed. The principal components of depreciation relate to shelving,
facilities and leasehold improvements, equipment for new facilities and
computer systems. Amortization primarily relates to goodwill, deferred
financing costs and noncompetition agreements arising from acquisitions and
client acquisition costs. The Company has accounted for all of its
acquisitions under the purchase method. Since the purchase price for records
management companies is usually substantially in excess of the fair market
value of their assets, these purchases have given rise to significant goodwill
and, accordingly, significant levels of amortization. Although amortization is
a non-cash charge, it does decrease reported net income. Accordingly, as the
Company expands by making such acquisitions, amortization charges will
increase, thereby continuing to affect net income negatively.
Capital Expenditure Requirements
The majority of the Company's capital expenditures are related to expansion.
The largest single component is the purchase of shelving which is directly
related to the addition of new records. Shelving costs total approximately
$2.00 per cubic foot on a fully installed basis. Shelving has a relatively
long life and rarely needs
46
<PAGE>
to be replaced. Most of the Company's storage facilities (both in number and
square feet) are leased, but the Company will purchase facilities on an
opportunistic basis. New facilities (leased or purchased) require certain
improvements such as installation of lighting and security systems and other
storage related modifications. The Company's data processing capital
expenditures are also largely related to growth. As new facilities are added,
on-site computer enhancements are needed.
In 1995, over 80% of total capital expenditures of $16.3 million was related
to expansion items. Capital expenditures consisted of $7.2 million for new
shelving, $5.1 million for new facility purchases and related improvements,
$1.6 million for data processing, $1.5 million for leasehold and building
improvements, and $0.9 million for the purchase of transportation, warehouse
and office equipment. Of the total 1995 capital expenditures, approximately
$2.5 million was for upgrading and restructuring of existing facilities to
accommodate growth or for maintenance capital expenditures.
Since the majority of the Company's capital expenditures are growth related,
the Company has the ability to adjust a major component of its use of funds by
slowing its rate of growth. Under a slow growth strategy, the Company's
capital expenditures would be significantly reduced, as minimal additional
shelving and other expansionary capital expenditures would be required. The
Company capitalizes, as client acquisition costs, certain costs related to
new, large multi-year storage contracts. Client acquisition costs totaled $2.9
million during 1995 and included sales commissions and certain client move-in
costs. Client acquisition costs are amortized over six years, the average
initial contract term.
Extraordinary Losses
To provide capital to fund its growth oriented business strategy, the
Company has incurred substantial indebtedness. The Company has completed
several expansions of its credit facilities, primarily utilizing bank and
insurance company debt, which have resulted in one-time charges including the
repurchase of warrants, prepayment penalties and the write-off of deferred
financing costs aggregating $18.4 million from 1993 to 1995. Similarly, the
Company will recognize a one-time charge of approximately $2.0 million in the
third quarter of 1996 from the write-off of deferred financing costs in
connection with the repayment of the existing indebtedness in such quarter.
See "Risk Factors--Non-Recurring Charges; Expected Loss in Third Quarter of
1996."
Results of Operations
The following table sets forth, for the periods indicated, information
derived from the Company's consolidated statements of operations, expressed as
a percentage of revenue. There can be no assurance that the trends in revenue
growth or operating results shown below will continue in the future.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------ ----------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues:
Storage..................... 57.4% 57.0% 58.2% 58.3% 57.9%
Service and storage material
sales...................... 42.6% 43.0% 41.8% 41.7% 42.1%
-------- -------- -------- ------- -------
Total revenues.............. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales, excluding de-
preciation and amortiza-
tion........................ 61.9% 59.8% 58.3% 58.2% 57.4%
Selling, general and adminis-
trative..................... 16.3% 19.2% 16.9% 17.5% 16.2%
Depreciation and amortiza-
tion........................ 9.4% 10.2% 8.6% 9.7% 9.2%
Consulting payments to re-
lated parties............... 0% 0.6% 0.5% 0.6% 0%
-------- -------- -------- ------- -------
Operating income............ 12.4% 10.2% 15.7% 14.0% 17.2%
Interest expense............. 8.4% 8.7% 10.1% 9.3% 9.7%
-------- -------- -------- ------- -------
Income (loss) before ex-
traordinary loss........... 4.0% 1.5% 5.6% 4.7% 7.5%
Extraordinary loss........... 12.5% 7.2% 3.4% 0% 0%
-------- -------- -------- ------- -------
Net income (loss)........... (8.5%) (5.7%) 2.2% 4.7% 7.5%
======== ======== ======== ======= =======
EBITDA...................... 21.8% 21.0% 24.8% 24.3% 26.5%
======== ======== ======== ======= =======
</TABLE>
47
<PAGE>
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Storage revenues increased from $26.0 million in the six months ended June
30, 1995 to $35.5 million in the six months ended June 30, 1996, an increase
of $9.5 million or 36.6%. Service and storage material sales revenues
increased from $18.6 million in the six months ended June 30, 1995 to $25.8
million in the six months ended June 30, 1996, an increase of $7.2 million or
38.9%.
Total revenues increased from $44.6 million in the six months ended June 30,
1995 to $61.3 million in the six months ended June 30, 1996, an increase of
$16.7 million or 37.6%. Seven acquisitions completed from July 1995 to June
1996 accounted for $12.3 million or 73.7% of such increase in total revenues.
The balance of the revenue growth resulted from net increases in cubic feet
stored from existing customers and from sales to new customers, partially
offset by the reduction of records of a major customer pursuant to a records
destruction program recommended by the Company pursuant to a consulting
agreement.
The monthly average cubic feet of storage increased approximately 34.2% for
the first six months of 1996 as compared to the first six months of 1995, from
approximately 23.7 million cubic feet to approximately 31.8 million cubic
feet.
Cost of sales (excluding depreciation and amortization) increased from $25.9
million in the six months ended June 30, 1995 to $35.2 million in the six
months ended June 30, 1996, an increase of $9.3 million or 35.9%, but
decreased slightly as a percentage of total revenues from 58.2% in 1995 to
57.4% in 1996. The $9.3 million increase resulted primarily from an increase
in cubic feet stored from internal growth and acquisitions. The decrease as a
percentage of total revenues was due primarily to operating efficiencies
partially offset by the effect of the severe winter weather in 1996 as
compared to 1995.
Selling, general and administrative expenses increased from $7.8 million in
the six months ended June 30, 1995 to $9.9 million in the six months ended
June 30, 1996, an increase of $2.1 million or 26.8%, but decreased as a
percentage of total revenues from 17.5% in 1995 to 16.2% in 1996. The $2.1
million increase was due primarily to increases in administrative staffing,
including increases due to acquisitions.
As a result of the foregoing factors, EBITDA increased from $10.8 million in
the six months ended June 30, 1995 to $16.2 million in the six months ended
June 30, 1996, an increase of $5.4 million or 50% and increased as a
percentage of total revenues from 24.3% in 1995 to 26.5% in 1996.
Depreciation and amortization expenses increased from $4.3 million in the
six months ended June 30, 1995 to $5.6 million in the six months ended June
30, 1996, an increase of $1.3 million or 30.4%, but decreased as a percentage
of total revenues from 9.7% in 1995 to 9.2% in 1996. Depreciation and
amortization expenses continued to increase primarily as a result of the
Company's acquisitions and capital investments for shelving, improvements to
records management facilities, information systems and client acquisition
costs.
Interest expense increased from $4.2 million in the six months ended June
30, 1995 to $6.0 million in the six months ended June 30, 1996. This increase
was due primarily to increased levels of indebtedness, primarily to finance
acquisitions, as well as higher interest rates. The Company's future interest
expense will increase significantly as a result of the higher interest rate on
the Exchange Notes and additional indebtedness the Company may incur to
finance possible future growth.
As a result of the foregoing factors, net income increased from $2.1 million
in the six months ended June 30, 1995 to $4.7 million in the six months ended
June 30, 1996, an increase of $2.6 million or 121.6%, and increased as a
percentage of total revenues from 4.7% in 1995 to 7.6% in 1996.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Storage revenues increased from $47.1 million in 1994 to $55.5 million in
1995, an increase of $8.4 million or 17.8%. Service and storage material sales
revenues increased from $35.5 million in 1994 to $39.9 million in 1995, an
increase of $4.4 million or 12.4%.
48
<PAGE>
Total revenues increased from $82.6 million in 1994 to $95.4 million in
1995, an increase of $12.8 million or 15.5%. Almost one-half of the total
revenue growth resulted from sales to new customers and increases in cubic
feet stored from existing customers, partially offset by the reduction of
records of a major customer pursuant to a records destruction program
recommended by the Company pursuant to a consulting agreement. Five
acquisitions completed from February 1995 to October 1995 accounted for $7.4
million (or 57.8%) of the increase.
The annual average cubic feet stored increased from approximately 20.6
million in 1994 to approximately 25.1 million in 1995, an increase of 21.8%.
The percentage increase in average cubic feet stored was greater than that of
total revenues for the reasons discussed in the second paragraph under "--
General--Revenues" above.
Cost of sales (excluding depreciation and amortization) increased from $49.4
million in 1994 to $55.6 million in 1995, an increase of $6.2 million or
12.6%, but decreased as a percentage of total revenues from 59.8% in 1994 to
58.3% in 1995. The $6.2 million increase was due primarily to increases in
storage volume and the associated cost of additional storage capacity. The
decrease as a percentage of total revenues was due primarily to increased
operating and storage efficiencies, in part reflecting the full implementation
of the PLUS(R) system during the first quarter of 1995.
Selling, general and administrative expenses increased from $15.9 million in
1994 to $16.1 million in 1995, an increase of $0.2 million or 1.3%, and
decreased as a percentage of total revenues from 19.2% in 1994 to 16.9% in
1995. The decrease as a percentage of total revenues was due to operating
efficiencies and the implementation of programs to control and reduce certain
administrative expenses.
As a result of the foregoing factors, EBITDA increased from $17.4 million in
1994 to $23.6 million in 1995, an increase of $6.2 million or 35.6%, and
increased as a percentage of total revenues from 21.0% in 1994 to 24.8% in
1995. The increase as a percentage of total revenues reflected growth in the
Company's business, economies of scale and increased operating efficiencies.
Depreciation and amortization expenses decreased from $8.4 million in 1994
to $8.2 million in 1995, a decrease of $0.2 million or 2.4%, and decreased as
a percentage of total revenues from 10.2% in 1994 to 8.6% in 1995. This
decrease, both in dollars and as a percentage of total revenues, was due
primarily to the Company's revision of the estimated useful lives of certain
long-term assets, effective January 1, 1995, to more accurately reflect the
estimated economic lives of the related assets and to be more in conformity
with industry practices. The aggregate effect of adopting these revised lives
was to decrease amortization and depreciation expense by approximately $4.9
million. This change more than offset what would have been an increase in
depreciation charges resulting from capital expenditures for shelving and
improvements to records management facilities and information systems and the
amortization of goodwill from the Company's acquisitions.
Interest expense increased from $7.2 million in 1994 to $9.6 million in
1995, an increase of $2.4 million or 33.3%, due primarily to higher levels of
indebtedness. The Company recorded extraordinary losses of $6.0 million in
1994 and $3.3 million in 1995 related to the early extinguishment of debt as a
result of refinancing and expanding its existing credit agreement in 1994 and
again in 1995.
As a result of the foregoing factors, net income was $2.1 million in 1995
compared to a net loss of $4.8 million in 1994.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Storage revenues increased from $42.1 million in 1993 to $47.1 million in
1994, an increase of $5.0 million or 11.9%. Service and storage material sales
revenues increased from $31.3 million in 1993 to $35.5 million in 1994, an
increase of $4.2 million or 13.4%.
49
<PAGE>
Total revenues increased from $73.4 million in 1993 to $82.6 million in
1994, an increase of $9.2 million or 12.5%. The substantial majority of the
revenue growth resulted from sales to new customers and increases in cubic
feet stored from existing customers. Four acquisitions completed from April to
October 1994 accounted for $1.0 million (or 10.9%) of the increase.
The annual average cubic feet stored increased from approximately 17.6
million in 1993 to approximately 20.6 million in 1994, an increase of 17.1%.
The percentage increase in cubic feet stored was greater than that of total
revenues for the reasons discussed in the second paragraph under "--General--
Revenues" above.
Cost of sales (excluding depreciation and amortization) increased from $45.4
million in 1993 to $49.4 million in 1994, an increase of $4.0 million or 8.8%,
but decreased as a percentage of total revenues from 61.9% in 1993 to 59.8% in
1994. The $4.0 million increase was due primarily to increases in storage
volume and the cost of additional storage capacity. The decrease as a
percentage of total revenues was due primarily to increased storage
efficiencies.
Selling, general and administrative expenses increased from $12.0 million in
1993 to $15.9 million in 1994, an increase of $3.9 million or 32.5%, and
increased as a percentage of total revenues from 16.3% in 1993 to 19.2% in
1994. The increase in such expenses was due primarily to increased staffing
principally related to the Company's investment in its corporate and sales
infrastructure, the cost of converting its facilities to the PLUS(R) system,
and the need to operate duplicate information systems in this period.
As a result of the foregoing factors, EBITDA increased from $16.0 million in
1993 to $17.4 million in 1994, an increase of $1.4 million or 8.8%, but
decreased as a percentage of total revenues from 21.8% in 1993 to 21.0% in
1994.
Depreciation and amortization expenses increased from $6.9 million in 1993
to $8.4 million in 1994, an increase of $1.5 million or 21.7%, and increased
as a percentage of total revenues from 9.4% in 1993 to 10.2% in 1994. This
increase, both in dollars and as a percentage of total revenues, was due
primarily to an increase in depreciation charges resulting from capital
expenditures for shelving and improvements to records management facilities
and information systems and amortization of goodwill resulting from
acquisitions.
Interest expense increased from $6.2 million in 1993 to $7.2 million in
1994, an increase of $1.0 million or 16.1%, due primarily to increased levels
of indebtedness. The Company incurred an extraordinary loss in 1994 of $6.0
million related to the early extinguishment of debt and cancellation of
warrants when it refinanced and expanded its existing credit facility in 1994
as compared to a $9.2 million extraordinary loss in 1993 for the same reasons.
As a result of the foregoing factors, the net loss decreased from $6.2
million in 1993 to $4.8 million in 1994, a decrease of $1.4 million and
decreased from 8.5% of total revenues to 5.7% of total revenues.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of capital have been cash flows from
operations and borrowings under various revolving credit facilities and other
senior indebtedness. Historically, the Company's primary uses of capital have
been acquisitions, capital expenditures and client acquisition costs.
The Company's expansion program has negatively affected shareholders'
deficit and the ratio of earnings to fixed charges, primarily as a result of
extraordinary losses related to the early extinguishment of debt as a result
of refinancings, increased interest expense from borrowings, increased
depreciation and amortization expenses and the amortization of goodwill.
Capital Investments
For 1993, 1994 and 1995 and the six months ended June 30, 1996, capital
expenditures were $5.8 million, $6.4 million, $16.3 million and $7.7 million,
respectively, and client acquisition costs were $2.8 million, $1.9
50
<PAGE>
million, $2.2 million and $2.3 million, respectively. Capital expenditures for
1995 were comprised of $7.2 million for new shelving, $5.1 million for new
facility purchases and related improvements, $1.6 million for data processing,
$1.5 million for leasehold and building improvements and $0.9 million for the
purchase of transportation, warehouse and office equipment. In each period,
the largest component of capital expenditures was for the purchase and
installation of shelving to store additional records. The Company's Canadian
subsidiary purchased a facility in Montreal for approximately Cdn $5.15
million (approximately U.S. $3.8 million). The Canadian subsidiary financed
the purchase through a combination of mortgage financing and the proceeds of
the Original Notes offering.
Excluding the Transactions and the Pending Acquisitions, the Company expects
capital expenditures for 1996 will approximate $27.0 million, including $3.8
million for the purchase of the Montreal facility and $6.0 million to exercise
an option to purchase a storage facility currently being leased by the
Company. The Company expects client acquisition costs for 1996 will
approximate $5.0 million. The non-real estate 1996 estimated capital
expenditures are primarily growth related and, like estimated client
acquisition costs, are based on assumed continued growth of the Company's
business consistent with levels for the first half of 1996. There can be no
assurance that the Company's business will continue to grow at such rate, and
for any variance there will be a corresponding change in growth-related
capital expenditures. The Company expects to fund such expenditures with cash
flows from existing operating activities and by borrowings under the Credit
Facility.
Recent and Pending Acquisitions
In order to capitalize on industry consolidation opportunities, the Company
has actively pursued acquisitions since the beginning of 1993, which has
significantly impacted liquidity and capital resources through the investment
of approximately $98.1 million in acquisitions. The Company has historically
financed its acquisitions with borrowings under its credit agreements and with
cash flows from existing operating activities.
To the extent that future acquisitions are financed by additional borrowings
under the Credit Facility or other borrowings, the resulting increase in debt
and interest expense could have a negative effect on such measures of
liquidity as the ratio of debt to equity and the ratio of earnings to fixed
charges.
Sources of Funds
Net cash provided by operating activities totaled $8.0 million, $11.0
million, $17.5 million and $6.6 million for 1993, 1994 and 1995 and the six
months ended June 30, 1996, respectively. The $3.0 million increase from 1993
to 1994 is primarily accounted for by a $1.4 million increase in EBITDA, which
was partially offset by a $1.0 million increase in interest expense and no
increase in working capital in 1994 as compared to an increase in working
capital of $3.2 million in 1993. The $6.5 million increase from 1994 to 1995
is primarily comprised of a $6.2 million increase in EBITDA and a $3.4 million
decrease in working capital, partially offset by a $2.4 million increase in
interest expense.
Net cash flows provided by financing activities were $5.8 million, $2.8
million, $34.2 million and $25.6 million for 1993, 1994 and 1995 and the six
months ended June 30, 1996, respectively. In 1993, the Company entered into a
$75.0 million credit agreement which allowed it to refinance its existing
indebtedness, cancel the warrants issued in connection with the acquisition of
Leahy Business Archives in 1990 and provided for working capital. In 1994, the
credit agreement was expanded to $120.0 million and included a substantial
acquisition facility. In 1995, the credit agreement was expanded to $170.0
million, including a substantial acquisition facility, and provided funds for
the acquisition of PLC Command in Canada.
The Company entered into the Credit Facility on August 13, 1996 which
provides $100.0 million in U.S. dollar borrowings and Cdn $35.0 million in
Canadian dollar borrowings. The Credit Facility contains a number of financial
and other covenants restricting the Company's ability to incur additional
indebtedness and make certain types of expenditures. Covenants in the
Indenture governing the Notes will restrict borrowings under the Credit
Facility. As of June 30, 1996, after giving effect to the acquisitions
completed after June 30, 1996 and to
51
<PAGE>
the Pending Acquisitions, the Company could have borrowed $27.4 million under
the Credit Facility. The Company expects that its borrowing capacity under the
Credit Facility will increase as it makes additional acquisitions because the
Credit Facility takes into account pro forma EBITDA (as defined in the Credit
Facility) from acquisitions in determining borrowing capacity under the
facility. See "Description of Credit Facility" and "Description of the Notes--
Certain Covenants--Limitation on Additional Indebtedness."
As a Subchapter S corporation, the Company does not pay federal income
taxes. However, the Company does make distributions to its shareholders to
allow them to pay federal and state taxes related to the Company's taxable
income. As of December 31, 1995, the shareholders for federal tax purposes had
net operating loss carryforwards of approximately $18.5 million. Consequently,
there have been minimal distributions to shareholders for tax payments in
recent years.
Future Capital Needs
The Company's ability to generate cash adequate to fund its needs depends
primarily on the results of its operations and the availability of financing.
Management believes that cash flow from operations in conjunction with the
proceeds of the Original Notes and borrowings under the Credit Facility will
be sufficient for the foreseeable future to meet debt service requirements and
to make possible future acquisitions and capital expenditures. Depending on
the pace of acquisitions, the Company may elect to seek additional financing
during the next two years. The Company anticipates that any such financing
will be debt financing, including the issuance of debt securities. However,
depending on market conditions and the preferences of acquisition candidates,
the Company might consider issuing equity securities. There can be no
assurance that the Company will be able to obtain any future financing, if
required, or that the terms for any such future financing would be favorable
to the Company.
52
<PAGE>
BUSINESS
GENERAL
Pierce Leahy is the largest archive records management company in North
America, as measured by its approximately 38 million cubic feet of records
currently under management. The Company operates a total of 118 records
management facilities of which 105 are in the United States, serving 48 local
markets, including the 15 largest U.S. markets. In addition, the Company
operates 13 records management facilities in five of Canada's six largest
markets. The Company provides records management services to a diversified
group of over 15,000 customer accounts in a variety of industries including
financial services, manufacturing, transportation, healthcare and law. The
Company believes it is the most technologically advanced records management
company in the industry by virtue of its Pierce Leahy User Solution (PLUS(R))
computer system. The PLUS(R) system fully integrates the Company's records
management, data retrieval and billing functions on a centralized basis
through the use of proprietary, real time software. Management believes the
PLUS(R) system allows the Company to efficiently manage records in multiple
markets for national customers, rapidly integrate acquisitions of records
management companies and maintain a low-cost operating structure.
Pierce Leahy is a full-service provider of records management and related
services, enabling customers with the ability to outsource their data and
records management functions. The Company offers storage for all major media,
including paper (which has typically accounted for approximately 95% of the
Company's storage revenues), computer tapes, optical discs, microfilm, video
tapes and X-rays. In addition, the Company provides next day or same day
records retrieval and delivery, allowing customers prompt access to all stored
material. The Company also offers a wide range of other data management
services, including customer records management programs, imaging services and
records management consulting services. The Company's storage and related
services are typically provided pursuant to annual or multi-year contracts
that include recurring monthly storage fees, which continue until such records
are permanently removed (for which the Company charges a fee), and additional
charges for services such as retrieval on a per unit basis. In 1995, revenues
from storage and from service and storage material sales accounted for 58% and
42% of the Company's total revenues, respectively.
The Company believes that it benefits from several positive industry
fundamentals, including (i) the diversified and recurring nature of storage
and service revenues, (ii) the ability of larger records management companies
to achieve economies of scale in both labor and real estate costs, (iii) the
continued trend toward corporate outsourcing of records management functions,
(iv) low maintenance capital expenditure requirements, (v) the historically
non-cyclical nature of the records management industry and (vi) the ongoing
consolidation of records management companies. The Company derives the
majority of its revenues from monthly fees charged for the storage of records.
The recurring nature of these revenues, which are derived from a diversified,
stable customer base (none of which accounted for more than 3% of total
revenues during 1995) and require relatively little direct ongoing labor and
marketing expenses, contributes significantly to the Company's EBITDA. As the
Company's volume of records under management grows, the substantial
investments made in its PLUS(R) system and centralized support functions are
amortized over a larger base of business, creating economies of scale. These
operating efficiencies, coupled with the Company's entry into new markets,
allow the Company to take advantage of the trend by larger companies with
multiple locations to outsource their records management functions. The
Company's capital expenditures are primarily growth related and are comprised
substantially of new shelving and other expenditures related to storing and
servicing new records. Pierce Leahy has not experienced a reduction of its
business as a result of economic downturns, in fact, management believes that
the outsourcing of records management may accelerate during such times as a
result of increased customer focus on noncore operating costs. Finally,
management believes the Company is well positioned to continue to participate
in the industry consolidation due to its ability to rapidly and efficiently
integrate in-market and new market acquisitions as a result of its PLUS(R)
system and centralized corporate administrative functions.
53
<PAGE>
THE RECORDS MANAGEMENT INDUSTRY
According to a 1994 study by the ACRC, an industry trade group with over 500
members, approximately 2,800 companies offer records storage and related
services in North America. The Company believes that only 25% of the potential
market outsources its records management functions and that approximately 75%
is still "unvended," or internally managed. The Company estimates that the
North American vended records management industry generates annual revenues in
excess of $1.0 billion. Management believes that only four companies offer
records storage and services on a national basis in the United States and only
two companies do so in Canada. Other industry participants operate regionally,
or more typically, in single markets.
According to industry sources, an estimated four trillion documents are
created each year in the United States, many of which must be retained and
remain accessible for many years. Saved documents, or records, generally fall
into two categories: active and inactive. Active records refer to information
that is frequently referenced and usually stored on-site by the originator.
Inactive records are not needed for frequent access, but must be retained for
future reference, legal requirements or regulatory compliance. Inactive
records, which the Company estimates comprise approximately 80% of all
records, are the principal focus of the records management industry.
Management is not aware of any definitive information about the size or nature
of the North American market (vended and unvended, active and inactive).
Estimates of such numbers and percentages contained in this Prospectus have
been developed by the Company from internal sources and reflect the Company's
current estimates; however, no assurance can be given regarding the accuracy
of such estimates.
The Company believes that the records management industry is characterized
by the following trends:
Increasing Production of Paper. Increasingly widespread technologies such as
facsimiles, copiers, personal computers, laser printers and advanced software
packages have enabled organizations to create, copy and distribute documents
more easily and broadly. In spite of new "paperless" technologies (including
the Internet and "e-mail"), information remains predominantly paper based, and
such technologies have actually promoted the desire for hard copies of such
electronic information.
Expanded Record Keeping Needs. While technology has augmented the growth of
paper generation, several external forces and concerns have played an
important role in organizations' decisions to store and retain access to
records. For example, the continued growth of regulatory requirements and the
proliferation of litigation has resulted in increased volumes and lengthened
holding periods of documents. Retained records are also remaining in storage
for extended periods of time because the process of determining which records
to destroy is time consuming and often more costly in the short-term than
continued storage.
Movement Towards Outsourcing. Outsourcing of internal records management
functions represents the largest single source of new business for records
management companies. The Company believes that as more organizations become
aware of the advantages of professional records management, such as net cost
reductions and enhanced levels of service, the records management industry
will continue to gain a growing portion of the unvended segment. For example,
it may be more cost effective for a company to store inactive records at an
off-site facility rather than at a corporate headquarters where real estate
costs can be substantially greater. Moreover, third party records management
companies are able to create real estate and labor efficiencies relative to a
single customer by spreading multiple customers' records storage needs over a
single fixed cost base.
Industry Consolidation. The records management industry is undergoing a
period of consolidation as larger, better capitalized industry participants
acquire smaller regional or single-market participants. Management believes
that this trend is driven by larger records management companies' desire to
add to their revenue base quickly and cost effectively, achieve broader market
presence and realize economies of scale, especially with respect to labor,
real estate and management information expenses. Industry consolidation also
provides private owners of smaller records management companies the ability to
obtain liquidity.
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<PAGE>
BUSINESS STRATEGY
Pierce Leahy's business strategy is to become the preferred provider of
records management services in each of its markets by offering premium
services while maintaining a low-cost operating structure. The Company seeks
to expand its business in current and new markets through increased business
from existing customers, the addition of new customers and acquisitions of
other records management companies. The Company expects to continue its growth
and enhance its market position by implementing its strategy based on the
following elements:
Pursuing National and Unvended Customers. The Company focuses its sales and
marketing efforts on pursuing large regional and national accounts, typically
through multi-year contracts, where the Company believes its national presence
and sophisticated systems provide it with a competitive advantage. The
greatest source of potential business is from large organizations which are
currently managing their records internally. These organizations are
increasingly outsourcing such noncore activities, enabling their management to
focus on their core business and to reduce capital requirements. For example,
during the first eight months of 1996, the Company entered into 53 contracts,
each to manage initially at least 10,000 cubic feet of records, including
eight contracts for at least 100,000 cubic feet of records.
Remaining a Low-Cost Operator. The Company strives to offer premium services
to its customers while remaining a low-cost operator through achieving
economies of scale in real estate, labor, transportation, management
information and administrative expenses. The Company believes that it is one
of the few records management companies with the size and resources to realize
significant economies of scale in these areas.
Using Sophisticated Centralized Systems. The Company believes that its
proprietary PLUS(R) system is the most technologically advanced computer
system in the industry, and allows the Company to maintain a centralized
management approach to its business. All customer calls are fielded by one of
the Company's two centralized customer service departments located at the
Company's U.S. and Canadian corporate headquarters which can take customer
calls 24 hours a day, seven days a week. Routine pick-up and delivery requests
are dispatched directly by customer service representatives to local
facilities as directed by PLUS(R). All billing functions are also handled
centrally by PLUS(R) system software. The Company's centralized customer
service and billing functions eliminate the need for redundant functions at
individual facilities. PLUS(R), in tandem with a centralized order processing
organization and local field support personnel, enables the Company to provide
a high and consistent level of service (24 hours a day, seven days a week) to
its customers in a cost-effective manner.
Although PLUS(R) is centralized so that the customer has real-time access to
the database, the system offers local management flexibility in meeting a
customer's needs. Through a variety of pre-programmed options, local
management can customize the system to enhance its utility to different types
of customers. For example, PLUS(R) offers (i) specialized inventory reporting
formats (e.g., by insurance policy, law case file number or mortgage file),
(ii) specialized invoicing (e.g., to local division with information reporting
to the customer's corporate office, and vice versa, and departmental
invoicing), (iii) pre-set inventory review dates based on the assigned
retention period for a particular class of document and (iv) authorized users
with security passwords.
Enhancing Facility Efficiency. The PLUS(R) system allows the Company to
enhance the efficiency of its facilities while reducing fixed and operating
costs and maintaining high customer service levels. PLUS(R) provides the
Company with a real time inventory tracking system, using sophisticated bar-
coding technology, designed to pinpoint the exact location of any individual
customer's records within any facility in North America. This system
eliminates the need to designate permanent locations for an individual
customer's records within a facility, enabling records to be stored wherever
space is available and to be positioned within the Company's facilities based
on retrieval frequency, thereby reducing labor costs.
The system also provides the local archive manager a number of pre-
programmed options for managing the archive workforce (e.g., where to shelve
new boxes in a labor efficient manner, the sequence in which to perform
55
<PAGE>
non-rush deliveries), as well as providing management comprehensive labor
productivity and warehouse utilization data to monitor archive efficiency.
ACQUISITION HISTORY AND GROWTH STRATEGY
Pierce Leahy believes that the consolidation trend occurring in the North
American records management industry will continue and that acquisitions will
remain an important part of the Company's growth strategy. Acquisitions
provide the Company with the ability to expand and achieve additional
economies of scale. Since 1991, the Company has successfully completed and
integrated 21 acquisitions, totaling approximately 8.9 million cubic feet of
records at the time of acquisition. From July 1994 through December 31, 1995,
approximately $45.2 million (including purchase price, capital expenditures
and related integration costs) was invested in eight acquisitions, which
produced an incremental $11.0 million of EBITDA on a full-year or annualized
basis during the first year following acquisition. In each of these
acquisitions, staffing levels were immediately reduced with further reductions
typically taking place in the following months as general and administrative
functions were integrated into the Company's corporate organization.
The following table summarizes the market or markets for each acquisition
since 1990 and its date of acquisition:
<TABLE>
<CAPTION>
DATE OF
ACQUISITION MARKET ACQUISITION
----------- ------ -----------
<S> <C> <C>
Leahy Business Archives Multiple* February 1990
Muhlenhaupt Records Management Long Island April 1992
Arcus Data New York July 1992
File Away Baltimore/Washington, D.C. July 1992
Taylor Document Richmond August 1992
Data Management of Tennessee Nashville April 1993
Command Records Chicago June 1994
Fidelity Archives Philadelphia July 1994
ProFilers Jacksonville October 1994
Fileminders Jacksonville October 1994
Vital Archives New York February 1995
Bestway Archival Services Miami May 1995
Curtis Archives Seattle August 1995
Command Records Service Canada** October 1995
AMK Documents Phoenix October 1995
Brambles (Ottawa Division) Ottawa March 1996
The File Cabinet Atlanta March 1996
File Box Austin April 1996
Security Archives Dallas May 1996
Archives America of San Diego San Diego July 1996
Security Archives of Denver Denver August 1996
Data Protection Services Birmingham September 1996
</TABLE>
- --------
* Los Angeles, Houston, New York, New Jersey, Boston, Connecticut, Chicago,
Dallas and Miami/Ft. Lauderdale.
** Toronto, Montreal, Vancouver, Ottawa and Calgary.
The Company's centralized organizational structure and management
information systems are essential elements for both the successful integration
of acquired records management operations and the ability of the Company to
achieve economies of scale. The rapid conversion of an acquired company's
records into the PLUS(R) system and the integration of all corporate functions
(order processing, accounting, payroll, etc.) into Pierce Leahy's corporate
organization in an efficient, standardized process allows the Company to
realize immediate cost savings as a result of reduced labor and overhead costs
and improved facility utilization.
The Company targets potential acquisitions in both its existing markets (in-
market) and in new markets which it is not yet servicing. In-market
acquisitions typically provide the highest degree of operating leverage since
in addition to eliminating redundant overhead, such as overlapping delivery
runs, an acquired company's
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<PAGE>
storage facility can, when possible, be consolidated into an existing Company
facility within the same market area. New market acquisitions allow the
Company to both expand its business generally and enhance its ability to serve
national customer accounts.
PENDING ACQUISITIONS
The Company has entered into agreements to purchase records management
companies in Denver, Calgary and Las Vegas for an aggregate purchase price of
approximately $18.1 million (the "Pending Acquisitions"). The closing of each
Pending Acquisition is subject to various conditions, and there can be no
assurance that any Pending Acquisition will be completed. See "Risk Factors--
Risks Associated with Acquisitions." The Exchange Offer is not contingent upon
completion of the Pending Acquisitions, and no Pending Acquisition is
dependent upon the completion of the Exchange Offer. The Pending Acquisitions
are expected to be financed with the proceeds of the issuance of the Original
Notes.
DESCRIPTION OF SERVICES
Pierce Leahy's records management services are focused on storage, retrieval
and data management of hard copy documents.
Storage
Storage revenues have averaged 58% of total revenues during the Company's
last five fiscal years. Nearly all of the Company's storage fees are derived
from hard copy storage. During 1995, Pierce Leahy generated 93% of its storage
revenues from hard copy storage and 7% from vault storage for special items
such as computer tapes, X-rays, films or other valuable items. Storage charges
typically are billed monthly on a per cubic foot basis.
The Company tracks all of its records stored in cartons, from initial pick-
up through permanent removal, with the use of the PLUS(R) system. Bar-coded
boxes are packed by the customer and transported by the Company's
transportation department to the appropriate facility where they are scanned
and placed into storage at the locations designated by PLUS(R). At such time,
the Company's data input personnel enter the data twice (i.e., double key
verifying) to enhance the integrity of the information entered into the
system.
The Company offers secure, climate-controlled facilities for the storage of
non-paper forms of media such as computer tapes, optical discs, microfilm,
video tapes and X-rays. These types of media often require special facilities
due to the nature of the records. The Company's storage fees for non-paper
media are higher than for typical paper storage. The Company also provides
ancillary services for non-paper records in the same manner as it provides for
its hard copy storage operations.
Service and Product Sales
The Company's principal services include adding records to storage,
temporary removal of records from storage, replacing temporarily removed
records and permanent withdrawals from storage or destruction of records.
Pick-up and delivery of customer records can be tailored to a customer's
specific needs and range from standard next-day service (requests received by
3:30 p.m. are delivered or picked up the next day) to emergency service
(typically within three hours or less). Pick-up and delivery operations are
supported by the Company's fleet of over 300 owned or leased vehicles. The
Company charges for pick-up and delivery services on a per-unit basis
depending on the immediacy of delivery requested.
A small percentage of the Company's customers manage their records on a file
by file basis, allowing the customer direct access and traceability of a
specific file (rather than on a box by box basis). The Company provides data
entry services to such customers to input the file by file listings into the
PLUS(R) system.
All of the Company's services are centrally coordinated by the PLUS(R)
system, permitting the Company to cost-effectively provide its customers with
a high level of service. The centralized order entry system allows
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<PAGE>
(i) efficient workload balancing as the daily "peak" call-in periods can be
spread over three time zones, (ii) centralized quality control monitoring to
increase delivery of consistent and high-quality service, and (iii) the
employment of Spanish-speaking customer service representatives whose language
skills can serve any of the Company's U.S. customers, primarily for its
markets in Florida, Texas and California, and French-speaking representatives
serving Canada.
The Company also offers a records destruction service, which provides
customers with a secure, controlled program to periodically review and remove
records which no longer need to be retained. Although boxes destroyed no
longer generate monthly storage fees, the Company charges for the destruction
of records and increases its available shelving space as a result. The Company
believes its ability to manage destruction programs for customers efficiently
also enhances its ability to attract large accounts.
In addition to providing traditional storage, customers may contract with
Pierce Leahy to manage their on-site records or file services center. Such
management services generally include providing Company personnel and/or the
Company's Recordminder(R) PC-based file management software program to manage
the customer's active files (including records storage and tracking) at the
customer's facilities, supplemented by off-site storage at the Company's
facilities. Pierce Leahy also provides consulting and other services on an
individualized basis, including advisory work for customers setting up in-
house records management systems. In addition, the Company sells cardboard
boxes and other storage containers to its customers.
MANAGEMENT INFORMATION SYSTEMS
The Company believes that PLUS(R), its core management information system,
is the most sophisticated records management system in the industry, and
provides the Company with a significant customer service and cost advantage in
attracting and retaining major national accounts in multiple cities and
acquiring other records management companies. The PLUS(R) system, together
with the Company's Recordminder(R) program (a PC-based file management program
which a customer can pay to utilize on-site at its own facilities), enables
the Company to offer its customers full life cycle records management, from
file creation to destruction, and coordinates inventory control, order entry,
billing, material sales, service activity, accounts receivable and management
reporting on a centralized basis. PLUS(R) utilizes database technology,
proprietary software and extensive bar coding in a flexible, enterprise-wide,
client/server environment.
During 1993, the Company completed an extensive two and one-half year
development program and began to install the PLUS(R) system in each of its
facilities. The Company invested approximately $8 million in developing
PLUS(R), primarily in conjunction with Andersen Consulting, together with
input from Hewlett Packard, Racal, Progress and Symbol Technologies. Company-
wide installation of PLUS(R) was completed during the first quarter of 1995.
Implementation of the PLUS(R) system has improved the Company's operating
efficiency by streamlining a number of its daily work processes:
. PLUS(R) allows the Company to locate each unit of a customer's records,
regardless of location, through an enterprise-wide, shared database and
to centrally receive and dispatch pick-up and delivery orders to the
appropriate location for processing. Management believes that no other
records management system in the industry offers such real time access
for multi-market locations.
. The PLUS(R) system reduces the number of employees required to handle
the inbound/outbound movement of boxes through the use of sophisticated
algorithms which allow archive employees to process multiple customer
requests in an efficient manner.
. PLUS(R) facilitates the integration of acquired records management
companies in an efficient, standardized process. By converting the
acquired company's records into the PLUS(R) system, Pierce Leahy is able
to reduce the labor and overhead costs associated with the acquisition,
resulting in immediate cost savings.
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<PAGE>
. The PLUS(R) system assists the Company in efficiently utilizing its
storage space by eliminating the need for permanent locations for
individual records. At any one time, approximately 2% of total cubic
feet of records managed by Pierce Leahy are temporarily returned to
customers, freeing up storage space which PLUS(R) enables the Company to
use productively. When a box is temporarily returned to a customer, a
new box may be placed in the original box's location. Upon return of the
original box to the facility, PLUS(R) automatically assigns the box a
new location.
PLUS(R) offers several additional features which enhance the Company's
customer support functions. The system is continuously updated when any
account activity is undertaken, providing customers with real time access to
information regarding box location and retrievals. The PLUS(R) system is
flexible and allows Pierce Leahy to design and implement customized records
management solutions for various industries utilizing a set of standardized
options. The PLUS(R) system's on-line customer support network allows certain
customers to place orders for both records storage and retrieval directly from
their own in-house terminals resulting in a more efficient system of records
management. PLUS(R) can also perform sophisticated searches to locate
inventory items even when the customer does not have the specific number of
the box it is seeking.
SALES AND MARKETING
During the past four years, the Company has invested significant effort in
developing its sales and marketing department, which is comprised of 61
employees in the United States and Canada. Sales representatives are trained
to sell a "total systems approach," in which a customer's records management
requirements are surveyed and evaluated in order to determine the file
management system which best meets the customer's needs. Sales representatives
are instructed to offer recommendations on how to implement a system
responsive to a particular customer's needs. Since the beginning of 1992, the
Company's sales representatives secured over 2,600 new customer accounts
comprising over eight million cubic feet of new records.
The Company's sales and marketing department is divided into five regions:
Northeast; South; Midwest; West; and Canada. The Company's Vice President,
Sales and Marketing directs five regional sales managers who are each
responsible for one of the regions. The sales force is primarily compensated
on a commission basis with incentives tied to the Company's sales goals. The
Company also uses telemarketing, direct response and print advertising to
assist in its marketing programs.
CUSTOMERS
The Company serves a diversified group of over 15,000 customers accounts in
a variety of industries, including financial services, manufacturing,
transportation, healthcare and law. The Company tracks customer accounts,
which are based on billing invoices. Accordingly, depending on how billings
have been arranged at the request of a customer, one customer may have
multiple customer accounts. None of the Company's customers accounted for more
than 4% of the Company's total revenues during any of the last three years.
The Company services all types of customers from small to medium size
companies (such as professional groups and law firms that often are located in
one market) to large Fortune 500-type companies that have operations in
multiple locations. Larger companies with multiple locations that have
performed their own records management services to date are a principal focus
for new customers by the Company. The Company believes that its presence in
multiple markets in conjunction with the PLUS(R) system enable it to provide
the sophisticated file management services frequently required by such
customers on a regional or national basis.
The Company typically enters into contracts with customers which provide for
an initial term of one or more years and provide for annual renewals
thereafter (with either party having the right to terminate the contract).
Customers are generally charged monthly storage fees until their records are
destroyed or permanently removed, for which fees are charged. In addition,
services such as file retrieval are separately charged. During 1995, less than
2% of cubic feet of records under management by the Company were permanently
removed (other than as part of an organized records destruction program). The
Company believes this relatively low
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<PAGE>
attrition rate is due to a number of factors, including satisfaction with the
Company's services as well as the effort and expense of transferring records
to another service provider or back in-house.
FACILITIES
The Company operates a total of 118 records management facilities of which
105 are in the United States, serving 48 local markets, including the 15
largest U.S. markets, and 13 facilities in Canada serving five major markets.
Of the 7.9 million square feet of floor space in the Company's records storage
facilities, approximately 36% and 64% are in owned and leased facilities,
respectively. The Company's facilities are located as follows:
<TABLE>
<CAPTION>
RECORDS
MANAGEMENT
LOCATION FACILITIES
-------- ----------
<S> <C>
United States
Alabama.......................... 2
Arizona.......................... 4
California....................... 7
Colorado......................... 6
Connecticut...................... 8
Florida.......................... 8
Georgia.......................... 4
Illinois......................... 3
Maryland......................... 2
Massachusetts.................... 7
Michigan......................... 1
Nevada........................... 1
New Jersey....................... 11
New York......................... 4
North Carolina................... 4
Pennsylvania..................... 8
Tennessee........................ 2
Texas............................ 15
Virginia......................... 3
Washington....................... 5
---
Total U.S........................ 105
===
Canada
Calgary.......................... 3
Montreal......................... 3
Ottawa........................... 2
Toronto.......................... 4
Vancouver........................ 1
---
Total Canada..................... 13
---
Total............................ 118
===
</TABLE>
In order to accommodate its growth strategy, the Company has made
significant new facility investments during the last fifteen months,
substantially increasing the Company's available storage capacity in its
Northeast region. During 1995, the Company purchased a storage facility in New
Jersey with 12 million cubic feet of storage capacity and leased (with an
option to purchase) a storage facility in Massachusetts with five million
cubic feet of storage capacity. The addition of these facilities provides the
Company with substantial excess storage capacity and is expected to satisfy
the Company's facility expansion requirements in its Northeast region for
several years.
COMPETITION
The Company believes it competes with three other large multi-market
companies in the U.S. and one in Canada, as well as a large number of local
and regional concerns. The Company believes that competition for customers is
based on price, reputation for reliability, quality of service and scope and
scale of technology, and
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<PAGE>
believes that it generally competes effectively based on these factors.
Management believes that, except for Iron Mountain Incorporated, all of these
competitors have records management revenues significantly lower than those of
the Company. The Company believes that the trend towards consolidation in the
industry will continue and the Company also faces competition in identifying
attractive acquisition candidates. In addition, the Company faces competition
from the internal document handling capability of its current and potential
customers.
The substantial majority of the Company's revenues are derived from the
storage of paper records and from related services. Alternative technologies
for generating, capturing, managing, transmitting and storing information has
been developed, many of which require significantly less space than paper.
Such technologies include computer media, microforms, audio/video tape, film,
CD-Rom and optical disc. Management believes that conversion of paper
documents into these smaller storage media is currently not cost-effective for
inactive records.
EMPLOYEES
As of June 30, 1996, the Company had 1,266 employees, including 173
employees in Canada. None of the Company's employees is covered by a
collective bargaining agreement. Management considers its employee relations
to be good.
INSURANCE
The Company carries comprehensive property insurance with insurers which it
believes to be reputable and in amounts which it believes to be appropriate,
covering replacement costs of real and personal property. Subject to certain
limitations and deductibles, such policies also cover extraordinary expenses
associated with business interruption and damage or loss from flood or
earthquakes (in certain geographic areas), and losses at the Company's
facilities up to $20.5 million.
ENVIRONMENTAL MATTERS
The Company's properties and operations may be subject to liability under
various environmental laws, regardless of fault, for the investigation,
removal or remediation of soil or groundwater, on or off-site, resulting from
the release or threatened release of hazardous materials, as well as damages
to natural resources. The owner or operator of contaminated property may also
be subject to claims for damages and remediation costs from third parties
based upon the migration of any hazardous materials to other properties.
At certain of the properties owned or operated by the Company, petroleum
products or other hazardous materials, are or were stored in USTs. Some
formerly used USTs have been removed; others were abandoned in place. All of
the USTs are registered, as required, under applicable law. The Company also
is aware of the presence in some of its facilities of ACMs, but believes that
no action is presently required to be taken as a result of such material.
At the Company's recently acquired New Jersey facility, certain
contamination has been discovered resulting from operations of the prior owner
thereof. The prior owner, which has agreed to be responsible for the cost of
such remediation, is completing remediation of the property under a consent
order with the New Jersey Department of Environmental Protection ("NJDEP").
The prior owner has posted a $1.1 million letter of credit with the NJDEP
which expires in 1997. The Company has purchased an environmental liability
insurance policy covering the cleanup costs to the Company, if any, resulting
from any on- or off-site environmental condition existing at the time of the
Company's acquisition of this property, with a $250,000 deductible and policy
limits of $4 million per occurrence/$8 million in the aggregate, provided the
claim first arises during the term of the policy, which is August 10, 1995
through August 11, 1998.
The Company has not received any written notice from any governmental
authority or third party asserting, and is not otherwise aware of, any
material noncompliance, liability or claim under environmental laws applicable
to the Company other than as described above. No assurance can be given that
there are no
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<PAGE>
environmental conditions for which the Company may be liable in the future or
that future regulatory action, or compliance with future environmental laws,
will not require the Company to incur costs that could have a material adverse
effect on the Company's financial condition or results of operations.
LEGAL PROCEEDINGS
The Company is involved in litigation from time to time in the ordinary
course of its business. In the opinion of Management, no material legal
proceedings are pending to which the Company, or any of its property, is
subject.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is certain information regarding the Company's directors,
executive officers and other significant management personnel:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Leo W. Pierce, Sr.............. 78 Chairman of the Board
J. Peter Pierce................ 51 President, Chief Executive Officer and
Director
Douglas B. Huntley............. 36 Vice President, Chief Financial Officer and
Director
Joseph A. Nezi................. 50 Vice President, Sales and Marketing
David Marsh.................... 48 Vice President, Chief Information Officer
Ross M. Engelman............... 33 Vice President, Operations--South
J. Michael Gold................ 37 Vice President, Operations--Northeast
Christopher J. Williams........ 37 Vice President, Operations--West
Leo W. Pierce, Jr.............. 52 Vice President, Contracts Administration
and Director
Michael J. Pierce.............. 46 Vice President, Equipment Sales and
Distribution Group and Director
Raul A. Fernandez.............. 46 Vice President, Information Services
Joseph P. Linaugh.............. 47 Vice President, Treasurer
Lisa G. Goldschmidt............ 28 General Counsel
Alan B. Campell................ 46 Director
Delbert S. Conner.............. 67 Director
</TABLE>
Leo W. Pierce, Sr. has served as Chairman of the Board of the Company since
its formation in 1957. Mr. Pierce served as the Chief Executive Officer of the
Company from formation to January 1995 and as its President from formation to
January 1984. Prior to forming the Company, Mr. Pierce was a sales
representative for Lefebure Corporation and an accountant for Price
Waterhouse. Mr. Pierce holds a B.A. degree from St. John's University.
J. Peter Pierce has served as President and Chief Executive Officer of the
Company since January 1995 and has been a director since the early 1970s. Mr.
Pierce served as President and Chief Operating Officer of the Company from
January 1984 to January 1995, prior to which time he served in various other
capacities with the Company, including as Vice President of Operations,
General Manager of Connecticut, New York and New Jersey and Sales Executive.
Mr. Pierce attended the University of Pennsylvania and served in the United
States Marine Corps.
Douglas B. Huntley has served as Chief Financial Officer since January 1994
and a director of the Company since September 1994. From May 1993 until
December 1993, Mr. Huntley served as Assistant to the President of the
Company. From August 1989 to March 1993, he was an Executive Advisor and a
Project Manager of Rockwell International in connection with a multi-billion
dollar NASA contract. Prior thereto, Mr. Huntley was an accountant for
Deloitte Haskin & Sells. Mr. Huntley holds a B.S. degree from Bucknell
University and an M.B.A. from the University of Pennsylvania, Wharton School
of Business and is a Certified Public Accountant.
Joseph A. Nezi has served as Vice President, Sales and Marketing of the
Company since September 1991. From July 1990 to September 1991, Mr. Nezi was
the Vice President, Sales and Marketing of Delaware Valley Wholesale Florist
where he was responsible for the sales and marketing of a firm with $30
million of sales. Prior thereto, Mr. Nezi was the President and General
Manager of Pomerantz and Company following 17 years in various sales positions
of increasing responsibility with Xerox. Mr. Nezi holds a B.A. degree from
Villanova University.
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<PAGE>
David Marsh has served as Vice President and Chief Information Officer of
the Company since January 1995 and was Assistant to the President of the
Company from November 1994 to December 1994. From August 1986 to May 1994, Mr.
Marsh was Manager--Corporate Relations for the Massachusetts Institute of
Technology where he was responsible for the management and development of
MIT's relationships with U. S. and European information technology,
communications and service companies. Mr. Marsh holds a B.S. degree from
University of Salford, U.K. and S.M. degrees in Management and Nuclear
Engineering from MIT.
Ross M. Engelman has served as Vice President, Operations--South since
October 1994. From June 1993 to October 1994, Mr. Engelman was Vice President,
Information Systems and from September 1991 to June 1993, he was Assistant to
the President of the Company. From August 1985 to September 1991, Mr. Engelman
was a management consultant with Andersen Consulting. Mr. Engelman holds a
B.S.E. degree from the University of Pennsylvania, Wharton School of Business.
J. Michael Gold has served as Vice President, Operations--Northeast of the
Company since June 1993. Prior thereto, Mr. Gold was Vice President,
Operations from February 1992 to June 1993, Vice President, New York
Metropolitan Region from January 1990 to February 1992 and General Manager of
the New Jersey Archive from April 1985 to February 1989. Prior to joining the
Company, Mr. Gold was the Budget Administration Manager for SmithKline
Beecham. Mr. Gold holds a B.A. degree from Villanova University.
Christopher J. Williams has served as Vice President, Operations--West since
June 1993. From February 1992 to June 1993, Mr. Williams was the Company's
Vice President, Information Services. Prior thereto, Mr. Williams held a
number of additional positions with the Company since he joined it in 1980,
including most recently as General Manager of the New York Archive and
Regional Vice President--New England. Mr. Williams holds a B.S. degree from
Western New England College.
Leo W. Pierce, Jr. has served as Vice President, Contract Administration of
the Company since January 1990 and as a director since the early 1970s. Mr.
Pierce has been affiliated with the Company since its inception in various
capacities, including as manager of the Philadelphia Archive and Vice
President, Facilities Management. Mr. Pierce holds a B.A. degree from LaSalle
University.
Michael J. Pierce has served as Vice President, Equipment Sales and
Distribution Group of the Company since February 1990 and as a director since
the early 1970s. Mr. Pierce has been affiliated with the Company since its
inception in various sales capacities. Mr. Pierce attended Temple University
and served in the United States Army.
Raul A. Fernandez has served as Vice President, Information Systems of the
Company since February 1990. From March 1988 to February 1990, Mr. Fernandez
was Director of Information Systems. Prior to joining the Company, Mr.
Fernandez was employed by RCA Pictures Division and Sperry-Unisys as District
Manager. Mr. Fernandez holds a B.A. degree from Kings College.
Joseph P. Linaugh has served as Vice President and Treasurer of the Company
since January 1994. From January 1990 to December 1993, Mr. Linaugh served as
Vice President, Chief Financial Officer and a director of the Company. Prior
to joining the Company, Mr. Linaugh worked in various financial positions with
private and publicly held companies and for Laventhol & Horwath in public
accounting. Mr. Linaugh holds a B.S. degree from LaSalle University and is a
Certified Public Accountant.
Lisa G. Goldschmidt has served as General Counsel of the Company since
October 1995. From September 1992 to October 1995, Ms. Goldschmidt was an
attorney at Reed Smith Shaw & McClay. Ms. Goldschmidt holds a B.A. and a J.D.
degree from the University of Pennsylvania.
Alan B. Campell has served as a director of the Company since September
1994. Mr. Campell is one of the founders of Campell Vanderslice Furman, an
investment banking firm, and has been a Managing Director of the firm since
its formation in 1986. Prior thereto, Mr. Campell was a Vice President at
Chase Manhattan Bank,
64
<PAGE>
N.A. Mr. Campell holds a B.A. degree from Brown University and an M.A. from
the University of Southern California.
Delbert S. Conner has served as a director of the Company since September
1990. Since May 1995, Mr. Conner has served as the Vice Chairman of USCO
Distribution Services, Inc. on a semi-retired basis. From January 1994 through
April 1995, he was the Vice Chairman of USCO on a full-time basis and its
President and Chief Executive Officer from February 1983 to December 1993. Mr.
Conner holds a B.S. degree from Bryant College.
Messrs. J. Peter Pierce, Leo W. Pierce, Jr. and Michael J. Pierce are
brothers. Leo W. Pierce, Sr. is their father. For purposes of the above
biographical information, the Company includes L. W. Pierce Company, Inc., the
predecessor to Pierce Leahy. See "The Company."
BOARD COMMITTEES
The Company's Board of Directors appointed a Compensation Committee in
September 1994. The Compensation Committee is comprised of Leo W. Pierce, Sr.,
J. Peter Pierce and Alan B. Campell. The Compensation Committee recommends to
the Board both salary levels and bonuses for the officers of the Company. The
Compensation Committee also reviews and makes recommendations with respect to
the Company's existing and proposed compensation plans, and serves as the
committee responsible for administrating the Company's non-qualified stock
option plan. Until September 1994, the Compensation Committee's functions were
exercised by the Board of Directors.
All directors receive reimbursement of reasonable out-of-pocket expenses
incurred in connection with meetings of the Board of Directors. Mr. Conner
also receives $3,500 for each meeting of the Board of Directors which he
attends. No other director receives separate compensation for services
rendered as a director.
65
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation received by the Company's
Chief Executive Officer and the five other highest paid executive officers
(together with the Chief Executive Officer, the "Named Executive Officers")
for services to the Company in 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------- ------------
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS COMPENSATION
------------------ -------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
J. Peter Pierce ........ $186,800 $93,400 -- -- $6,680(a)
President and Chief Ex-
ecutive Officer
Ross M. Engelman ....... 130,422 65,000 -- 85 4,938(b)
Vice President, Opera-
tions--South
J. Michael Gold ........ 129,905 65,000 -- 85 3,416(c)
Vice President, Opera-
tions--Northeast
Douglas B. Huntley ..... 129,520 65,000 -- 85 4,802(d)
Vice President and
Chief Financial Officer
Joseph A. Nezi ......... 133,020 97,841(e) -- 85 5,739(f)
Vice President, Sales
and Marketing
Christopher J. Williams 129,905 65,000 -- 85 4,810(g)
.......................
Vice President, Opera-
tions--West
</TABLE>
- --------
(a) Included in such amount is $2,310 representing an employer match under the
401(k) Plan (as defined herein), $1,371 in net premiums for a guaranteed
term life insurance policy on behalf of Mr. Pierce and $3,000 representing
contributions made by the Company under the Profit Sharing Plan (as
defined herein).
(b) Included in such amount is $2,107 representing an employer match under the
401(k) Plan, $98 in net premiums for a guaranteed term life insurance
policy on behalf of Mr. Engelman and $2,608 representing contributions
made by the Company under the Profit Sharing Plan.
(c) Included in such amount is $700 representing an employer match under the
401(k) Plan, $119 in net premiums for a guaranteed term life insurance
policy on behalf of Mr. Gold and $2,598 representing contributions made by
the Company under the Profit Sharing Plan.
(d) Included in such amount is $2,093 representing an employer match under the
401(k) Plan, $119 in net premiums for a guaranteed term life insurance
policy on behalf of Mr. Huntley and $2,590 representing contributions made
by the Company under the Profit Sharing Plan.
(e) Includes $32,842 paid as commissions.
(f) Included in such amount is $2,310 representing an employer match under the
401(k) Plan, $438 in net premiums for a guaranteed term life insurance
policy on behalf of Mr. Nezi and $3,000 representing contributions made by
the Company under the Profit Sharing Plan.
(g) Included in such amount is $2,066 representing an employer match under the
401(k) Plan, $125 in net premiums for a guaranteed term life insurance
policy on behalf of Mr. Williams and $2,598 representing contributions
made by the Company under the Profit Sharing Plan.
66
<PAGE>
OPTION GRANTS IN 1995
The following table sets forth certain information concerning stock options
granted to the Named Executive Officers during 1995.
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(B)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------
NAME GRANTED(A) 1995 (SHARE) DATE 5% 10%
---- ---------- ------------ -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
J. Peter Pierce......... -- -- -- -- -- --
Ross M. Engelman........ 85 15 $5,406 * $ 288,983 $ 732,341
J. Michael Gold......... 85 15 5,406 * 288,983 732,341
Douglas B. Huntley...... 85 15 5,406 * 288,983 732,341
Joseph A. Nezi.......... 85 15 5,406 * 288,983 732,341
Christopher J.
Williams............... 85 15 5,406 * 288,983 732,341
</TABLE>
- --------
* The options have no specified expiration date.
(a) All options were granted under the Plan (as defined herein) and are for
the purchase of shares of Class B Common Stock of the Company. The options
vest in five equal annual installments commencing on the first anniversary
of the date of grant, and vested options become exercisable on the earlier
of ten years from the date of grant or the date the Company is no longer a
Subchapter S corporation. The Company may make loans with respect to
vested options. See "--Stock Incentive Plan."
(b) Illustrates the value that might be received upon exercise of options
immediately prior to the assumed expiration of their term at the specified
compounded rates of appreciation based on the market price for the Class B
Common Stock when the options were granted. There is no established
trading market for the Class B Common Stock and, accordingly, the market
price is based upon the formula set forth in the Plan based upon a
multiple of EBITDA, plus cash and cash equivalents, and less outstanding
indebtedness and other obligations of the Company. Since the options
granted to the Named Executive Officers do not have a specified expiration
date, for purposes of calculating the assumed appreciation, the options
have been deemed to expire ten years from the date of grant.
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth the value of options held by each of the
Named Executives at December 31, 1995. None of the Named Executives exercised
any options during 1995.
AGGREGATED OPTION EXERCISES IN 1995 AND
OPTION VALUES AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1995(A) DECEMBER 31, 1995(B)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Peter Pierce......... -- -- -- -- -- --
Ross M. Engelman........ -- -- -- 85 -- $68,255
J. Michael Gold......... -- -- -- 85 -- 68,255
Douglas B. Huntley...... -- -- -- 85 -- 68,255
Joseph A. Nezi.......... -- -- -- 85 -- 68,255
Christopher J. Wil-
liams.................. -- -- -- 85 -- 68,255
</TABLE>
- --------
(a) All options are for the purchase of shares of Class B Common Stock.
(b) There is no established market for the Class B Common Stock and,
accordingly, the values are based on the exercise price of options
granted on January 1, 1996 in accordance with the formula set forth in
the Plan.
67
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is comprised of Leo W.
Pierce, Sr., J. Peter Pierce and Alan B. Campell. Leo W. Pierce, Sr. is the
former Chief Executive Officer and President of the Company and J. Peter
Pierce is the Company's Chief Executive Officer and President.
The Company previously leased six facilities from the Pierce Family
Partnerships and subleased 16 properties from one of the Pierce Family
Partnerships. The leases and subleases were entered into during the period
from March 1980 to April 1995. The aggregate rental payments for the leases
and subleases were $7,036,000, $7,658,000 and $8,201,000 in 1993, 1994 and
1995, respectively. Pursuant to the Real Estate Transactions, the Company
purchased for $14.8 million (including the assumption of a mortgage for $1.1
million) all of the interests of the Pierce Family Partnerships in such
properties as well as minority interests in five other properties currently
leased by the Company. The purchase price was based on third party appraisals
or the recent acquisition price for the six facilities and management's
estimates of the value of the leasehold and minority ownership interests based
on the net present value of the cash flows generated by such interests. See
"The Transactions."
The Company also leases from four separate limited partnerships its
corporate headquarters in King of Prussia, Pennsylvania and its facilities in
Suffield, Connecticut, Orlando, Florida and Charlotte, North Carolina. J.
Peter Pierce, the Company's President and Chief Executive Officer, is the
general partner of three of the limited partnerships and members of the Pierce
family and certain other officers of the Company and their affiliates own
substantial limited partnership interests in each of the four limited
partnerships. The lease on the Company's corporate headquarters expires on
April 30, 2003, without any renewal options. The leases for the Suffield,
Orlando and Charlotte facilities terminate on December 31, 2005, October 31,
2004 and August 31, 2001, respectively. Each of such leases contains two five-
year renewal options. The aggregate rental payments by the Company for such
properties during 1993, 1994 and 1995 were $327,000, $531,000 and $773,000,
respectively.
The Company believes that the terms of its leases with the related parties
are as favorable to the Company as those generally available from unaffiliated
third parties. There are no plans by the Company to lease additional
facilities from officers, directors or other affiliated parties.
In December 1993, the Company's Chairman, Leo W. Pierce, Sr., advanced
$80,000 to the Company. The Company repaid the loan, together with interest at
7%, in three equal installments in December 1994, December 1995 and May 1996.
As part of the Transactions, the Company redeemed 100 shares of Class A Common
Stock from Mr. Pierce for an aggregate price of $1.45 million, which price was
based on the Company's EBITDA. The Company previously undertook to pay $60,000
per year for a five-year period to Mr. Pierce's spouse upon his death. The
Company intends to replace this arrangement by providing an annual pension in
the amount of $96,000 to Mr. Pierce and then to his spouse, if she survives
him.
Alan B. Campell is a managing director of Campell Vanderslice Furman
("CVF"), an investment banking firm that has provided investment banking
services to the Company since 1992. Mr. Campell became a director of the
Company in 1994. During 1993, 1994 and 1995, the Company paid CVF $1.5
million, $0.8 million and $0.7 million, respectively, with respect to
investment banking services. In addition, CVF was paid investment banking fees
of $0.7 million for advisory services in connection with the Transactions and
the offering of the Original Notes.
STOCK INCENTIVE PLAN
The Company established a Nonqualified Stock Option Plan (the "Plan") in
September 1994 to provide incentives to Key Employees (defined below) who
contribute significantly to the strategic and long-term performance objectives
and growth of the Company. The Plan is administered by the Compensation
Committee of the Board of Directors.
68
<PAGE>
The Plan provides for the issuance of non-qualified stock options to "Key
Employees," defined as employees of the Company who are members of a select
group of management or highly compensated employees. As of May 31, 1996, there
were 13 Key Employees. Under the Plan, options exercisable for an aggregate of
1,141 shares of Class B Common Stock are available for grant. The exercise
price per share of Class B Common Stock of options granted under the Plan
shall be equal to or greater than the fair market value of the Class B Common
Stock as of the last day of the calendar quarter coinciding with or
immediately preceding the date of the grant. Options granted under the Plan
become exercisable, to the extent they are vested, at the earlier of the tenth
anniversary of the date of grant or the date the Company is no longer a
Subchapter S Corporation.
The Board, in its sole discretion, may direct the Company to make a loan to
a Key Employee whose Vested Percentage (defined below) with respect to one or
more stock options is at least 60%. The maximum amount of any such loan shall
be 25% of the amount which would be payable to the Key Employee had he
terminated employment other than on account of death or total and permanent
disability as of the date of the loan as set forth in the following paragraph.
Vested Percentage is based upon the options vesting in five equal annual
installments commencing on the first anniversary of the date of grant;
provided, however, that 100% shall be deemed to be vested in the case of a Key
Employee who terminates employment on account of death or total and permanent
disability.
If a Key Employee's employment is terminated for any reason, each stock
option which has not been exercised shall terminate; provided, however, that
if a Key Employee terminates employment after the Class B Common Stock has
become readily tradeable in an established securities market, other than
pursuant to a termination for cause, his option shall not expire until the end
of the 90-day period following the date of termination. Upon termination of
employment (other than for cause or when the Class B Common Stock is tradeable
in an established securities market), the Company is required to pay the Key
Employee the Vested Percentage of the value of any options held by the Key
Employee. The value of the options for this purpose is equal to the aggregate
fair market value of the underlying shares (determined by a formula set forth
in the Plan), less (i) the principal amount of any outstanding loans pursuant
to the Plan and (ii) the aggregate exercise price of the underlying shares.
401(K) PLAN; PROFIT SHARING PLAN
The Company has a savings and investment plan under Section 401(k) of the
Code (the "401(k) Plan") and a profit sharing plan also under Section 401(k)
(the "Profit Sharing Plan"). The 401(k) Plan covers substantially all full-
time employees over the age of 20 1/2 and with more than 1,000 hours of
service. Participants in the 401(k) Plan may elect to defer a specified
percentage of their compensation into the 401(k) Plan on a pre-tax basis. The
Company is required to make matching contributions under the 401(k) Plan equal
to 25% of the employee's contributions up to a maximum of 2% of the employee's
annual compensation. The contributions to the 401(k) Plan by a participant
vest immediately. Participants earn a vested right to their matching
contributions in increasing amounts over a period of five years, commencing
after three full years of employment. After seven years of service, the
participant's right to his or her matching contribution is fully vested.
Thereafter, the participant may receive a distribution of the entire value of
his or her account upon termination of employment or upon retirement,
disability or death.
The Profit Sharing Plan covers substantially all full-time employees over
the age of 21 with more than 1,000 hours of service. The Company may make
discretionary profit sharing contributions in amounts as the Board of
Directors of the Company may determine. The Company's contributions under the
Profit Sharing Plan have historically ranged from 2-3% of a participant's
annual eligible income. Participants are not permitted to contribute to the
Profit Sharing Plan directly. Participants earn a vested right to their profit
sharing contribution in increasing amounts over a period of five years,
commencing after three full years of employment. After seven years of service,
the participant's right to his or her profit sharing contribution is fully
vested. Thereafter, the participant may receive a distribution of the entire
value of his or her account upon termination of employment or upon retirement,
disability or death.
69
<PAGE>
CERTAIN TRANSACTIONS
The Company has entered into a consulting agreement with Maurice Cox, Jr., a
shareholder of the Company, to provide consulting services to the Company
through 2004 for an annual payment of $40,000.
In December 1994, the Company loaned $60,000 to J. Michael Gold, its Vice
President, Operations--Northeast, of which the entire principal amount,
together with interest accruing at a rate of 8.875%, was outstanding as of
August 31, 1996.
See also "Management--Compensation Committee Interlocks and Insider
Participation."
70
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of September 30, 1996, information as to
the Company's stock beneficially owned by (i) each director of the Company,
(ii) each Named Executive Officer, (iii) all directors and executive officers
of the Company as a group, and (iv) each person who is known by the Company to
be the beneficial owner of more than 5% of the Company's Class A Common Stock,
the only class of voting stock outstanding.
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK PERCENTAGE OF PERCENTAGE
-------------------- -------------------- BENEFICIAL OF VOTING
PERCENT OF PERCENT OF OWNERSHIP OF POWER OF ALL
NO. OF CLASS A NO. OF CLASS B ALL COMMON COMMON
NAME(A) SHARES(B) SHARES SHARES(B) SHARES STOCK STOCK
------- --------- ---------- --------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Leo W. Pierce, Sr. (c).. 410 45.6% 20 * 4.2% 45.6%
J. Peter Pierce (d)..... 90 10.0 1,480 16.4% 15.9 10.0
Leo W. Pierce, Jr. (e).. 90 10.0 1,300 14.4 14.0 10.0
Michael J. Pierce (f)... 70 7.8 1,265 14.1 13.5 7.8
Mary E. Pierce.......... 50 5.6 1,265 14.1 13.3 5.6
Barbara P. Quinn (g).... 50 5.6 1,255 13.9 13.2 5.6
Constance P. Buckley
(h).................... 50 5.6 1,255 13.9 13.2 5.6
Maurice Cox, Jr. (i).... 90 10.0 1,160 12.9 12.6 10.0
Alan B. Campell......... -- -- -- -- -- --
Delbert S. Conner....... -- -- -- -- -- --
Ross M. Engelman........ -- -- -- -- -- --
J. Michael Gold......... -- -- -- -- -- --
Douglas B. Huntley...... -- -- -- -- -- --
Joseph A. Nezi.......... -- -- -- -- -- --
Christopher J.
Williams............... -- -- -- -- -- --
All Directors and
Executive Officers as a
Group (12 persons)..... 660 73.3% 4,065 45.2% 47.7% 73.3%
</TABLE>
- --------
* Less than one percent.
(a) The address of all persons in this table who are shown to beneficially own
5% or more of the Class A Common Stock, unless otherwise specified, is c/o
Pierce Leahy Corp., 631 Park Avenue, King of Prussia, Pennsylvania 19406.
(b) As used in this table, "beneficial ownership" means sole or shared power
to vote or direct the voting of a security, or the sole or shared
investment power with respect to a security (i.e., the power to dispose,
or direct the disposition, of a security). A person is deemed for any date
to have "beneficial ownership" of any security that such person has a
right to acquire within 60 days after such date. For purposes of computing
the percentage of outstanding shares held by each person named above, any
security that such person has the right to acquire within 60 days of the
date of calculation is deemed to be outstanding, but is not deemed to be
outstanding for purposes of computing the percentage ownership of any
other person.
(c) Includes 10 shares of Class B Common Stock held by Mr. Pierce's wife.
(d) Includes 340 shares of Class B Common Stock held for the benefit of Mr.
Pierce's children.
(e) Includes 213 shares of Class B Common Stock held for the benefit of Mr.
Pierce's children.
(f) Includes 100 shares of Class B Common Stock held for the benefit of Mr.
Pierce's child.
(g) Includes 523 shares of Class B Common Stock held for the benefit of Ms.
Quinn's children.
(h) Includes 144 shares of Class B Common Stock held for the benefit of Ms.
Buckley's children.
(i) The address of Mr. Cox is 731 E. Manoa Road, Havertown, Pennsylvania
19083. Includes 10 shares of Class A Common Stock and 320 shares of Class
B Common Stock held by Mr. Cox's wife and 120 shares held by or for the
benefit of Mr. Cox's children.
71
<PAGE>
SHAREHOLDERS' AGREEMENT
The Company and its shareholders, with the exception of Leo W. Pierce, Sr.
(collectively, with the exclusion of Mr. Pierce, the "Shareholders"), are
parties to a buy/sell agreement which imposes certain restrictions on the
issuance and transfer of the Company's stock. Transfers of the Company's stock
during a Shareholder's lifetime may only be made to (i) lineal descendants of
Mr. Pierce and his wife, (ii) any trust for the benefit of any such lineal
descendant, provided that at least one trustee of such trust at all times is a
lineal descendant of Mr Pierce and his wife or (iii) to the spouse of a lineal
descendant of Mr. Pierce and his wife as custodian under a Uniform Transfers
to Minors Act for a lineal descendant of Mr. Pierce and his wife who has not
attained age 21 (collectively, "Permitted Transferees"). Shareholders are
permitted to make testamentary transfers to Permitted Transferees or to any
trust for the benefit of a lineal descendant of Mr. Pierce and his wife,
provided that at least one trustee of such trust at all times is a lineal
descendant of Mr. Pierce and his wife.
Within 270 days after a permitted testamentary transfer, the transferee may
elect to require the Company to purchase all or any part of the stock that was
acquired in such testamentary transfer. Upon the death of a Shareholder (other
than in the event of a permitted testamentary transfer), commencement of
bankruptcy or similar proceeding by or against a Shareholder, receipt by a
Shareholder of a bona fide written offer from a person other than a Permitted
Transferee to acquire all of the Shareholder's stock or a transfer or
attempted transfer by a Shareholder of any of his stock in violation of the
buy/sell agreement, the Company and the remaining Shareholders have the option
to purchase all or any of the stock owned by the affected Shareholder;
provided, however, that the Company is required to purchase any such stock not
purchased under such options, to the extent not prohibited by law or
agreement. The purchase price for such purchases is the agreed value, to be
determined at least annually by a qualified third party appraiser selected by
the Company, except that with respect to bona fide offers from third parties,
the purchaser may elect either the offer price or the agreed value. The
purchase of stock by the Company and/or remaining Shareholders following the
death of a Shareholder or a permitted testamentary transfer shall be funded,
to the extent available, with the proceeds of any life insurance policies
received by the Company and/or remaining Shareholders on the deceased
Shareholder or transferor, respectively. The Company currently maintains life
insurance policies on the lives of various of the Shareholders with an
aggregate death benefit of $3.75 million.
72
<PAGE>
DESCRIPTION OF CREDIT FACILITY
As of August 13, 1996, the Company entered into a new credit facility with
Canadian Imperial Bank of Commerce ("CIBC" or "Agent") as the Agent. The
credit facility (the "Credit Facility") is a senior secured revolving line of
credit in an aggregate principal amount of $100 million in U.S. dollar
borrowings and Cdn $35 million in Canadian dollar borrowings by the Company's
Canadian subsidiary. The following summary does not purport to be complete and
is subject to and qualified by reference to the Credit Facility which is filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part.
The aggregate available commitment under the Credit Facility will be reduced
incrementally on a quarterly basis, beginning September 30, 1999. The Credit
Facility matures on June 30, 2002, unless previously terminated. Prior to any
advance being made under the Credit Facility, the Company will be required to
be in compliance with all financial and operating covenants. The lenders under
the Credit Facility will be paid a commitment fee at a rate of 0.375% per
annum on unused commitments, payable quarterly. In addition, the Agent will
receive other customary fees.
Borrowings under the U.S. Dollar portion of the Credit Facility will bear
interest at a rate equal to, at the option of the Company, either (i) the base
rate (which is based on as the Federal Funds rate or the prime rate most
recently announced by the Agent) or (ii) LIBOR, in each case plus an
applicable margin determined by reference to the ratio of Total Net Debt to
EBITDA of the Company (as defined in the Credit Facility). Borrowings under
the Canadian Dollar portion of the Credit Facility will also bear interest
based on various methods plus an applicable margin.
The obligations of the Company under the Credit Facility will be
unconditionally guaranteed, jointly and severally, by all subsidiaries of the
Company. The obligations of the Company and such guarantors under the Credit
Facility will be secured primarily by a first priority pledge of the stock of
all material subsidiaries of the Company and a first priority lien on all of
the assets of the Company and such guarantors. In addition, substantially all
of the shareholders of the Company have pledged their stock as additional
security for payment of all obligations under the Credit Facility. Recourse to
the Company's shareholders will be limited to their stock. Obligations under
the Canadian facility will be guaranteed by the Company.
The Credit Facility contains, among other things, covenants restricting the
ability of the Company and its subsidiaries to dispose of assets, pay
dividends, repurchase or redeem capital stock and indebtedness, create liens,
make capital expenditures, make certain investments or acquisitions, enter
into transactions with affiliates and otherwise restrict corporate activities.
The Credit Facility also contains the following financial covenants:
maintenance of a fixed charge ratio of 1:1; maintenance of an interest
coverage ratio ranging from 1.5:1 to 2:1; maintenance of a leverage ratio
(total net debt to Adjusted EBITDA) ranging from 5.75:1 to 5.5:1; maintenance
of a Net Senior Debt to Adjusted EBITDA ratio ranging from 2.75:1 to 1.75:1;
and limitations on aggregate capital expenditures and acquisitions (all such
terms as defined in the Credit Agreement).
Events of default under the Credit Facility include those usual and
customary for facilities of this type, including among other things, default
in the payment of principal and interest in respect of material amounts of
indebtedness of the Company or its subsidiaries, any non-payment on
indebtedness under the Credit Facility, a Change of Control (as defined in the
Credit Facility), any material breach of the covenants, representations and
warranties included in the Credit Facility and related documents, the
institution of any bankruptcy proceedings and the failure of any security
agreement related to the Credit Facility or lien granted thereunder to be
valid and enforceable. Upon the occurrence and continuance of an event of
default under the Credit Facility, the lenders may terminate their commitments
to lend and declare the outstanding advances due and payable.
73
<PAGE>
DESCRIPTION OF THE NOTES
The Original Notes were, and the Exchange Notes will be, issued under an
Indenture, dated as of July 15, 1996 (the "Indenture") between the Company and
the United States Trust Company of New York, as trustee (the "Trustee"). The
terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). The Notes are subject to all such terms, and
holders of the Notes are referred to the Indenture and the Trust Indenture Act
for a statement of such terms.
The following is a summary of the material terms and provisions of the
Notes. This summary does not purport to be a complete description of the Notes
and is subject to the detailed provisions of, and qualified by reference to,
the Notes and the Indenture (including the definitions contained therein).
Definitions relating to certain capitalized terms are set forth under "--
Certain Definitions" and throughout this description. Capitalized terms that
are used but not otherwise defined herein have the meanings assigned to them
in the Indenture, and such definitions are incorporated herein by reference.
The Indenture has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The form of the Exchange Notes and the
Original Notes are identical in all material respects except that the Exchange
Notes will have been registered under the Securities Act and, therefore, will
not bear legends restricting their transfer. The Exchange Notes will not
represent new indebtedness of the Company, will be entitled to the benefits of
the same Indenture which governs the Original Notes and will rank pari passu
with the Original Notes. Any provisions of the Indenture which require actions
by or approval of a specified percentage of Original Notes shall require the
approval of the holders of such percentage of principal amount of Original
Notes and Exchange Notes, in the aggregate.
GENERAL
The Notes are limited in aggregate principal amount to $200,000,000. The
Notes are general unsecured obligations of the Company, subordinated in right
of payment to Senior Indebtedness of the Company and senior in right of
payment to any current or future subordinated indebtedness of the Company,
except as otherwise provided herein.
The Notes will be unconditionally guaranteed, on a senior subordinated
basis, as to payment of principal, premium, if any, and interest, jointly and
severally, by each domestic Restricted Subsidiary which guarantees payment of
the Notes pursuant to the covenant described under "Limitation on Creation of
Subsidiaries" (the "Guarantors"). None of the Company's current Restricted
Subsidiaries are guaranteeing the Notes and accordingly, as of the date
hereof, there are no Guarantors.
The Notes are, however, secured by a pledge of 65% of the capital stock of
the Company's Canadian subsidiary. The pledge is on a second priority basis,
junior to the pledge of such shares in favor of the lenders and the
administrative agent under the Credit Facility. Pursuant to a Pledge and
Intercreditor Agreement, the Trustee may not take any action to enforce its
rights with respect to the pledged stock prior to the date on which all
obligations under the Credit Facility have been paid in full and the
commitments under the Credit Facility have expired or been terminated.
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on July 15, 2006. The Notes will bear interest at a
rate of 11 1/8% per annum from the date of original issuance until maturity.
Interest is payable semi-annually in arrears on January 15 and July 15,
commencing January 15, 1997, to holders of record of the Notes at the close of
business on the immediately preceding January 1, and July 1, respectively.
Interest on the Exchange Notes will accrue from (A) the later of (i) the last
interest payment date on which interest was paid on the Notes surrendered in
exchange therefor or (ii) if the Notes are surrendered for exchange on a date
in a period which includes the record date for an interest payment date to
occur on or after the date of such exchange and as to which interest will be
paid, the date of such interest payment date, or (B) if no interest has been
paid on the Notes, from the Issue Date.
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The interest rate on the Notes is subject to increase, and such Additional
Interest will be payable on the payment dates set forth above, in certain
circumstances, if the Notes (or other securities substantially similar to the
Notes) are not registered with the Commission within the prescribed time
periods. Upon consummation of the Exchange Offer, such registration
requirements will have been met and no Additional Interest will be payable
with respect the Notes, except as set forth below. In the event that the
Company does not exchange Exchange Notes for all Original Notes validly
tendered in accordance with the terms of the Exchange Offer on or prior to 60
days after the date of this Prospectus or the Registration Statement of which
this Prospectus forms a part ceases to be effective at any time prior to the
consummation of the Exchange Offer (either such event, a "Registration
Default"), the sole remedy available to holders of the Notes will be the
immediate assessment of additional interest ("Additional Interest") as
follows: the per annum interest rate on the Notes will increase by 50 basis
points; and the per annum interest rate will increase by an additional 25
basis points for each subsequent 90-day period during which the Registration
Default remains uncured, up to a maximum additional interest rate of 200 basis
points per annum in excess of the interest rate on the cover of this
Prospectus. All Additional Interest will be payable to holders of the Notes in
cash on the same original issue payment dates as the Notes, commencing with
the first such date occurring after any such Additional Interest commences to
accrue, until such Registration Default is cured. After the date on which such
Registration Default is cured, the interest rate on the Notes will revert to
the interest rate originally borne by the Notes (as shown on the cover of this
Prospectus).
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part, a copy of which will be available upon
request to the Company.
OPTIONAL REDEMPTION
The Notes are redeemable at the option of the Company, in whole or in part,
at any time on or after July 15, 2001 at the following redemption prices
(expressed as a percentage of principal amount), together, in each case, with
accrued and unpaid interest to the redemption date, if redeemed during the
twelve-month period beginning on July 15, of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.............................................................. 105.563%
2002.............................................................. 103.708%
2003.............................................................. 101.854%
2004 and thereafter............................................... 100.000%
</TABLE>
Notwithstanding the foregoing, the Company may redeem in the aggregate up to
35% of the original principal amount of Notes at any time and from time to
time prior to July 15, 1999 at a redemption price equal to 110% of the
aggregate principal amount so redeemed, plus accrued interest to the
redemption date out of the Net Proceeds of one or more Public Equity
Offerings; provided, that at least $130,000,000 aggregate principal amount of
Notes originally issued remains outstanding immediately after the occurrence
of any such redemption and that any such redemption occurs within 90 days
following the closing of any such Public Equity Offering.
In the event of redemption of fewer than all of the Notes, the Trustee shall
select either on a pro rata basis or by lot or in such other manner as it
shall deem fair and appropriate the Notes to be redeemed. The Notes will be
redeemable in whole or in part upon not less than 30 nor more than 60 days'
prior written notice, mailed by first class mail to a holder's last address as
it shall appear on the register maintained by the Registrar of the Notes. If
any Note is to be redeemed in part only, the notice of redemption that relates
to such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note, in a principal amount equal to the unredeemed portion
thereof, will be issued in the name of the holder thereof upon cancellation of
the original Note. On and after any redemption date, interest will cease to
accrue on the Notes or portions thereof called for redemption unless the
Company shall fail to redeem any such Note.
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SUBORDINATION
The indebtedness represented by the Notes is, to the extent and in the
manner provided in the Indenture, subordinated in right of payment to the
prior indefeasible payment and satisfaction in full in cash of all existing
and future Senior Indebtedness of the Company. As of March 31, 1996, after
giving pro forma effect to the application of the net proceeds of the offering
of the Original Notes, no Senior Indebtedness would have been outstanding.
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding
in connection therewith, relative to the Company or to its creditors, as such,
or to its assets, whether voluntary or involuntary, or any liquidation,
dissolution or other winding-up of the Company, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy, or any
general assignment for the benefit of creditors or any other marshalling of
assets or liabilities of the Company (except in connection with the merger or
consolidation of the Company or its liquidation or dissolution following the
transfer of substantially all of its assets, upon the terms and conditions
permitted under the circumstances described under "Mergers, Consolidations or
Sale of Assets") (all of the foregoing referred to herein individually as a
"Bankruptcy Proceeding" and collectively as "Bankruptcy Proceedings"), the
holders of Senior Indebtedness of the Company will be entitled to receive
payment and satisfaction in full in cash of all amounts due on or in respect
of all Senior Indebtedness of the Company before the holders of the Notes are
entitled to receive or retain any payment or distribution of any kind on
account of the Notes. In the event that, notwithstanding the foregoing, the
Trustee or any holder of Notes receives any payment or distribution of assets
of the Company of any kind, whether in cash, property or securities,
including, without limitation, by way of set-off or otherwise, in respect of
the Notes before all Senior Indebtedness of the Company is paid and satisfied
in full in cash, then such payment or distribution will be held by the
recipient in trust for the benefit of holders of Senior Indebtedness and will
be immediately paid over or delivered to the holders of Senior Indebtedness or
their representative or representatives to the extent necessary to make
payment in full in cash of all Senior Indebtedness remaining unpaid, after
giving effect to any concurrent payment or distribution, or provision
therefor, to or for the holders of Senior Indebtedness. By reason of such
subordination, in the event of liquidation or insolvency, creditors of the
Company who are holders of Senior Indebtedness may recover more, ratably, than
other creditors of the Company, and creditors of the Company who are not
holders of Senior Indebtedness or of the Notes may recover more, ratably, than
the holders of the Notes.
No payment or distribution of any assets or securities of the Company or any
Restricted Subsidiary of any kind or character (including, without limitation,
cash, property and any payment or distribution which may be payable or
deliverable by reason of the payment of any other Indebtedness of the Company
being subordinated to the payment of the Notes by the Company) may be made by
or on behalf of the Company or any Restricted Subsidiary, including, without
limitation, by way of set-off or otherwise, for or on account of the Notes, or
for or on account of the purchase, redemption, defeasance or other acquisition
of the Notes, and neither the Trustee nor any holder or owner of any Notes
shall take or receive from the Company or any Restricted Subsidiary, directly
or indirectly in any manner, payment in respect of all or any portion of Notes
following the delivery by the representative of the holders of Designated
Senior Indebtedness ("Representative") to the Trustee of written notice of (i)
the occurrence of a Payment Default or (ii) the occurrence of a Non-Payment
Event of Default on Designated Senior Indebtedness and the acceleration of the
maturity of such Designated Senior Indebtedness in accordance with its terms,
and, in any such event, such prohibition shall continue until such Payment
Default is cured, waived in writing or ceases to exist or such acceleration
has been rescinded or otherwise cured. At such time as the prohibition set
forth in the preceding sentence shall no longer be in effect, subject to the
provisions of the following paragraph, the Company shall resume making any and
all required payments in respect of the Notes, including any missed payments.
Upon the occurrence of a Non-Payment Event of Default on Designated Senior
Indebtedness, no payment or distribution of any assets or securities of the
Company of any kind or character (including, without limitation, cash,
property and any payment or distribution which may be payable or deliverable
by reason of the payment of any other Indebtedness of the Company being
subordinated to the payment of the Notes by the Company) may
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be made by or on behalf of the Company, including, without limitation, by way
of set-off or otherwise, on account of the Notes, or for or on account of the
purchase, redemption, defeasance or other acquisition of Notes, and neither
the Trustee nor any holder or owner of any Notes shall take or receive from
the Company or any Restricted Subsidiary, directly or indirectly in any
manner, payment in respect of all or any portion of the Notes, for a period (a
"Payment Blockage Period") commencing on the date of receipt by the Trustee of
written notice from the Representative of such Non-Payment Event of Default
unless and until (subject to any blockage of payments that may then be in
effect under the preceding paragraph) the earliest of (x) more than 179 days
shall have elapsed since receipt of such written notice by the Trustee, (y)
such Non-Payment Event of Default shall have been cured or waived in writing
or shall have ceased to exist or such Designated Senior Indebtedness shall
have been paid in full or (z) such Payment Blockage Period shall have been
terminated by written notice to the Company or the Trustee from such
Representative, after which, in the case of clause (x), (y) or (z), the
Company shall resume making any and all required payments in respect of the
Notes, including any missed payments. Notwithstanding any other provision of
the Indenture, in no event shall a Payment Blockage Period commenced in
accordance with the provisions of the Indenture described in this paragraph
extend beyond 179 days from the date of the receipt by the Trustee of the
notice referred to above (the "Initial Blockage Period"). Any number of
additional Payment Blockage Periods may be commenced during the Initial
Blockage Period; provided, however, that no such additional Payment Blockage
Period shall extend beyond the Initial Blockage Period. After the expiration
of the Initial Blockage Period, no Payment Blockage Period may be commenced
until at least 180 consecutive days have elapsed from the last day of the
Initial Blockage Period. Notwithstanding any other provision of the Indenture,
no event of default with respect to Designated Senior Indebtedness (other than
a Payment Default) which existed or was continuing on the date of the
commencement of any Payment Blockage Period initiated by the Representative
shall be, or be made, the basis for the commencement of a second Payment
Blockage Period initiated by the Representative, whether or not within the
Initial Blockage Period, unless such event of default shall have been cured or
waived for a period of not less than 90 consecutive days.
Each Guarantee will, to the extent set forth in the Indenture, be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness of the respective Guarantor, including obligations of such
Guarantor with respect to the Credit Facility (including any guarantee
thereof), and will be subject to the rights of holders of Designated Senior
Indebtedness of such Guarantor to initiate blockage periods, upon terms
substantially comparable to the subordination of the Notes to all Senior
Indebtedness of the Company.
If the Company or any Guarantor fails to make any payment on the Notes or
any Guarantee, as the case may be, when due or within any applicable grace
period, whether or not on account of payment blockage provisions, such failure
constitutes an Event of Default under the Indenture and would enable the
holders of the Notes to accelerate the maturity thereof. See "--Events of
Default."
A holder of Notes by his acceptance of Notes agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purpose.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Additional Indebtedness
The Company will not, and will not permit any Restricted Subsidiary of the
Company to, directly or indirectly, incur (as defined) any Indebtedness
(including Acquired Indebtedness) unless (a) after giving effect to the
incurrence of such Indebtedness and the receipt and application of the
proceeds thereof, the ratio of total Indebtedness of the Company and its
Restricted Subsidiaries to the Company's Adjusted EBITDA is less than 6.0 to 1
if the Indebtedness is incurred prior to July 15, 2001 and 5.5 to 1 if the
Indebtedness is incurred thereafter; provided, however, that if the
Indebtedness which is the subject of a determination under this provision is
Acquired Indebtedness, or Indebtedness incurred in connection with the
simultaneous acquisition of
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any Person, business, property or assets, then such ratio shall be determined
by giving effect (on a pro forma basis, as if the transaction had occurred at
the beginning of the four quarter period ending at the end of the last fiscal
quarter of such Person or business for which financial statements are
available) to the incurrence or assumption of such Acquired Indebtedness or
such other Indebtedness by the Company; and (b) no Default or Event of Default
shall have occurred and be continuing at the time or as a consequence of the
incurrence of such Indebtedness.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may incur Permitted Indebtedness; provided, that the Company will not incur
any Permitted Indebtedness, without meeting the Indebtedness incurrence
provisions of the preceding paragraph, that ranks pari passu or junior in
right of payment to the Notes and that has a maturity or mandatory sinking
fund payment prior to the maturity of the Notes.
Notwithstanding the two preceding paragraphs, the Company will not permit
any of its foreign Subsidiaries to incur any subordinated Indebtedness.
Limitation on Restricted Payments
The Company will not make, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be continuing
at the time of or immediately after giving effect to such Restricted
Payment;
(b) immediately after giving pro forma effect to such Restricted Payment,
the Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the covenant set forth under "Limitation on
Additional Indebtedness"; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared (except to the extent not
made on the payment date) or made after the Issue Date does not exceed the
sum of (1) 50% of the cumulative Consolidated Net Income of the Company
subsequent to the Issue Date (or minus 100% of any cumulative deficit in
Consolidated Net Income during such period) and (2) 100% of the aggregate
Net Proceeds and the fair market value of securities or other property
received by the Company from the issue or sale, after the Issue Date, of
Capital Stock (other than Disqualified Capital Stock or Capital Stock of
the Company issued to any Subsidiary of the Company) of the Company or any
Indebtedness or other securities of the Company convertible into or
exercisable or exchangeable for Capital Stock (other than Disqualified
Capital Stock) of the Company which has been so converted or exercised or
exchanged, as the case may be, and (3) $1,000,000. For purposes of
determining under this clause (c) the amount expended for Restricted
Payments, cash distributed shall be valued at the face amount thereof and
property other than cash shall be valued at its fair market value.
Notwithstanding the foregoing, the provisions of this covenant shall not
prohibit (i) the payment of any distribution within 60 days after the date of
declaration thereof, if at such date of declaration such payment would comply
with the provisions of the Indenture, (ii) the retirement of any shares of
Capital Stock of the Company or subordinated Indebtedness by conversion into,
or by or in exchange for, shares of Capital Stock (other than Disqualified
Capital Stock), or out of, the Net Proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of other shares of Capital
Stock of the Company (other than Disqualified Capital Stock), (iii) the
redemption or retirement of Indebtedness of the Company subordinated to the
Notes in exchange for, by conversion into, or out of the Net Proceeds of, a
substantially concurrent sale or incurrence of Indebtedness (other than any
Indebtedness owed to a Subsidiary) of the Company that is contractually
subordinated in right of payment to the Notes to at least the same extent as
the subordinated Indebtedness being redeemed or retired, (iv) the retirement
of any shares of Disqualified Capital Stock by conversion into, or by exchange
for, shares of Disqualified Capital Stock, or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other shares of Disqualified Capital Stock, (v) Permitted Tax Distributions,
(vi) the Real Estate Transactions, (vii) the Stock Redemption, (viii)
distributions or other payments
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to the Permitted Holders, whether or not pro rata, provided, however, that the
aggregate amount of all such distributions or payments under this clause
(viii) made in any one year does not exceed $700,000 or (ix) additional
payments to the Permitted Holders or employees of the Company for repurchases
of stock or repurchases pursuant to the Nonqualified Stock Option Plan;
provided, however, that the aggregate amount of all such payments under this
clause (ix) does not exceed $2,000,000 in the aggregate, exclusive of amounts
funded by insurance proceeds and, provided, further, that with respect to
clauses (viii) and (ix) (other than with respect to payments funded by
insurance proceeds) no Default or Event of Default shall have occurred and be
continuing at the time of any such distribution or payment or will occur
immediately after giving effect to any such distribution or payment; and,
provided, further, that, in determining the aggregate amount of all Restricted
Payments made subsequent to the Issue Date, all distributions or payments made
pursuant to clauses (viii) and (ix) (exclusive of insurance proceeds) shall be
included.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this covenant were computed, which calculations may be based upon
the Company's latest available financial statements, and that no Default or
Event of Default exists and is continuing and no Default or Event of Default
will occur immediately after giving effect to any Restricted Payments.
Limitation on Other Senior Subordinated Debt
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, incur, contingently or otherwise, any Indebtedness
(other than the Notes and the Guarantees, as the case may be) that is both (i)
subordinate in right of payment to any Senior Indebtedness of the Company or
its Restricted Subsidiaries, as the case may be, and (ii) senior in right of
payment to the Notes and the Guarantees, as the case may be. For purposes of
this covenant, Indebtedness is deemed to be senior in right of payment to the
Notes and the Guarantees, as the case may be, if it is not explicitly
subordinate in right of payment to Senior Indebtedness at least to the same
extent as the Notes and the Guarantees, as the case may be, are subordinate to
Senior Indebtedness.
Limitations on Investments
The Company will not, and will not permit any of its Restricted Subsidiaries
to, make any Investment other than (i) a Permitted Investment or (ii) an
Investment that is made as a Restricted Payment in compliance with the
"Limitation on Restricted Payments" covenant, after the Issue Date.
Limitations on Liens
The Company will not, and will not permit any of its Restricted Subsidiaries
to, create, incur or otherwise cause or suffer to exist or become effective
any Liens of any kind (other than Permitted Liens) upon any property or asset
of the Company or any Restricted Subsidiary or any shares of stock or debt of
any Restricted Subsidiary which owns property or assets, now owned or
hereafter acquired, in any case which secures Indebtedness pari passu with or
subordinated to the Notes unless (i) if such Lien secures Indebtedness which
is pari passu with the Notes, then the Notes are secured on an equal and
ratable basis with the obligations so secured until such time as such
obligation is no longer secured by a Lien or (ii) if such Lien secures
Indebtedness which is subordinated to the Notes, any such Lien shall be
subordinated to the Lien granted to the holders of the Notes in the same
collateral to the same extent as such subordinated Indebtedness is
subordinated to the Notes.
Limitation on Transactions with Affiliates
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, enter into any transaction or series of related
transactions (including, without limitation, the sale, purchase, exchange or
lease of assets, property or services) with any Affiliate (including entities
in which the Company or any of its Restricted Subsidiaries own a minority
interest) or holder of 10% or more of the Company's Common Stock (an
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"Affiliate Transaction") or extend, renew, waive or otherwise modify the terms
of any Affiliate Transaction entered into prior to the Issue Date unless (i)
such Affiliate Transaction is between or among the Company and its Wholly-
Owned Subsidiaries; (ii) such Affiliate Transaction is solely between or among
Wholly-Owned Subsidiaries of the Company; or (iii) the terms of such Affiliate
Transaction are fair and reasonable to the Company or such Restricted
Subsidiary, as the case may be, and the terms of such Affiliate Transaction
are at least as favorable as the terms which could be obtained by the Company
or such Restricted Subsidiary, as the case may be, in a comparable transaction
made on an arm's-length basis between unaffiliated parties; provided, however,
that the Company and its Restricted Subsidiaries may renew any then existing
Affiliate Transaction through either a renewal option or upon expiration of an
arrangement on substantially similar terms to those in effect immediately
preceding such expiration. In any Affiliate Transaction involving an amount or
having a value in excess of $1 million which is not permitted under clause (i)
or (ii) above, the Company must obtain a resolution of the Board of Directors
certifying that such Affiliate Transaction complies with clause (iii) above.
In transactions with a value in excess of $3 million which are not permitted
under clause (i) or (ii) above, the Company must obtain a written opinion as
to the fairness from a financial point of view of such a transaction from an
independent investment banking firm or recognized real estate firm (as the
case may be).
The foregoing provisions will not apply to (i) any Restricted Payment that
is not prohibited by the provisions described under "Limitations on Restricted
Payments" contained herein, (ii) any transaction, approved by the Board of
Directors of the Company in good faith, with an officer, director, employee or
consultant of the Company or of any Subsidiary in his or her capacity as an
officer, director, employee or consultant entered into in the ordinary course
of business, including compensation, indemnity and employee benefit
arrangements with any officer, director, employee or consultant of the Company
or of any Subsidiary, or (iii) customary investment banking, underwriting,
placement agent or financial advisor fees paid in connection with services
rendered to the Company or any Subsidiary.
Limitation on Creation of Subsidiaries
The Company shall not create or acquire, nor permit any of its Restricted
Subsidiaries to create or acquire, any Subsidiary other than (i) a Restricted
Subsidiary existing as of the date of the Indenture, (ii) a Restricted
Subsidiary that is acquired or created after the date of the Indenture, or
(iii) an Unrestricted Subsidiary; provided, however, that each Restricted
Subsidiary organized under the laws of the United States or any State thereof
or the District of Columbia acquired or created pursuant to clause (ii) shall,
at the time it has either assets or shareholder's equity in excess of $5,000,
execute a guarantee, in the form attached to the Indenture and reasonably
satisfactory in form and substance to the Trustee (and with such documentation
relating thereto as the Trustee shall require, including, without limitation a
supplement or amendment to the Indenture and opinions of counsel as to the
enforceability of such guarantee). See "Future Guarantees."
Limitation on Certain Asset Sales
The Company will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless (i) the Company or its Restricted
Subsidiaries, as the case may be, receives consideration at the time of such
sale or other disposition at least equal to the fair market value thereof (as
determined for Asset Sales other than eminent domain, condemnation or similar
government proceedings in good faith by the Company's board of directors, and
evidenced by a board resolution); (ii) not less than 85% of the consideration
received by the Company or its Subsidiaries, as the case may be, is in the
form of cash or Temporary Cash Investments; and (iii) the Asset Sale Proceeds
received by the Company or such Restricted Subsidiary are applied (a) first,
to the extent the Company elects, or is required, to prepay, repay or purchase
debt under any then existing Senior Indebtedness of the Company or any
Restricted Subsidiary within 180 days following the receipt of the Asset Sale
Proceeds from any Asset Sale; (b) second, to the extent of the balance of
Asset Sale Proceeds after application as described above, to the extent the
Company elects, to an investment in assets (including Capital Stock or other
securities purchased in connection with the acquisition of Capital Stock or
property of another Person) used or useful in businesses similar or ancillary
to the business of the Company or Restricted Subsidiary as conducted at the
time of such Asset Sale, provided that such investment occurs or the Company
or a Restricted Subsidiary enters into
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contractual commitments to make such investment, subject only to customary
conditions (other than the obtaining of financing), on or prior to the 181st
day following receipt of such Asset Sale Proceeds (the "Reinvestment Date")
and Asset Sale Proceeds contractually committed are so applied within 270 days
following the receipt of such Asset Sale Proceeds; and (c) third, if on the
Reinvestment Date with respect to any Asset Sale, the Available Asset Sale
Proceeds exceed $10 million, the Company shall apply an amount equal to such
Available Asset Sale Proceeds to an offer to repurchase the Notes, at a
purchase price in cash equal to 100% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of repurchase (an "Excess
Proceeds Offer"). If an Excess Proceeds Offer is not fully subscribed, the
Company may retain the portion of the Available Asset Sale Proceeds not
required to repurchase Notes for general corporate purposes. If the aggregate
principal amount of Notes tendered pursuant to such Excess Proceeds Offer is
more than the amount of the Available Asset Sale Proceeds, the Notes tendered
will be repurchased on a pro rata basis or by such other method as the Trustee
shall deem fair and appropriate.
If the Company is required to make an Excess Proceeds Offer, the Company
shall mail, within 30 days following the Reinvestment Date, a notice to the
holders stating, among other things: (1) that such holders have the right to
require the Company to apply the Available Asset Sale Proceeds to repurchase
such Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase; (2)
the purchase date, which shall be no earlier than 30 days and not later than
60 days from the date such notice is mailed; (3) the instructions, determined
by the Company, that each holder must follow in order to have such Notes
repurchased; and (4) the calculations used in determining the amount of
Available Asset Sale Proceeds to be applied to the repurchase of such Notes.
Limitation on Preferred Stock of Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary to issue any Preferred
Stock (except Preferred Stock to the Company or a Restricted Subsidiary) or
permit any Person (other than the Company or a Subsidiary) to hold any such
Preferred Stock unless the Company or such Restricted Subsidiary would be
entitled to incur or assume Indebtedness under the covenant described under
"Limitation on Additional Indebtedness" in the aggregate principal amount
equal to the aggregate liquidation value of the Preferred Stock to be issued;
provided, however, that any Restricted Subsidiary that guarantees the Notes
pursuant to the covenant described under "Limitation on Creation of
Subsidiaries" shall be permitted to issue Preferred Stock that is not
Disqualified Capital Stock.
Limitation on Capital Stock of Restricted Subsidiaries
The Company will not (i) sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of a Restricted Subsidiary (other than under the
terms of the Credit Facility or under the terms of any Designated Senior
Indebtedness) or (ii) permit any of its Restricted Subsidiaries to issue any
Capital Stock, other than to the Company or a Wholly-Owned Subsidiary of the
Company. The foregoing restrictions shall not apply to an Asset Sale made in
compliance with "Limitation on Certain Asset Sales" or the issuance of
Preferred Stock in compliance with the covenants described under "Limitation
on Preferred Stock of Restricted Subsidiaries."
Limitation on Sale and Lease-Back Transactions
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold, as determined by a board resolution of the
Company, and (ii) the Company could incur the Attributable Indebtedness in
respect of such Sale and Lease-Back Transaction in compliance with the
covenant described under "Limitation on Additional Indebtedness."
Payments for Consent
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
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to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or
agreed to be paid to all holders of the Notes which so consent, waive or agree
to amend in the time frame set forth in solicitation documents relating to
such consent, waiver or agreement.
CHANGE OF CONTROL OFFER
Within 30 days of the occurrence of a Change of Control, the Company shall
notify the Trustee in writing of such occurrence and shall make an offer to
purchase (the "Change of Control Offer") the outstanding Notes at a purchase
price equal to 101% of the principal amount thereof plus any accrued and
unpaid interest thereon to the Change of Control Payment Date (as hereinafter
defined) (such applicable purchase price being hereinafter referred to as the
"Change of Control Purchase Price") in accordance with the procedures set
forth in this covenant. See "Certain Definitions--Change of Control" herein.
Within 30 days of the occurrence of a Change of Control, the Company also
shall (i) cause a notice of the Change of Control Offer to be sent at least
once to the Dow Jones News Service or similar business news service in the
United States and (ii) send by first-class mail, postage prepaid, to the
Trustee and to each holder of the Notes, at the address appearing in the
register maintained by the Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment, and
otherwise subject to the terms and conditions set forth herein;
(2) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 20 business days and no later than
60 days from the date such notice is mailed (the "Change of Control Payment
Date"));
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Notes delivered for purchase, and a
statement that such holder is withdrawing his election to have such Notes
purchased;
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, provided that each Note purchased and each such new
Note issued shall be in an original principal amount in denominations of
$1,000 and integral multiples thereof;
(8) any other procedures that a holder must follow to accept a Change of
Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (i) accept for payment Notes or portions thereof or beneficial
interests under a Global Note properly tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof or beneficial interests so
tendered and (iii) deliver or cause to be delivered to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Company. The Paying Agent shall promptly (1) mail to
each holder of Notes so accepted and (2) cause to be credited to the
respective accounts of the holders under a Global Note of beneficial interest
so accepted payment in an amount
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equal to the purchase price for such Notes, and the Company shall execute and
issue, and the Trustee shall promptly authenticate and mail to such holder, a
new Note equal in principal amount to any unpurchased portion of the Notes
surrendered and shall issue a Global Note equal in principal amount to any
unpurchased portion of beneficial interest so surrendered; provided that each
such new Note shall be issued in an original principal amount in denominations
of $1,000 and integral multiples thereof.
The Indenture requires that if the Credit Facility is in effect, or any
amounts are owing thereunder or in respect thereof, at the time of the
occurrence of a Change of Control, prior to the mailing of the notice to
holders described in the preceding paragraph, but in any event within 30 days
following any Change of Control, the Company covenants to (i) repay in full
all obligations under or in respect of the Credit Facility or offer to repay
in full all obligations under or in respect of the Credit Facility and repay
the obligations under or in respect of the Credit Facility of each lender who
has accepted such offer or (ii) obtain the requisite consent under the Credit
Facility to permit the repurchase of the Notes as described above. The Company
must first comply with the covenant described in the preceding sentence before
it shall be required to purchase Notes in the event of a Change of Control;
provided that the Company's failure to comply with the covenant described in
the preceding sentence constitutes an Event of Default described in clause
(iii) under "Events of Default" below if not cured within 60 days after the
notice required by such clause. As a result of the foregoing, a holder of the
Notes may not be able to compel the Company to purchase the Notes unless the
Company is able at the time to refinance all of the obligations under or in
respect of the Credit Facility or obtain requisite consents under the Credit
Facility.
The Indenture provides that, (A) if the Company or any Subsidiary thereof
has issued any outstanding (i) Indebtedness that is subordinated in right of
payment to the Notes or (ii) Preferred Stock, and the Company or such
Subsidiary is required to make a Change of Control Offer or to make a
distribution with respect to such subordinated Indebtedness or Preferred Stock
in the event of a change of control, the Company shall not consummate any such
offer or distribution with respect to such subordinated Indebtedness or
Preferred Stock until such time as the Company shall have paid the Change of
Control Purchase Price in full to the holders of Notes that have accepted the
Company's Change of Control Offer and shall otherwise have consummated the
Change of Control Offer made to holders of the Notes and (B) the Company will
not issue Indebtedness that is subordinated in right of payment to the Notes
or Preferred Stock with change of control provisions requiring the payment of
such Indebtedness or Preferred Stock prior to the payment of the Notes in the
event of a Change of Control under the Indenture.
In the event that a Change of Control occurs and the holders of Notes
exercise their right to require the Company to purchase Notes, if such
purchase constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act at that time, the Company will comply with the requirements of
Rule 14e-1 as then in effect with respect to such repurchase.
The Company's ability to purchase the Notes will be limited by the Company's
then available financial resources and, if such financial resources are
insufficient, its ability to arrange financing to effect such purchases. There
can be no assurance that the Company will have sufficient funds to repurchase
the Notes upon a Change of Control or that the Company will be able to arrange
financing for such purpose.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company will not and will not permit any Guarantor to consolidate with,
merge with or into, or transfer all or substantially all of its assets (as an
entirety or substantially as an entirety in one transaction or a series of
related transactions), to any Person unless: (i) the Company or the Guarantor,
as the case may be, shall be the continuing Person, or the Person (if other
than the Company or the Guarantor) formed by such consolidation or into which
the Company or the Guarantor, as the case may be, is merged or to which the
properties and assets of the Company or the Guarantor, as the case may be, are
transferred shall be a corporation organized and existing under the laws of
the United States or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all of the obligations of the
Company or the Guarantor, as the case may be, under the Notes and the
Indenture, and the
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obligations under the Indenture shall remain in full force and effect; (ii)
immediately before and immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; and (iii)
immediately after giving effect to such transaction on a pro forma basis the
Company or such Person could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the covenant set forth under
"Limitation on Additional Indebtedness"; provided, however, that a Guarantor
may merge into the Company or another Guarantor without complying with this
clause (iii).
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an Officers' Certificate and an opinion of counsel, each stating
that such consolidation, merger or transfer and the supplemental indenture in
respect thereto comply with this provision and that all conditions precedent
herein provided for relating to such transaction or transactions have been
complied with.
FUTURE GUARANTEES
The Notes will be guaranteed on a senior subordinated basis by the
Guarantors. All payments pursuant to the Guarantees by the Guarantors will be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness of the Guarantor, to the same extent and in the same manner that
all payments pursuant to the Notes are subordinated in right of payment to the
prior payment in full of all Senior Indebtedness of the Company.
The obligations of each Guarantor will be limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of
such Guarantor (including, without limitation, any guarantees of Senior
Indebtedness) and after giving effect to any collections from or payments made
by or on behalf of any other Guarantor in respect of the obligations of such
other Guarantor under its Guarantee or pursuant to its contribution
obligations under the Indenture, result in the obligations of such Guarantor
under the Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law. Each Guarantor that makes a payment or
distribution under a Guarantee will be entitled to a contribution from each
other Guarantor in a pro rata amount based on the Adjusted Net Assets of each
Subsidiary Guarantor.
A Guarantor will be released from all of its obligations under its Guarantee
if all or substantially all of its assets are sold or all of its Capital Stock
is sold, in each case in a transaction in compliance with the covenants
described under "Limitation on Certain Asset Sales" and "Merger, Consolidation
or Sale of Assets," or the Guarantor merges with or into or consolidates with,
or transfers all or substantially all of its assets to, the Company or another
Guarantor in a transaction in compliance with "Merger, Consolidation or Sale
of Assets," and such Guarantor has delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent herein provided for relating to such transaction have been complied
with.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) default in payment of any principal of, or premium, if any, on the
Notes;
(ii) default for 30 days in payment of any interest on the Notes after
such interest becomes due and payable;
(iii) default by the Company or any Guarantor in the observance or
performance of any other covenant in the Notes or the Indenture for 60 days
after written notice from the Trustee or the holders of not less than 25%
in aggregate principal amount of the Notes then outstanding;
(iv) default in the payment at final maturity of principal in an
aggregate amount of $3,000,000 or more with respect to any Indebtedness of
the Company or any Restricted Subsidiary thereof which default shall not be
cured, waived or postponed pursuant to an agreement with the holders of
such Indebtedness within 60 days after written notice as provided in the
Indenture, or the acceleration of any such Indebtedness aggregating
$3,000,000 or more which acceleration shall not be rescinded or annulled
within 20 days after written notice as provided in the Indenture;
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(v) any final judgment or judgments which can no longer be appealed for
the payment of money in excess of $3,000,000 (which are not paid or covered
by third party insurance by financially sound insurers that have not
disclaimed coverage) shall be rendered against the Company or any
Restricted Subsidiary thereof, and shall not be discharged for any period
of 60 consecutive days during which a stay of enforcement shall not be in
effect; and
(vi) certain events involving bankruptcy, insolvency or reorganization of
the Company or any Restricted Subsidiary thereof.
The Indenture provides that the Trustee may withhold notice to the holders
of the Notes of any default (except in payment of principal or premium, if
any, or interest on the Notes) if the Trustee in good faith determines it to
be in the best interest of the holders of the Notes to do so.
The Indenture provides that if an Event of Default (other than an Event of
Default resulting from certain events of bankruptcy, insolvency or
reorganization) shall have occurred and be continuing, then the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding may declare to be immediately due and payable the entire principal
amount of all the Notes then outstanding plus premium, if any, and accrued
interest to the date of acceleration and (i) such amounts shall become
immediately due and payable or (ii) if there are any amounts outstanding under
or in respect of the Credit Facility such amounts shall become due and payable
upon the first to occur of an acceleration of amounts outstanding under or in
respect of the Credit Facility or five business days after receipt by the
Company and the representative of the holders of Senior Indebtedness under or
in respect of the Credit Facility, of notice of the acceleration of the Notes;
provided, however, that after such acceleration but before a judgment or
decree based on acceleration is obtained by the Trustee, the holders of a
majority in aggregate principal amount of outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than nonpayment of accelerated principal, premium, if any, or interest,
have been cured or waived as provided in the Indenture. In case an Event of
Default resulting from certain events of bankruptcy, insolvency or
reorganization shall occur, the principal, premium and interest amount with
respect to all of the Notes shall be due and payable immediately without any
declaration or other act on the part of the Trustee or the holders of the
Notes.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing default or Event of Default or
compliance with any provision of the Indenture or the Notes and to direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee, subject to certain limitations specified in the Indenture.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder
shall have previously given to the Trustee written notice of a continuing
Event of Default and unless also the holders of at least 25% in aggregate
principal amount of the outstanding Notes shall have made written request and
offered reasonable indemnity to the Trustee to institute such proceeding as a
trustee, and unless the Trustee shall not have received from the holders of a
majority in aggregate principal amount of the outstanding Notes a direction
inconsistent with such request and the Trustee shall have failed to institute
such proceeding within 60 days. However, such limitations do not apply to a
suit instituted for payment of principal, premium, if any, or interest on a
Note on or after the respective due dates expressed in such Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides the Company may elect either (a) to defease and be
discharged from any and all obligations with respect to the Notes (except for
the obligations to register the transfer or exchange of such Notes, to replace
temporary or mutilated, destroyed, lost or stolen Notes, to maintain an office
or agency in respect of the Notes and to hold monies for payment in trust)
("defeasance") or (b) to be released from its obligations with respect to the
Notes under certain covenants contained in the Indenture and described above
under "Certain Covenants" ("covenant defeasance"), upon the deposit with the
Trustee (or other qualifying trustee), in trust for such purpose, of money
and/or U.S. Government Obligations which through the payment of principal and
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interest in accordance with their terms will provide money, in an amount
sufficient to pay the principal of, premium, if any, and interest on the
Notes, on the scheduled due dates therefor or on a selected date of redemption
in accordance with the terms of the Indenture. Such a trust may only be
established if, among other things, the Company has delivered to the Trustee
an opinion of counsel (as specified in the Indenture) (i) to the effect that
neither the trust nor the Trustee will be required to register as an
investment company under the Investment Company Act of 1940, as amended, and
(ii) to the effect that holders of the Notes or persons in their positions
will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to
federal income tax on the same amount and in the same manner and at the same
times, as would have been the case if such deposit, defeasance and discharge
had not occurred, which, in the case of defeasance only, must be based upon a
private letter ruling concerning the Notes, a published ruling of the Internal
Revenue Service or a change in applicable federal income tax law.
MODIFICATION OF INDENTURE
From time to time, the Company, the Guarantors, if applicable, and the
Trustee may, without the consent of holders of the Notes, modify, amend, waive
or supplement the provisions of the Indenture or the Notes for certain
specified purposes, including providing for uncertificated Notes in addition
to certificated Notes, and curing any ambiguity, defect or inconsistency, or
making any other change that does not materially and adversely affect the
rights of any holder. The Indenture contains provisions permitting the
Company, the Guarantors, if applicable, and the Trustee, with the consent of
holders of at least a majority in principal amount of the outstanding Notes,
to modify, amend, waive or supplement the Indenture or the Notes, except that
no such modification shall, without the consent of each holder affected
thereby, (i) reduce the amount of Notes whose holders must consent to an
amendment, modification, supplement or waiver to the Indenture or the Notes,
(ii) reduce the rate of or change the time for payment of interest on any
Note, (iii) reduce the principal of or premium on or change the stated
maturity of any Note, (iv) make any Note payable in money other than that
stated in the Note or change the place of payment from New York, New York, (v)
change the amount or time of any payment required by the Notes or reduce the
premium payable upon any redemption of Notes, or change the time before which
no such redemption may be made, (vi) waive a default on the payment of the
principal of, interest on, or redemption payment with respect to any Note, or
(vii) take any other action otherwise prohibited by the Indenture to be taken
without the consent of each holder affected thereby.
The consent of the holders is not necessary to approve the particular form
of a proposed amendment, modification, supplement or waiver. It is sufficient
if such consent approves the substance thereof.
REPORTS TO HOLDERS
So long as the Company is subject to the periodic reporting requirements of
the Exchange Act, it will continue to furnish the information required thereby
to the Commission and to the holders of the Notes. The Indenture provides that
even if the Company is entitled under the Exchange Act not to furnish such
information to the Commission or to the holders of the Notes, it will
nonetheless continue to furnish such information to the Commission, so long as
the Commission will accept such filings, and holders of the Notes.
COMPLIANCE CERTIFICATE
The Company will deliver to the Trustee on or before 100 days after the end
of the Company's fiscal year and on or before 50 days after the end of each
the first, second and third fiscal quarters in each year an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default that has occurred. If they do, the certificate will describe the
Default or Event of Default and its status.
THE TRUSTEE
The Trustee under the Indenture is the Registrar and Paying Agent with
regard to the Notes. The Indenture provides that, except during the
continuance of an Event of Default which is continuing, the Trustee will
perform
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only such duties as are specifically set forth in the Indenture. During the
existence of an Event of Default which is continuing, the Trustee will
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange Notes in accordance with the
Indenture. The Registrar under such Indenture may require a holder, among
other things, to furnish appropriate endorsements and transfer documents, and
to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar is not required to transfer or exchange any Note selected for
redemption. Also, the Registrar is not required to transfer or exchange any
Note for a period of 15 days before selection of the Notes to be redeemed.
The Original Notes were issued in a transaction exempt from registration
under the Securities Act and are subject to restrictions on transfer.
The registered holder of a Note may be treated as the owner of it for all
purposes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. Reference is made to the Indenture for
the full definition of all such terms as well as any other capitalized terms
used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from a
Person.
"Acquisition EBITDA" means, without duplication, (i) EBITDA for the last
four fiscal quarters for which financial statements are available at the date
of determination (the "Acquisition EBITDA Period") with respect to a business
or Person which has been acquired by the Company or one of its Restricted
Subsidiaries or which is the subject of a binding acquisition agreement
requiring the calculation of EBITDA for purposes of the covenant restricting
the incurrence of Indebtedness and, in each case, with respect to which
financial results on a consolidated basis with the Company have not been made
available for an entire fiscal quarter; plus (ii) in connection with any such
acquisition, projected quantifiable improvements in operating results due to
an established program of cost reductions (consistent with the cost reductions
actually achieved by the Company in connection with prior acquisitions)
adopted, in good faith, by the Company or one of its Restricted Subsidiaries
through a Board Resolution certified by an Officers' Certificate filed with
the Trustee (calculated on a pro forma basis for the Acquisition EBITDA Period
as if the program had been implemented at the beginning of the Acquisition
EBITDA Period), without giving effect to any operating losses of the acquired
Person. Such Officers' Certificate shall confirm that any such anticipated
cost reductions made in connection with an acquisition with a purchase price
in excess of $25,000,000 have been reviewed for reasonableness and consistency
with past practice by an independent nationally recognized investment banking
firm and such firm shall not have raised any material objections thereto. Each
such Officers' Certificate shall be signed by the Chief Financial Officer and
another officer of the Company. Acquisition EBITDA of a business shall be a
fixed number determined as of the date the calculation of EBITDA for purposes
of the covenant restricting the incurrence of Indebtedness is first required
with respect to the acquisition of such business (the "Determination Date")
and shall be utilized from the Determination Date through the date financial
results are available for the first full fiscal quarter following the
acquisition (following which the actual EBITDA of such business or Person
shall be included in the EBITDA of the Company). For purposes of determining
Acquisition EBITDA with respect to the acquisition of a particular business or
Person, Acquisition EBITDA shall include not only the Acquisition EBITDA of
such business or Person, but also the Acquisition EBITDA of any business
previously acquired by the Company or the subject of a pending acquisition
agreement to the extent that, as of the Determination Date, the financial
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results for such business or Person on a consolidated basis with the Company
for a full fiscal quarter subsequent to its acquisition by the Company are not
yet available.
"Adjusted EBITDA" means for any Person, without duplication, the sum of (a)
EBITDA of such Person and its Restricted Subsidiaries for the most recent
fiscal quarter for which internal financial statements are available,
multiplied by four and (b) Acquisition EBITDA.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of
the amount by which (x) the fair value of the property of such Guarantor
exceeds the total amount of liabilities, including, without limitation,
contingent liabilities (after giving effect to all other fixed and contingent
liabilities (including, without limitation, any guarantees of Senior
Indebtedness)), but excluding liabilities under the Guarantee, of such
Guarantor at such date and (y) the present fair salable value of the assets of
such Guarantor at such date exceeds the amount that will be required to pay
the probable liability of such Guarantor on its debts (after giving effect to
all other fixed and contingent liabilities (including, without limitation, any
guarantees of Senior Indebtedness) and after giving effect to any collection
from any Subsidiary of such Guarantor in respect of the obligations of such
Subsidiary under the Guarantee), excluding Indebtedness in respect of the
Guarantee, as they become absolute and matured.
"Affiliate" of any specified Person means any other Person which directly or
indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such specified Person. For the purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise.
"Asset Sale" means the sale, transfer or other disposition (other than to
the Company or any of its Restricted Subsidiaries) in any single transaction
or series of related transactions involving assets with a fair market value in
excess of $500,000 of (a) any Capital Stock of or other equity interest in any
Restricted Subsidiary of the Company, (b) all or substantially all of the
assets of the Company or of any Restricted Subsidiary thereof, (c) real
property of the Company or a Restricted Subsidiary or (d) all or substantially
all of the assets of any business property, or part thereof, owned by the
Company or any Restricted Subsidiary thereof, or a division, line of business
or comparable business segment of the Company or any Restricted Subsidiary
thereof; provided that Asset Sales shall not include (i) sales, leases,
conveyances, transfers or other dispositions to the Company or to a Restricted
Subsidiary or to any other Person if after giving effect to such sale, lease,
conveyance, transfer or other disposition such other Person becomes a
Restricted Subsidiary, (ii) transactions complying with "Merger, Consolidation
or Sale of Assets" above and (iii) transfers or other distributions of assets
which constitute (1) Permitted Investments or (2) Restricted Payments made in
compliance with the covenant described under "Certain Covenants--Limitation on
Restricted Payments."
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any Restricted Subsidiary from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such
Asset Sale; provided, however, that so long as the Company is taxed as an S
corporation or other pass-through entity for federal income tax purposes,
taxes shall be determined on a pro forma basis as if the Company was a C
corporation, (b) payment of all brokerage commissions, underwriting and other
fees and expenses related to such Asset Sale, (c) provision for minority
interest holders in any Restricted Subsidiary as a result of such Asset Sale,
(d) payments made to retire Indebtedness secured by the assets subject to such
Asset Sale and (e) deduction of appropriate amounts to be provided by the
Company or a Restricted Subsidiary as a reserve, in accordance with GAAP,
against any liabilities associated with the assets sold or disposed of in such
Asset Sale and retained by the Company or a Restricted Subsidiary after such
Asset Sale, including, without limitation, pension and other post employment
benefit liabilities and liabilities related to environmental matters or
against any indemnification obligations associated with the assets sold or
disposed of in such Asset Sale, and (ii) promissory notes and other non-cash
consideration received by the
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Company or any Restricted Subsidiary from such Asset Sale or other disposition
upon the liquidation or conversion of such notes or non-cash consideration
into cash.
"Attributable Indebtedness" under the Indenture in respect of a Sale and
Lease-Back Transaction means, as of the time of determination, the greater of
(i) the fair value of the property subject to such arrangement (as determined
by the Board of Directors) and (ii) the present value (discounted at the rate
of interest implicit in such transaction) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
such Sale and Lease-Back Transaction (including any period for which such
lease has been extended).
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sales that have not been applied
in accordance with clauses (iii)(a) or (iii)(b), and which has not yet been
the basis for an Excess Proceeds Offer in accordance with clause (iii)(c), of
the first paragraph of "Certain Covenants--Limitation on Certain Asset Sales".
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated) of capital stock, partnership interests
or any other participation, right or other interest in the nature of an equity
interest in such Person or any option, warrant or other security convertible
into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such
Indebtedness shall be the capitalized amount of such obligations determined in
accordance with GAAP.
A "Change of Control" of the Company will be deemed to have occurred at such
time as (i) any Person (including a Person's Affiliates and associates), other
than a Permitted Holder, becomes the beneficial owner (as defined under Rule
13d-3 or any successor rule or regulation promulgated under the Exchange Act)
of more than 50% of the total voting power of the Company's Common Stock, (ii)
any Person (including a Person's Affiliates and associates), other than a
Permitted Holder, becomes the beneficial owner of more than 33 1/3% of the
total voting power of the Company's Common Stock, and the Permitted Holders
beneficially own, in the aggregate, a lesser percentage of the total voting
power of the Common Stock of the Company than such other Person and do not
have the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the Company,
(iii) there shall be consummated any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant
to which the Common Stock of the Company would be converted into cash,
securities or other property, other than a merger or consolidation of the
Company in which the holders of the Common Stock of the Company outstanding
immediately prior to the consolidation or merger hold, directly or indirectly,
at least a majority of the Common Stock of the surviving corporation
immediately after such consolidation or merger, (iv) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Company has been approved by a majority of the directors
then still in office who either were directors at the beginning of such period
or whose election or recommendation for election was previously so approved)
cease to constitute a majority of the Board of Directors of the Company or (v)
J. Peter Pierce shall no longer be involved in the strategic planning of the
Company (as President, Chairman of the Board or otherwise), other than by
reason of his death or disability; provided, however, that upon the
consummation of an initial public offering of common equity securities of the
Company yielding gross proceeds to the Company of at least $20,000,000 this
clause (v) shall cease to constitute a "Change of Control" under the
Indenture.
"Common Stock" of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will
control the management and policies of such Person.
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"Consolidated Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis
for such period (including, but not limited to, Redeemable Dividends, whether
paid or accrued, on Preferred Stock of a Subsidiary, imputed interest included
in Capitalized Lease Obligations, all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs associated with hedging obligations, the interest
portion of any deferred payment obligation, amortization of discount or
premium, if any, and all other non-cash interest expense (other than interest
amortized to cost of sales)) plus, without duplication, all net capitalized
interest for such period and all interest paid under any guarantee of
Indebtedness (including a guarantee of principal, interest or any combination
thereof) of any Person, plus the amount of all dividends or distributions paid
on Disqualified Capital Stock (other than dividends paid or payable in shares
of Capital Stock of the Company).
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP provided,
however, that (a) the Net Income of any Person (the "other Person") in which
the Person in question or any of its Subsidiaries has less than a 99% interest
(which interest does not cause the net income of such other Person to be
consolidated into the net income of the Person in question in accordance with
GAAP) shall be included only to the extent of the amount of dividends or
distributions paid to the Person in question or the Subsidiary, (b) the Net
Income of any Subsidiary of the Person in question, which Subsidiary is
subject to any restriction or limitation on the payment of dividends or the
making of other distributions (other than pursuant to the Notes or the
Indenture), shall be excluded to the extent of such restriction or limitation
(provided that if any such restriction or limitation by its terms takes effect
upon the occurrence of a default or event of default, such exclusion shall
become effective only upon the occurrence of such default or event of default
which is continuing), (c)(i) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition and (ii) any net gain (but not loss) resulting from an Asset Sale
by the Person in question or any of its Subsidiaries other than in the
ordinary course of business shall be excluded, and (d) extraordinary, unusual
and nonrecurring gains and losses shall be excluded.
"Credit Facility" means the credit agreement or credit agreements to be
entered into by and among the Company, the Restricted Subsidiaries and any one
or more lenders from time to time parties thereto, as the same may be amended,
extended, increased, renewed, restated, supplemented or otherwise modified (in
whole or in part, and without limitation as to amount, terms, conditions,
covenants and other provisions) from time to time, and any agreement or
agreements governing Indebtedness incurred to refinance, replace, restructure
or refund in whole or in part the borrowings and then maximum commitments
under the Credit Facility or such agreement (whether with the original
administrative agent and lenders or other agents and lenders or otherwise, and
whether provided under the original Credit Facility or other credit agreements
or otherwise). The Company shall promptly notify the Trustee of any such
refunding, replacement, restructuring or refinancing of the Credit Facility.
"Designated Senior Indebtedness," as to the Company or any Guarantor, as the
case may be, means any Senior Indebtedness (a) under the Credit Facility, or
(b) which at the time of determination exceeds $15,000,000 in aggregate
principal amount (or accreted value in the case of Indebtedness issued at a
discount) outstanding or available under a committed facility, and (i), unless
such designation is prohibited by the Credit Facility, which is specifically
designated in the instrument evidencing such Senior Indebtedness as
"Designated Senior Indebtedness" by such Person and (ii) as to which the
Trustee has been given written notice of such designation.
"Disqualified Capital Stock" means any Capital Stock of the Company or a
Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include (i) any Preferred Stock of a Restricted Subsidiary
of the Company and (ii) any Preferred Stock of the Company, with respect to
either of which, under
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the terms of such Preferred Stock, by agreement or otherwise, such Restricted
Subsidiary or the Company is obligated to pay current dividends or
distributions in cash during the period prior to the maturity date of the
Notes; provided, however, that Preferred Stock of the Company or any
Restricted Subsidiary thereof that is issued with the benefit of provisions
requiring a change of control offer to be made for such Preferred Stock in the
event of a change of control of the Company or Restricted Subsidiary, which
provisions have substantially the same effect as the provisions of the
Indenture described under "Change of Control," shall not be deemed to be
Disqualified Capital Stock solely by virtue of such provisions, and provided,
further, that Capital Stock owned by the Company or a Wholly-Owned Restricted
Subsidiary shall not constitute Disqualified Capital Stock.
"EBITDA" means, for any Person, for any period, an amount equal to (a) the
sum of (i) Consolidated Net Income for such period, plus (ii) the provision
for taxes for such period based on income or profits to the extent such income
or profits were included in computing Consolidated Net Income and any
provision for taxes utilized in computing net loss under clause (i) hereof,
plus (iii) Consolidated Interest Expense for such period (but only including
Redeemable Dividends in the calculation of such Consolidated Interest Expense
to the extent that such Redeemable Dividends have not been excluded in the
calculation of Consolidated Net Income), plus (iv) depreciation for such
period on a consolidated basis, plus (v) amortization of intangibles and other
deferred financing fees for such period on a consolidated basis, plus (vi) any
other non-cash items reducing Consolidated Net Income for such period, plus
(vii) any payments to Permitted Holders not exceeding $700,000 per year
permitted under clause (vi) of "Certain Covenants--Limitation on Restricted
Payments," plus (viii) Permitted Tax Distributions, except that with respect
to the Company each of the foregoing items shall be determined on a
consolidated basis with respect to the Company and its Restricted Subsidiaries
only, plus (ix) for any calculation of EBITDA utilizing the three month period
ending June 30, 1996 or September 30, 1996, the amount of pro forma savings
with respect to the Real Estate Transactions set forth in this Prospectus
(without duplication for amounts actually realized and included in EBITDA).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness
or other obligation or the recording (other than previously recorded), as
required pursuant to GAAP or otherwise, of any such Indebtedness or other
obligation on the balance sheet of such Person (and "incurrence," "incurred,"
"incurrable," and "incurring" shall have meanings correlative to the
foregoing); provided that a change in GAAP that results in an obligation of
such Person that exists at such time becoming Indebtedness shall not be deemed
an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities arising in the
ordinary course of business) if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, and shall also include, to the extent not
otherwise included (i) any Capitalized Lease Obligations, (ii) obligations
secured by a Lien to which the property or assets owned or held by such Person
is subject, whether or not the obligation or obligations secured thereby shall
have been assumed (provided, however, that if such obligation or obligations
shall not have been assumed, the amount of such Indebtedness shall be deemed
to be the lesser of the principal amount of the obligation or the fair market
value of the pledged property or assets), (iii) guarantees of items of other
Persons which would be included within this definition for such other Persons
(whether or not such items would appear upon the balance sheet of the
guarantor), (iv) all obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction (provided
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that, in the case of any such letters of credit, the items for which such
letters of credit provide credit support are those of other Persons which
would be included within this definition for such other Persons), (v) in the
case of the Company, Disqualified Capital Stock of the Company or any
Restricted Subsidiary thereof, and (vi) obligations of any such Person under
any Interest Rate Agreement applicable to any of the foregoing (if and to the
extent such Interest Rate Agreement obligations would appear as a liability
upon a balance sheet of such Person prepared in accordance with GAAP). The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided (i) that
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the principal amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at
such time as determined in conformity with GAAP and (ii) that Indebtedness
shall not include any liability for federal, state, local or other taxes.
Notwithstanding any other provision of the foregoing definition, any trade
payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business or contingent obligations arising
out of customary indemnification agreements with respect to the sale of assets
or securities shall not be deemed to be "Indebtedness" of the Company or any
Restricted Subsidiaries for purposes of this definition. Furthermore,
guarantees of (or obligations with respect to letters of credit supporting)
Indebtedness and Liens securing Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance, account receivable
(other than an account receivable arising in the ordinary course of business
or acquired as a part of the assets acquired by the Company in connection with
an acquisition of assets which is otherwise permitted by the terms of the
Indenture), loan or capital contribution to (by means of transfers of property
to others, payments for property or services for the account or use of others
or otherwise), the purchase of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities of, the
acquisition, by purchase or otherwise, of all or substantially all of the
business or assets or stock or other evidence of beneficial ownership of, any
Person or the making of any investment in any Person. Investments shall
exclude (i) extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices and (ii) the repurchase or redemption
of securities of any Person by such Person.
"Issue Date" means the date the Notes are first issued by the Company and
authenticated by the Trustee under the Indenture.
"Lien" means with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential arrangement
of any kind or nature whatsoever on or with respect to such property or assets
(including without limitation, any Capitalized Lease Obligation, conditional
sales, or other title retention agreement having substantially the same
economic effect as any of the foregoing).
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP minus
Permitted Tax Distributions with respect to such period, and excluding any
foreign currency translation gains or losses added or deducted, as applicable,
in the computation of Net Income.
"Net Proceeds" means (i) in the case of any sale of Capital Stock by the
Company, the aggregate net proceeds received by the Company, after payment of
expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the board of directors, at the time of
receipt), (ii) in the case of any exchange, exercise,
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conversion or surrender of outstanding securities of any kind for or into
shares of Capital Stock of the Company which is not Disqualified Capital
Stock, the net book value of such outstanding securities on the date of such
exchange, exercise, conversion or surrender (plus any additional amount
required to be paid by the holder to the Company upon such exchange, exercise,
conversion or surrender, less any and all payments made to the holders, e.g.,
on account of fractional shares and less all expenses incurred by the Company
in connection therewith) and (iii) in the case of any issuance of any
Indebtedness by the Company or any Restricted Subsidiary, the aggregate net
cash proceeds received by such Person after payment of expenses, commissions,
underwriting discounts and the like incurred in connection therewith.
"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate
the maturity of any Designated Senior Indebtedness.
"Notes" means the securities that are issued under the Indenture, as amended
or supplemented from time to time pursuant to the Indenture.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the Controller, the President or any
Vice President and the Chief Financial Officer or any Treasurer of such Person
that shall comply with applicable provisions of the Indenture.
"Payment Default" means any default, whether or not any requirement for the
giving of notice, the lapse of time or both, or any other condition to such
default becoming an event of default has occurred, in the payment of principal
of (or premium, if any) or interest on or any other amount payable in
connection with Designated Senior Indebtedness.
"Permitted Holders" means, collectively, Leo W. Pierce, Sr., his children or
other lineal descendants (whether adoptive or biological), the spouses of any
of the foregoing and any probate estate of any such individual and any trust,
so long as one or more of the foregoing individuals is the principal
beneficiary of such trust, and any other partnership, corporation or other
entity all of the partners, shareholders, members or owners of which are any
one or more of the foregoing.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Restricted Subsidiary arising
under or in connection with the Credit Facility in an amount not to exceed
$10,000,000 above the amount that could be borrowed at the time of
determination under the first paragraph under "Certain Covenants--
Limitation on Additional Indebtedness";
(ii) Indebtedness of the Company's Canadian subsidiary (and related
guarantees) under the Credit Facility in an aggregate amount at any one
time outstanding not to exceed Cdn $30,300,000;
(iii) Indebtedness under the Notes and the Guarantees;
(iv) Indebtedness not covered by any other clause of this definition
which is outstanding on the date of the Indenture;
(v) Indebtedness of the Company to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Company or another
Restricted Subsidiary;
(vi) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Indebtedness and Capitalized Lease Obligations do not in the aggregate
exceed 5% of the Company's consolidated total assets;
(vii) Interest Rate Agreements;
(viii) additional Indebtedness of the Company not to exceed $3,000,000 in
principal amount outstanding at any time; and
(ix) Refinancing Indebtedness.
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"Permitted Investments" means, for any Person, Investments made on or after
the date of the Indenture consisting of
(i) Investments by the Company, or by a Restricted Subsidiary thereof, in
the Company or a Restricted Subsidiary; and
(ii) Temporary Cash Investments; and
(iii) Investments by the Company, or by a Restricted Subsidiary thereof,
in a Person (or in all or substantially all of the business or assets of a
business or a Person), if as a result of such Investment (a) such Person
becomes a Restricted Subsidiary of the Company, (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary thereof or (c) such business or assets are owned by
the Company or a Restricted Subsidiary; and
(iv) reasonable and customary loans made to employees not to exceed
$500,000 in the aggregate at any one time outstanding, plus any loans which
may be required to be made under the Nonqualified Stock Option Plan in an
amount not to exceed $2,000,000; and
(v) an Investment that is made by the Company or a Restricted Subsidiary
thereof in the form of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities that are issued by a third
party to the Company or Restricted Subsidiary solely as partial
consideration for the consummation of an Asset Sale that is otherwise
permitted under the covenant described under "Certain Covenants--Limitation
on Certain Asset Sales"; and
(vi) accounts receivable of the Company and its Restricted Subsidiaries
generated in the ordinary course of business; and
(vii) Investments existing on the Issue Date; and
(viii) the Real Estate Transactions and the Stock Redemption; and
(ix) Investments for any purpose not to exceed $2,000,000.
"Permitted Liens" means (i) Liens on property or assets of, or any shares of
stock of or secured debt of, any Person or business existing at the time such
Person becomes a Restricted Subsidiary of the Company or at the time such
Person is merged into or consolidated with the Company or any of its
Restricted Subsidiaries or at the time such business is acquired by the
Company or a Restricted Subsidiary, provided that such Liens are not incurred
in anticipation of such Person becoming a Restricted Subsidiary of the Company
or merging into or consolidating with the Company or any of its Restricted
Subsidiaries or such business being acquired by the Company or a Restricted
Subsidiary, (ii) Liens securing Refinancing Indebtedness, provided that any
such Lien does not extend to or cover any Property, shares or debt other than
the Property, shares or debt securing the Indebtedness so refunded, refinanced
or extended, (iii) Liens in favor of the Company or any of its Restricted
Subsidiaries, (iv) Liens securing industrial revenue bonds, (v) Liens to
secure Purchase Money Indebtedness that is otherwise permitted under the
Indenture, provided that (a) any such Lien is created solely for the purpose
of securing Indebtedness representing, or incurred to finance, refinance or
refund, the cost (including sales and excise taxes, installation and delivery
charges and other direct costs of, and other direct expenses paid or charged
in connection with, such purchase or construction) of such Property, (b) the
principal amount of the Indebtedness secured by such Lien does not exceed 100%
of such costs, and (c) such Lien does not extend to or cover any Property
other than such item of Property and any improvements on such item, (vi)
statutory liens or landlords', carriers', warehousemen's, mechanics',
suppliers', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business and with respect to amounts not yet delinquent or
being contested in good faith by appropriate proceedings, (vii) other Liens
securing obligations incurred in the ordinary course of business which
obligations do not exceed $1,000,000 in the aggregate at any one time
outstanding, (viii) Liens for taxes, assessments or governmental charges that
are being contested in good faith by appropriate proceedings, (ix) Liens
securing Capitalized Lease Obligations permitted to be incurred under clause
(v) of the definition of "Permitted Indebtedness," provided that such Lien
does not extend to any property other than that subject to the underlying
lease, (x) Liens securing Designated Senior Indebtedness, (xi) easements or
minor defects or
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irregularities in title and other similar charges or encumbrances on property
not interfering in any material respect with the Company's or any Restricted
Subsidiary's use of such property, (xii) Liens existing on the date of the
Indenture and (xiii) pledges or deposits made in the ordinary course of
business (a) in connection with (1) leases, performance bonds and similar
bonds or (2) workers' compensation, unemployment insurance and other social
security legislation or (b) securing the performance of surety bonds and
appeal bonds required (1) in the ordinary course of business or in connection
with the enforcement of rights or claims of the Company or a Subsidiary
thereof or (2) in connection with judgments that do not give rise to an Event
of Default and which do not exceed $3,000,000 in the aggregate, (xiv) Liens
securing Interest Rate Agreements entered into with any lender under the
Credit Facility or any Affiliate thereof and any guarantees thereof and (xv)
any extensions, substitutions, replacements or renewals of the foregoing.
"Permitted Tax Distributions" means, for so long as the Company is taxed as
an S corporation or other pass-through entity for federal income tax purposes,
distributions to the holders of Capital Stock of the Company based on
estimates of the highest amount of federal, state and local income tax per
share of Capital Stock that any holder of Capital Stock of the Company would
be required to pay as a result of the Company's being treated as a pass-
through entity for income tax purposes.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in
the most recent consolidated balance sheet of such Person and its Subsidiaries
under GAAP.
"Public Equity Offering" means a public offering by the Company of shares of
its Capital Stock and any and all rights, warrants or options to acquire such
Capital Stock.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the
cost of construction) of an item of Property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Redeemable Dividend" means, for any dividend or distribution with regard to
Disqualified Capital Stock, the quotient of the dividend or distribution
divided by the difference between one and the maximum statutory federal income
tax rate (expressed as a decimal number between 1 and 0) then applicable to
the issuer of such Disqualified Capital Stock.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances,
renews, replaces or extends any Indebtedness of the Company outstanding on the
Issue Date or other Indebtedness permitted to be incurred by the Company or
its Restricted Subsidiaries pursuant to the terms of the Indenture, whether
involving the same or any other lender or creditor or group of lenders or
creditors, but only to the extent that (i) the Refinancing Indebtedness is
subordinated to the Notes to at least the same extent as the Indebtedness
being refunded, refinanced or extended, if at all, (ii) the Refinancing
Indebtedness is scheduled to mature either (a) no earlier than the
Indebtedness being refunded, refinanced or extended, or (b) after the maturity
date of the Notes, (iii) the portion, if any, of the Refinancing Indebtedness
that is scheduled to mature on or prior to the maturity date of the Notes has
a weighted average life to maturity at the time such Refinancing Indebtedness
is incurred that is equal to or greater than the weighted average life to
maturity of the portion of the Indebtedness being refunded, refinanced or
extended that is scheduled to mature on or prior to the maturity date of the
Notes, (iv) such Refinancing Indebtedness is in an aggregate principal amount
that is equal to or less than the sum of (a) the
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aggregate principal amount then outstanding under the Indebtedness being
refunded, refinanced or extended, (b) the amount of accrued and unpaid
interest, if any, and premiums owed, if any, not in excess of preexisting
prepayment provisions on such Indebtedness being refunded, refinanced or
extended and (c) the amount of customary fees, expenses and costs related to
the incurrence of such Refinancing Indebtedness, and (v) such Refinancing
Indebtedness is incurred by the same Person that initially incurred the
Indebtedness being refunded, refinanced or extended, except that the Company
may incur Refinancing Indebtedness to refund, refinance or extend Indebtedness
of any Wholly-Owned Subsidiary of the Company.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Capital Stock
of the Company or any Restricted Subsidiary of the Company or any payment made
to the direct or indirect holders (in their capacities as such) of Capital
Stock of the Company or any Restricted Subsidiary of the Company (other than
(x) dividends or distributions payable solely in Capital Stock (other than
Disqualified Capital Stock) or in options, warrants or other rights to
purchase Capital Stock (other than Disqualified Stock), and (y) in the case of
Restricted Subsidiaries of the Company, dividends or distributions payable to
the Company or to a Wholly-Owned Subsidiary of the Company); (ii) the
purchase, redemption or other acquisition or retirement for value of any
Capital Stock of the Company or any of its Restricted Subsidiaries (other than
Capital Stock owned by the Company or a Wholly-Owned Subsidiary of the
Company, excluding Disqualified Capital Stock); (iii) the purchase,
defeasance, repurchase, redemption or other acquisition or retirement for
value, prior to any scheduled maturity, scheduled repayment or scheduled
sinking fund payment of, or the making of any principal payment on, any
Indebtedness which is subordinated in right of payment to the Notes other than
subordinated Indebtedness acquired in anticipation of satisfying a scheduled
sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition); (iv) the making of any
Investment or guarantee of any Investment in any Person other than a Permitted
Investment; (v) any designation of a Restricted Subsidiary as an Unrestricted
Subsidiary on the basis of the Investment by the Company therein; and (vi)
forgiveness of any Indebtedness of an Affiliate of the Company (other than a
Restricted Subsidiary) to the Company or a Restricted Subsidiary. For purposes
of determining the amount expended for Restricted Payments, cash distributed
or invested shall be valued at the face amount thereof and property other than
cash shall be valued at its fair market value in the good faith determination
of the Board of Directors. It is agreed that any payments made to Leo W.
Pierce, Sr. or his spouse pursuant to a pension obligation of the Company in
the annual amount of $96,000 shall not constitute a Restricted Payment.
"Restricted Subsidiary" means a Subsidiary of the Company other than an
Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date. The Board of Directors of the Company may
designate any Unrestricted Subsidiary or any Person that is to become a
Subsidiary as a Restricted Subsidiary if immediately after giving effect to
such action (and treating any Acquired Indebtedness as having been incurred at
the time of such action), the Company could have incurred at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"Limitation on Additional Indebtedness" covenant.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary of the
Company of any real or tangible personal property, which property (i) has been
or is to be sold or transferred by the Company or such Restricted Subsidiary
to such Person in contemplation of such leasing and (ii) would constitute an
Asset Sale if such property had been sold in an outright sale thereof.
"Senior Indebtedness" means the principal of and premium, if any, and
interest (including, without limitation, interest accruing or that would have
accrued but for the filing of a bankruptcy, reorganization or other insolvency
proceeding whether or not such interest constitutes an allowable claim in such
proceeding) on, and any and all other fees, expense reimbursement obligations
and other amounts due pursuant to the terms of all agreements, documents and
instruments providing for, creating, securing or evidencing or otherwise
entered into in connection with (a) all Indebtedness of the Company owed to
lenders under or in respect of the Credit Facility, (b) all obligations of the
Company with respect to any Interest Rate Agreement, (c) all obligations of
the
96
<PAGE>
Company to reimburse any bank or other person in respect of amounts paid under
letters of credit, acceptances or other similar instruments, (d) all other
Indebtedness of the Company which does not provide that it is to rank pari
passu with or subordinate to the Notes and (e) all deferrals, renewals,
extensions, replacements, refundings, refinancings and restructurings of, and
amendments, modifications and supplements to, any of the Senior Indebtedness
described above. Notwithstanding anything to the contrary in the foregoing,
Senior Indebtedness will not include (i) Indebtedness of the Company to any of
its Subsidiaries, (ii) Indebtedness represented by the Notes and any
Guarantees, (iii) any Indebtedness which by the express terms of the agreement
or instrument creating, evidencing or governing the same is junior or
subordinate in right of payment to any item of Senior Indebtedness, (iv) any
trade payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business, or (v) Indebtedness (other than
that described in clause (a) above) incurred in violation of the Indenture.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which
more than 50% of the total voting power of the Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the
direction of the management and policies of such entity by contract or
otherwise or if in accordance with GAAP such entity is consolidated with the
first-named Person for financial statement purposes.
"Temporary Cash Investments" means (i) Investments in marketable direct
obligations issued or guaranteed by the United States of America, or of any
governmental agency or political subdivision thereof, maturing within 365 days
of the date of purchase; (ii) Investments in demand deposits or certificates
of deposit issued by a bank organized under the laws of the United States of
America or any state thereof or the District of Columbia, in each case having
capital, surplus and undivided profits totaling more than $500,000,000 and
rated at least A by Standard & Poor's Corporation and A-2 by Moody's Investors
Service, Inc., maturing within 365 days of purchase; (iii) Investments not
exceeding 365 days in duration in money market funds that invest substantially
all of such funds' assets in the Investments described in the preceding
clauses (i) and (ii); (iv) any security maturing not more than 180 days after
the date of acquisition, backed by a stand-by or direct pay letter of credit
issued by a bank meeting the qualifications described in clause (ii) above; or
(v) commercial paper, maturing not more than one year after the date of
acquisition, issued by a corporation (other than an Affiliate or Subsidiary of
the Company) organized and existing under the laws of the United States of
America or any state thereof or the District of Columbia with a rating, at the
time as of which any investment therein is made, of "P-1" by Moody's Investors
Service, Inc. or "A-1" by Standard & Poor's Corporation.
"Unrestricted Subsidiary" means (i) any Subsidiary of an Unrestricted
Subsidiary and (ii) any Subsidiary of the Company which is classified after
the Issue Date as an Unrestricted Subsidiary by a resolution adopted by the
Board of Directors of the Company; provided that a Subsidiary organized or
acquired after the Issue Date may be so classified as an Unrestricted
Subsidiary only if such classification is in compliance with the covenant set
forth under "Limitation on Restricted Payments." The Trustee shall be given
prompt notice by the Company of each resolution adopted by the Board of
Directors of the Company under this provision, together with a copy of each
such resolution adopted.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary, 99% or more of
the outstanding Capital Stock (other than directors' qualifying shares) of
which are owned, directly or indirectly, by the Company.
BOOK-ENTRY; DELIVERY AND FORM
The Original Notes were issued in the form of one Note certificate (the
"Original Global Note"). Except for Exchange Notes issued to Non-Global
Purchasers (as defined below), the Exchange Notes will initially be issued in
the form of one or more Global Notes (collectively, the "Exchange Global
Notes"). The Original Global Note was deposited on the date of the closing of
the sale of the Original Notes, and the Exchange Global
97
<PAGE>
Notes will be deposited on the date of closing of the Exchange Offer, with, or
on behalf of, The Depository Trust Company ("DTC" or the "Depository") and
registered in the name of a nominee of the DTC.
Notes that are (i) originally issued or transferred to institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act) that are not "qualified institutional buyers" (as defined
in Rule 144A under the Securities Act) (the "Non-Global Purchasers") or (ii)
issued as described below under "--Certificated Securities" will be issued, in
registered form, without interest coupons ("Certificated Securities"). Upon
the transfer to a qualified institutional buyer of such Certificated
Securities initially issued to a Non-Global Purchaser, such Certificated
Securities will, unless the Global Note has previously been exchanged in whole
for such Certificated Securities, be exchanged for an interest in the Global
Note. "Global Notes" means the Original Global Notes or the Exchange Global
Notes, as the case may be.
The Global Note. The Company expects that pursuant to procedures established
by the DTC (i) upon deposit of the Global Note, the DTC will credit the
accounts of persons who have accounts with DTC ("participants") or persons who
hold interests through participants designated by such person with portions of
the Global Note and (ii) ownership of the Notes will be shown on, and the
transfer of ownership thereof will be effected only through, records
maintained by DTC or its nominee (with respect to interests of participants)
and the records of participants (with respect to interests of persons other
than participants). Qualified institutional buyers may hold their interests in
the Global Note directly through DTC if they are participants in such system,
or indirectly through organizations which are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee will be considered the sole owner or holder of the
Notes represented by the Global Note for all purposes under the Indenture. No
beneficial owner of an interest in the Global Note will be able to transfer
such interest except in accordance with DTC's applicable procedures, in
addition to those provided for under the Indenture.
Payments of the principal of, premium (if any) and interest on the Global
Note will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. None of the Company, the Trustee or any Paying Agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of, premium (if any) and interest on the Global Note, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note,
as shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global Note
held through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts
of customers registered in the names of nominees for such customers. Such
payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in accordance with
DTC rules and will be settled in clearinghouse funds. If a holder requires
physical delivery of a Certificated Security for any reason, including to sell
Notes to persons in states which require physical delivery of such securities
or to pledge such securities, such holder must transfer its interest in the
Global Note in accordance with the normal procedures of DTC and the procedures
set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange
as described below) only at the direction of one or more participants to whose
account the DTC interest in the Global Note is credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
participant or participants have given such direction. However, if there is an
Event of Default under the Indenture, DTC will exchange the Global Note for
Certificated Securities, which it will distribute to its participants.
98
<PAGE>
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and a successor depositary is not
appointed by the Company within 90 days, the Company will issue Certificated
Securities in exchange for the Global Note. In addition, subject to certain
conditions, any person having a beneficial interest in the Global Notes may,
upon request to the Trustee, exchange such beneficial interest for Notes in
the form of Certificated Securities. Upon any such issuance, the Trustee is
required to register such Certificated Securities in the name of, and cause
the same to be delivered to, such person or persons (or the nominee thereof).
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 2,000,000 shares of
Common Stock with a par value of $.01 per share. Of the 2,000,000 shares of
Common Stock that the Company is authorized to issue, 1,000,000 shares are
designated as Class A Common Stock (the "Class A Common Stock") and 1,000,000
shares are designated as Class B Common Stock (the "Class B Common Stock").
Currently, 900 shares of Class A Common Stock and 9,000 shares of Class B
Common Stock are outstanding. In addition, 1,141 shares of Class B Common
Stock are reserved for issuance with respect to the exercise of certain rights
under the Company's Non-Qualified Stock Option Plan.
Holders of shares of Class A Common Stock are entitled to one vote per share
for each matter submitted to the shareholders of the Company without
cumulative voting rights in the election of directors. Holders of Class B
Common Stock have no right to vote on any matter voted on by the shareholders
of the Company, except as may be provided by law. In all other respects, all
shares of Common Stock shall have identical rights, preferences and
privileges. The shares of Common Stock have no pre-emptive rights. In the
event of a liquidation, dissolution or winding up of the Company, the holders
of the Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities. The holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time
by the Board of Directors out of funds legally available therefor. Except for
distributions to the shareholders to pay their tax obligations resulting from
the Company's Subchapter S status, the Company has not declared any dividends
on the Common Stock and, except with respect to Permitted Tax Distributions
and possible distributions to shareholders aggregating less than $700,000
annually, does not expect to declare dividends in the foreseeable future. See
"The Company." Payment of future dividends rests with the discretion of the
Board of Directors and will depend on, among other things, the earnings,
capital requirements and financial condition of the Company and shall be
subject to limitations set forth in the Notes and other Indebtedness,
including Senior Indebtedness, of the Company.
99
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain federal income tax
considerations for holders who elect to exchange their Original Notes for
Exchange Notes in the Exchange Offer. This summary is for general information
purposes only and does not address specific tax aspects of the Exchange Offer
which may be relevant to certain holders such as foreign persons, financial
institutions, broker-dealers, tax-exempt organizations or insurance companies.
THEREFORE, EACH HOLDER OF A NOTE SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
CONCERNING THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES
OF EXCHANGING HIS OR HER ORIGINAL NOTES FOR EXCHANGE NOTES IN THE EXCHANGE
OFFER.
Under current provisions of the Internal Revenue Code of 1986, as amended,
the Treasury Regulations promulgated thereunder and current judicial authority
and administrative rulings and practice, an exchange of the debt instrument of
an issuer for a new debt instrument of the issuer will be treated as an
"exchange" for federal income tax purposes if the new debt instrument differs
materially either in kind or in extent from the old debt instrument. Because
the Exchange Notes are substantially identical to the Original Notes and
because the Exchange was contemplated by the Indenture pursuant to which the
Original Notes were sold, the Exchange Notes and Original Notes should not be
considered to differ materially either in kind or in extent and, accordingly,
the Exchange should not constitute an "exchange" for federal income tax
purposes. Therefore, for federal income tax purposes, no gain or loss should
be recognized by the holder on the exchange of an Original Note for an
Exchange Note, the holder's adjusted tax basis in the Exchange Note should be
the same as his or her basis in the Original Note and the holding period for
the Exchange Note should be the same as the holding period for the Original
Note.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with the resale of Exchange Notes received in exchange for
Original Notes where such Original Notes were acquired as a result of market-
making activities or other trading activities. The Company has agreed that for
a period of 180 days after the Expiration Date, it will use reasonable efforts
to make this Prospectus, as amended or supplemented, available to any broker-
dealer for use in connection with any such resale; provided that such broker-
dealer indicates in the Letter of Transmittal that it is a broker-dealer. In
addition, until , 1996, all broker-dealers effecting transactions in the
Exchange Notes may be required to deliver a Prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers or any other persons. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange Notes
may be deemed to be an "underwriter" within the meaning of the Securities Act,
and any profit on any such resale of Exchange Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
100
<PAGE>
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal.
By acceptance of this Exchange Offer, each broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer agrees that, upon receipt of
notice from the Company of the happening of any event which makes any
statement in the Prospectus untrue in any material respect or which requires
the making of any changes in the Prospectus in order to make the statements
therein not misleading (which notice the Company agrees to deliver promptly to
such broker-dealer), such broker-dealer will suspend use of the Prospectus
until the Company has amended or supplemented the Prospectus to correct such
misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such broker-dealer. If the Company gives any such
notice to suspend the use of the Prospectus, it shall extend the 180-day
period referred to above by the number of days during the period from and
including the date of the giving of such notice up to and including when
broker-dealers have received copies of the supplement or amended Prospectus
necessary to permit resales of Exchange Notes.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders (including any broker-dealers) and certain parties
related to the holders against certain liabilities, including liabilities
under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the Notes offered hereby will be
passed upon for the Company by Cozen and O'Connor, Philadelphia, Pennsylvania.
EXPERTS
The financial statements and schedules of Pierce Leahy Corp. as of December
31, 1994 and 1995, and for each of the three years in the period ended
December 31, 1995, included in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
giving said reports.
The financial statements of Security Archives, Inc. as of June 30, 1994 and
1995, and for the years then ended included in this Prospectus and elsewhere
in this Registration Statement have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein and are
included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
101
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF PIERCE LEAHY CORP.:
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets.............................................. F-3
Consolidated Statements of Operations.................................... F-4
Consolidated Statements of Shareholders' Deficit......................... F-5
Consolidated Statements of Cash Flows.................................... F-6
Notes to Consolidated Financial Statements............................... F-7
FINANCIAL STATEMENTS OF COMMAND RECORDS SERVICES LIMITED................... F-17
FINANCIAL STATEMENTS OF SECURITY ARCHIVES, INC. ........................... F-23
FINANCIAL STATEMENTS OF AMK DOCUMENT SERVICES, INC. ....................... F-29
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Pierce Leahy Corp.:
We have audited the accompanying consolidated balance sheets of Pierce Leahy
Corp. (a New York corporation) and Subsidiary as of December 31, 1994 and
1995, and the related consolidated statements of operations, shareholders'
deficit and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pierce Leahy Corp. and
Subsidiary as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Philadelphia, Pa.,
March 4, 1996
F-2
<PAGE>
PIERCE LEAHY CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
------------------ JUNE 30,
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS:
Cash......................................... $ 358 $ 722 $ 860
Accounts receivable, net of allowance for
doubtful accounts of $554, $487, and $770... 11,513 14,182 18,234
Inventories.................................. 333 762 633
Prepaid expenses and other................... 554 1,025 2,091
-------- -------- --------
Total current assets....................... 12,758 16,691 21,818
-------- -------- --------
PROPERTY AND EQUIPMENT......................... 79,129 109,755 126,829
Less--Accumulated depreciation and amortiza-
tion........................................ (31,003) (35,328) (38,288)
-------- -------- --------
Net property and equipment................. 48,126 74,427 88,541
-------- -------- --------
OTHER ASSETS:
Intangible assets, net....................... 17,834 38,621 50,953
Other........................................ 1,028 1,589 1,484
-------- -------- --------
Total other assets......................... 18,862 40,210 52,437
-------- -------- --------
$ 79,746 $131,328 $162,796
======== ======== ========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt............ $ 2,144 $ 1,478 $ 1,723
Current portion of noncompete obligations.... 70 200 200
Accounts payable............................. 4,848 4,641 7,116
Accrued expenses............................. 3,871 9,533 8,706
Deferred revenues............................ 7,027 8,978 8,675
-------- -------- --------
Total current liabilities.................. 17,960 24,830 26,420
LONG-TERM DEBT................................. 75,294 116,812 144,799
NONCOMPETE OBLIGATIONS......................... -- 517 417
DEFERRED RENT.................................. 2,558 2,814 2,899
DEFERRED INCOME TAXES.......................... 3,100 3,492 3,366
COMMITMENTS AND CONTINGENCIES (Note 9)
REDEEMABLE WARRANTS............................ 175 1,064 --
SHAREHOLDERS' DEFICIT.......................... (19,341) (18,201) (15,105)
-------- -------- --------
$ 79,746 $131,328 $162,796
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
PIERCE LEAHY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS
DECEMBER 31 ENDED JUNE 30
------------------------- -------------------
1993 1994 1995 1995 1996
------- ------- ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Storage....................... $42,122 $47,123 $55,501 $ 25,965 $ 35,485
Service and storage material
sales........................ 31,266 35,513 39,895 18,599 25,837
------- ------- ------- --------- ---------
Total revenues.............. 73,388 82,636 95,396 44,564 61,322
------- ------- ------- --------- ---------
OPERATING EXPENSES:
Cost of sales, excluding de-
preciation and amortization.. 45,391 49,402 55,616 25,937 35,189
Selling, general and adminis-
trative...................... 11,977 15,882 16,148 7,815 9,911
Depreciation and amortiza-
tion......................... 6,888 8,436 8,163 4,304 5,612
Consulting payments to related
parties...................... -- 500 500 250 --
------- ------- ------- --------- ---------
Total operating expenses.... 64,256 74,220 80,427 38,306 50,712
------- ------- ------- --------- ---------
Operating income............ 9,132 8,416 14,969 6,258 10,610
------- ------- ------- --------- ---------
INTEREST EXPENSE................ 6,160 7,216 9,622 4,156 5,953
------- ------- ------- --------- ---------
Income before extraordinary
item....................... 2,972 1,200 5,347 2,102 4,657
EXTRAORDINARY ITEM--Loss on
early extinguishment of debt... 9,174 5,991 3,279 -- --
------- ------- ------- --------- ---------
NET INCOME (LOSS)............... (6,202) (4,791) 2,068 2,102 4,657
ACCRETION/(CANCELLATION) OF RE-
DEEMABLE WARRANTS.............. (746) 16 889 445 1,561
------- ------- ------- --------- ---------
NET INCOME (LOSS) APPLICABLE TO
COMMON SHAREHOLDERS............ $(5,456) $(4,807) $ 1,179 $ 1,657 $ 3,096
======= ======= ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
PIERCE LEAHY CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
--------------
ADDITIONAL
CLASS CLASS PAID-IN ACCUMULATED
A B CAPITAL DEFICIT TOTAL
------ ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993........ $ -- $ -- $ 24 $ (9,052) $ (9,028)
Cancellation of common stock
warrants..................... -- -- -- 746 746
Net loss...................... -- -- -- (6,202) (6,202)
Distributions to sharehold-
ers.......................... -- -- -- (24) (24)
------ ------ ---- -------- --------
BALANCE, DECEMBER 31, 1993...... -- -- 24 (14,532) (14,508)
Accretion of redeemable war-
rants........................ -- -- -- (16) (16)
Net loss...................... -- -- -- (4,791) (4,791)
Distributions to sharehold-
ers.......................... -- -- -- (26) (26)
------ ------ ---- -------- --------
BALANCE, DECEMBER 31, 1994...... -- -- 24 (19,365) (19,341)
Accretion of redeemable war-
rants........................ -- -- -- (889) (889)
Net income.................... -- -- -- 2,068 2,068
Distributions to sharehold-
ers.......................... -- -- -- (39) (39)
------ ------ ---- -------- --------
BALANCE, DECEMBER 31, 1995...... -- -- 24 (18,225) (18,201)
Accretion of redeemable war-
rants (unaudited)............ -- -- -- (1,561) (1,561)
Net income (unaudited)........ -- -- -- 4,657 4,657
------ ------ ---- -------- --------
BALANCE, JUNE 30, 1996 (unau-
dited)......................... $ -- $ -- $ 24 $(15,129) $(15,105)
====== ====== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
PIERCE LEAHY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31 JUNE 30
---------------------------- ----------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING AC-
TIVITIES:
Net income (loss)............. $ (6,202) $ (4,791) $ 2,068 $ 2,102 $ 4,657
Adjustments to reconcile net
income (loss) to net cash
provided by operating activi-
ties--
Extraordinary item............ 9,174 5,991 3,279 -- --
Depreciation and amortiza-
tion......................... 6,888 8,434 8,163 4,304 5,612
Amortization of deferred fi-
nancing costs................ 836 1,068 533 266 173
Imputed interest on long-term
debt and noncompete obliga-
tion......................... 647 231 -- -- --
Change in deferred rent....... (104) 50 29 (22) 85
Foreign currency adjustment
of long-term debt............ -- -- -- -- (23)
Change in assets and
liabilities, net of the
effects from
the purchase of businesses--
(Increase) decrease in--
Accounts receivable, net.... (2,671) (2,061) (360) 43 (3,663)
Inventories................. (5) (46) (347) (266) 128
Prepaid expenses............ 173 (91) 57 193 (989)
Other assets................ (504) 255 (536) (373) 117
Increase (decrease) in--
Accounts payable............ 96 1,763 (978) (1,309) 2,376
Accrued expenses............ (702) (170) 4,693 1,841 (1,416)
Deferred revenues........... 393 367 921 392 (302)
Deferred Income Tax......... -- -- -- -- (126)
-------- -------- -------- ------- -------
Net cash provided by operat-
ing activities.............. 8,019 11,000 17,522 7,171 6,629
-------- -------- -------- ------- -------
CASH FLOWS FROM INVESTING AC-
TIVITIES:
Capital expenditures.......... (5,827) (6,352) (16,288) (4,790) (7,657)
Client acquisition expendi-
tures........................ (2,840) (1,905) (2,245) (976) (2,253)
Payments for businesses ac-
quired, net of cash ac-
quired....................... (1,500) (4,663) (28,355) (6,772) (18,546)
Increase in intangible as-
sets......................... (47) (943) (4,274) (1,779) (3,564)
Payments on noncompete agree-
ments........................ (3,570) (70) (153) -- (100)
-------- -------- -------- ------- -------
Net cash used in investing
activities.................. (13,784) (13,933) (51,315) (14,317) (32,120)
-------- -------- -------- ------- -------
CASH FLOWS FROM FINANCING AC-
TIVITIES:
Net borrowings (payments) on
revolving line of credit..... 5,200 (7,700) (900) 1,200 5,998
Proceeds from issuance of
long-term debt............... 60,084 76,850 128,420 8,200 22,925
Payments on long-term debt.... (41,257) (61,121) (90,937) (2,370) (669)
Payments on capital lease ob-
ligations.................... (2,113) (74) (21) -- --
Prepayment penalties and can-
cellation of warrants........ (10,715) (1,781) -- -- (2,625)
Payment of debt financing
costs........................ (5,343) (3,385) (2,366) -- --
Distributions to sharehold-
ers.......................... (24) (26) (39) -- --
-------- -------- -------- ------- -------
Net cash provided by financ-
ing activities.............. 5,832 2,763 34,157 7,030 25,629
-------- -------- -------- ------- -------
NET INCREASE (DECREASE) IN
CASH.......................... 67 (170) 364 (116) 138
CASH, BEGINNING OF PERIOD...... 461 528 358 358 722
-------- -------- -------- ------- -------
CASH, END OF PERIOD............ $ 528 $ 358 $ 722 $ 242 $ 860
======== ======== ======== ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest........ $ 5,610 $ 6,738 $ 8,356 $ 3,650 $ 6,173
======== ======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(IN THOUSANDS EXCEPT SHARE DATA)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995
AND 1996 IS UNAUDITED)
1. BACKGROUND:
Pierce Leahy Corp. and its majority-owned subsidiary, Pierce Leahy Command
Company (together, the "Company"), stores and services business records for
clients throughout the United States and Canada. The Company also sells
storage containers and provides records management consulting services and
imaging services.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Interim Consolidated Financial Statements
The consolidated balance sheet as of June 30, 1996 and the consolidated
statements of operations for the six months ended June 30, 1995 and 1996 are
unaudited and, in the opinion of management of the Company, include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the results for those interim periods. The results of
operations for the six months ended June 30, 1995 and 1996 are not necessarily
indicative of the results to be expected for the full year.
Principles of Consolidation
The consolidated financial statements include the accounts of Pierce Leahy
Corp. and its 99%-owned subsidiary, Pierce Leahy Command Company. All
intercompany accounts and transactions have been eliminated in consolidation.
The minority interest in Pierce Leahy Command Company is not material to the
consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Inventories
Inventories, which consist of storage containers, are stated at the lower of
cost (first-in, first-out) or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
straight-line and accelerated methods over the estimated useful lives of the
assets.
Goodwill
Goodwill reflects the cost in excess of fair value of the net assets of
companies acquired in purchase transactions. Goodwill is amortized using the
straight-line method from the date of acquisition over the expected period to
be benefited, currently estimated at 30 years. The Company assesses the
recoverability of goodwill, as well as other long lived assets, based upon
expectations of future undiscounted cash flows in accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long
Lived Assets and for Long Lived Assets to be Disposed of."
F-7
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Client Acquisition Costs
The unreimbursed costs of moving the records of new clients into the
Company's facilities and sales commissions related to new client contracts
have been capitalized and are included in intangible assets in the
accompanying balance sheets (see Note 4). All such costs are being amortized
on a straight-line basis over six years, which represents the average initial
contract term.
Deferred Rent
Certain of the Company's leases for warehouse space, including the related
party leases discussed in Note 9, provide for scheduled rent increases over
the lease terms. The Company recognizes rent expense on a straight-line basis
over the lease terms, with the excess of the rent charged to expense over the
amount paid recorded as deferred rent in the accompanying balance sheets.
Health Insurance Reserve
The Company self-insures for benefit claims under a health insurance plan
provided to employees. The self-insurance is limited to $75 in claims per
insured individual per year, and a liability for claims incurred but not
reported is reflected in the accompanying balance sheets. Specific stop loss
insurance coverage is maintained to cover claims in excess of $75 per insured
individual per year.
Income Taxes
The Company is a Subchapter S corporation and, therefore, any taxable income
or loss for federal income tax purposes is passed through to the shareholders.
While not subject to federal income taxes, the Company is subject to income
taxes in certain states. The Company reports certain expenses in different
periods for financial reporting and income tax purposes. In addition, the
carrying value of certain assets acquired exceeded their tax bases. If the
Subchapter S corporation status was terminated, a deferred income tax
liability would need to be recorded.
The Tax Reform Act of 1986 provides for a tax at the corporate level on
gains realized on asset sales for a specified period following the election of
Subchapter S status. Deferred taxes have been provided for taxes which may be
triggered if the Company disposes of certain assets acquired in connection
with an acquisition.
Revenue Recognition
Storage and service revenues are recognized in the month the respective
service is provided. Storage material sales are recognized when shipped to the
customer. Deferred revenues represent amounts invoiced for storage services in
advance of the rendering of the services.
Change in Accounting Estimates
Effective January 1, 1995, the Company revised its estimates of the useful
lives of certain long-term assets as follows:
<TABLE>
<CAPTION>
USEFUL LIFE (YEARS)
--------------------
LONG-TERM ASSET OLD NEW
--------------- --------- ----------
<S> <C> <C>
Buildings............................................. 25 40
Warehouse equipment................................... 12 12-20
Client acquisition costs.............................. 3 6
Other intangibles..................................... 3 10
Goodwill.............................................. 5-20 30
</TABLE>
F-8
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The aggregate effect of adopting these revised lives was to decrease
amortization and depreciation expense and increase net income for the year
ended December 31, 1995, by approximately $4,868. Management believes that the
new lives more accurately reflect the estimated economic lives of the related
assets and that such lives are more in conformity with industry practices.
Foreign Currency Translation
The balance sheets and statements of operations of the Canadian operations
are translated into U.S. dollars using the rates of exchange at period end.
All foreign currency transaction gains and losses are included in operations
in the period in which they occur. The cumulative translation adjustment at
December 31, 1995 and June 30, 1996 is not material to the consolidated
financial statements.
New Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation." The
Company is required to adopt this standard for the year ending December 31,
1996. The Company has elected to adopt the disclosure requirement of this
pronouncement. The adoption of this pronouncement will have no impact on the
Company's consolidated statement of operations.
3. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
DECEMBER 31
------------------ JUNE 30,
LIFE 1994 1995 1996
----------- -------- -------- --------
<S> <C> <C> <C> <C>
Land............................. -- $ 3,594 $ 4,780 $ 5,848
Buildings and improvements....... 10-40 years 23,397 35,758 42,192
Warehouse equipment (primarily
shelving)....................... 12-20 years 39,485 53,943 60,553
Data processing equipment and
software........................ 7 years 9,051 10,684 12,392
Furniture and fixtures........... 7 years 2,515 2,970 3,309
Transportation equipment......... 5 years 1,087 1,620 2,535
-------- -------- --------
79,129 109,755 126,829
Less--Accumulated depreciation
and amortization................ (31,003) (35,328) (38,288)
-------- -------- --------
Net property and equipment..... $ 48,126 $ 74,427 $ 88,541
======== ======== ========
</TABLE>
Depreciation expense was $4,036, $5,066, $4,325, $2,129, and $3,084 for the
years ended December 31, 1993, 1994, and 1995 and for the six months ended
June 30, 1995 and 1996, respectively.
4. INTANGIBLE ASSETS:
<TABLE>
<CAPTION>
DECEMBER 31
------------------ JUNE 30,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Goodwill................................... $ 8,308 $ 25,857 $ 35,058
Client acquisition costs................... 6,435 8,680 10,933
Noncompete agreements...................... 6,180 6,980 8,160
Customer lists............................. 4,220 4,720 4,720
Deferred financing costs................... 3,409 2,248 2,283
Other intangible assets.................... 224 4,679 7,043
-------- -------- --------
28,776 53,164 68,197
Less--Accumulated amortization............. (10,942) (14,543) (17,244)
-------- -------- --------
Net intangible assets...................... $ 17,834 $ 38,621 $ 50,953
======== ======== ========
</TABLE>
F-9
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------------
ACCUMULATED NET BOOK
LIFE COST AMORTIZATION VALUE
---------- ------- ------------ --------
<S> <C> <C> <C> <C>
Goodwill............................ 30 years $35,058 $ 3,074 $31,984
Client acquisition costs............ 6 years 10,933 4,033 6,900
Noncompete agreements............... 3-7 years 8,160 6,381 1,779
Customer lists...................... 5 years 4,720 2,394 2,326
Deferred financing costs............ 5-8 years 2,283 222 2,061
Other intangible assets............. 3-15 years 7,043 1,140 5,903
------- ------- -------
$68,197 $17,244 $50,953
======= ======= =======
</TABLE>
Amortization of all intangible assets, other than deferred financing costs
which are charged to interest expense, was $2,852, $3,370, $3,838, $2,175, and
$2,505, for the years ended December 31, 1993, 1994, and 1995 and the six
months ended June 30, 1995 and 1996, respectively. Amortization of deferred
financing costs was $836, $1,068, $533, $266 and $173 for the years ended
December 31, 1993, 1994, and 1995 and the six months ended June 30, 1995 and
1996, respectively. Capitalized client acquisition costs were $2,840, $1,905,
$2,245, $976, and $2,253, and related amortization expense was $727, $1,536,
$909, $930, and $609 for the years ended December 31, 1993, 1994, and 1995 and
for the six months ended June 30, 1995 and 1996, respectively.
The Company continually evaluates whether events or circumstances have
occurred that indicate that the remaining useful lives of the intangible
assets should be revised or that the remaining balance of such assets may not
be recoverable. As of June 30, 1996, the Company believes that no revisions to
the remaining useful lives or write-downs of intangible assets are required.
5. ACCRUED EXPENSES:
<TABLE>
<CAPTION>
DECEMBER 31
------------- JUNE 30,
1994 1995 1996
------ ------ --------
<S> <C> <C> <C>
Accrued salaries and commissions...................... $ 603 $2,190 $1,297
Accrued vacation...................................... 1,723 2,140 2,505
Other................................................. 1,545 5,203 4,904
------ ------ ------
$3,871 $9,533 $8,706
====== ====== ======
</TABLE>
F-10
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT:
<TABLE>
<CAPTION>
DECEMBER 31
----------------- JUNE 30,
1994 1995 1996
------- -------- --------
<S> <C> <C> <C>
U.S. Revolver, variable interest rate (10.13%
at June 30, 1996)............................ $ -- $ -- $ 4,900
Canadian Revolver, variable interest rate
(8.38% at June 30, 1996)..................... -- -- 1,098
Standby Acquisition Note, variable interest
rate (10.13% at June 30, 1996), payable in
quarterly installments ranging from 4.17% to
11.67% of the outstanding balance beginning
December 1997 through November 2000.......... -- -- 22,925
Tranche A term loan, variable interest rate
(10.13% at June 30, 1996), payable in quar-
terly installments ranging from $313 to $938
beginning December 1995 through September
2000......................................... -- 12,188 11,563
Tranche B term loan, variable interest rate
(10.38% at June 30, 1996), payable in quar-
terly installments ranging from $425 to
$6,500 beginning March 1998 through September
2002......................................... -- 47,500 47,500
Tranche C term loan, variable interest rate
(10.63% at June 30, 1996), payable in quar-
terly installments of $9,500 beginning Decem-
ber 2002 through September 2003.............. -- 38,000 38,000
Canadian term loan, variable interest rate
(7.89% at June 30, 1996), payable in quar-
terly installments ranging from $138 to $276
beginning March 1997 through June 2002, with
final payment of $15,624 in September 2002... -- 20,520 20,497
Borrowings under previous credit agreement
(repaid in October 1995)..................... 76,750 -- --
Other......................................... 688 82 39
------- -------- --------
77,438 118,290 146,522
Less--Current portion......................... (2,144) (1,478) (1,723)
------- -------- --------
$75,294 $116,812 $144,799
======= ======== ========
</TABLE>
In October 1995, the Company entered into a credit facility (the "1995
Credit Facility"), which provides for borrowings of up to $143 million (U.S.
dollars) and $36 million (Canadian dollars). In addition to refinancing the
borrowings under the former credit facility and paying the related accrued
interest, the Company used the proceeds of the 1995 Credit Facility to acquire
Command Record Services, Inc., increase its available borrowing capacity for
acquisitions, and pay financing costs of $2,248.
F-11
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the aggregate commitment under the 1995 Credit Facility is as
follows:
<TABLE>
<CAPTION>
CANADIAN
U.S. DOLLARS DOLLARS
------------ --------
<S> <C> <C>
A Term Note............................................ $ 12,500 $ --
B Term Note............................................ 47,500 --
C Term Note............................................ 38,000 --
Standby Acquisition Note............................... 30,000 --
U.S. Revolver.......................................... 15,000 --
Canadian Term Loan..................................... -- 28,000
Canadian Revolver...................................... -- 8,000
-------- -------
$143,000 $36,000
======== =======
</TABLE>
At the closing of the 1995 Credit Facility, the A, B and C Term Notes and
the Canadian term loan were drawn in full and $2.3 million was drawn under the
Canadian Revolver. No proceeds were drawn under the Standby Acquisition Note
or the U.S. Revolver at that time.
Borrowing capacity under the U.S. Revolver and the Canadian Revolver has
scheduled reductions beginning in March 1997 and December 1997, respectively,
and expires in September 2000. Borrowing capacity under the Standby
Acquisition Note is reduced quarterly by amounts ranging from 4.167% to
11.666% of the outstanding borrowings under the Standby Acquisition Note
beginning on December 31, 1997. In addition to the scheduled principal
payments under the term loans and reductions in the borrowing capacity under
the U.S. Revolver, Canadian Revolver and Standby Acquisition Note, the Company
is subject to mandatory prepayments equal to 50% of excess cash flow, as
defined, and upon certain other events including sale of assets, stock or
incurrence of any other indebtedness, among others.
The highest amount outstanding under the U.S. and Canadian revolvers during
the year ended December 31, 1995 and the six month period ended June 30, 1996
was $3,200 and $4,235, respectively. The average amount outstanding on the
revolvers during such periods was $888 and $1,605, respectively, while the
weighted average interest rate was 10.43% and 9.76%, respectively.
The 1995 Credit Facility specifies certain minimum or maximum relationships
between operating cash flows (earnings before interest, taxes, depreciation
and amortization) and interest, total debt and fixed charges, along with
minimum levels of operating cash flows and defined current ratio and operating
cash flows to debt service targets. There are restrictions on dividends,
capital expenditures, incurrence of indebtedness and lease obligations, among
other items. The Company was in compliance with the applicable provisions of
the 1995 Credit Facility at June 30, 1996. The 1995 Credit Facility is secured
by substantially all of the assets and outstanding common stock of the
Company.
Future scheduled principal payments on the Company's long-term debt at June
30, 1996 are as follows:
<TABLE>
<S> <C>
1996.............................................................. $ 1,723
1997.............................................................. 7,101
1998.............................................................. 15,135
1999.............................................................. 22,167
2000.............................................................. 20,208
2001 and thereafter............................................... 80,188
--------
$146,522
========
</TABLE>
F-12
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Based on the borrowing rates currently available to the Company for loans
with similar terms and average maturities, the Company believes that the
carrying amount of debt at June 30, 1996 approximates fair value.
In connection with entering into credit facilities in 1993 and 1994, the
Company issued warrants to certain lenders to purchase common stock. Warrants
to purchase 217 shares at $.01 per share were issued in 1993 and 52 shares at
$2,839.72 per share were issued in 1994. Management assigned an initial value
of $338 to the 1993 warrants and $87 to the 1994 warrants for financial
reporting purposes. The outstanding warrants at December 31, 1994 and 1995
represent the right to purchase 2.63% of the Company's fully diluted common
stock. The warrant holders may put the warrants to the Company, and the
Company may call the warrants beginning in February 1996 and June 1997,
respectively, at amounts which are determined by a formula, as defined in the
Credit Facility. The change in value of the redeemable warrants from the
initial value has been accreted through a charge to shareholders' deficit in
the accompanying financial statements.
Debt refinancings occurred in 1993, 1994 and 1995 resulting in the write-off
of previously deferred financing costs of $1,043, $3,981 and $2,779,
respectively, and prepayment and other charges (including the write-off of
unamortized debt discount) of $8,131 in 1993, $2,011 in 1994 and $500 in 1995.
Such write-offs and charges have been recorded as extraordinary items in the
accompanying consolidated statements of operations.
7. COMMON STOCK:
At December 31, 1994 and 1995 and June 30, 1996, the Company's common stock
was comprised of the following:
<TABLE>
<CAPTION>
CLASS A CLASS B
---------- ----------
<S> <C> <C>
Par value........................................... $ .01 $ .01
Shares authorized................................... 1,000,000 1,000,000
Shares issued and outstanding....................... 1,000 9,000
</TABLE>
8. STOCK OPTIONS:
In September 1994, the Company established a nonqualified stock option plan
which provides for the granting to key employees of options to purchase an
aggregate of 1,141 shares of common stock. Options to purchase 567 shares at
$5 per share were granted in 1995 and options to purchase 340 shares at $6 per
share were granted in 1996. Option grants are exercisable at the earlier of
the tenth anniversary of the date of grant or the first date on which the
Company ceases to be an S Corporation, and have an exercise price equal to or
greater than the fair market value of the common stock on the date of grant.
Fair market value is determined based on a formula, as defined in the option
plan. The options vest in five equal annual installments beginning on the
first anniversary of the date of grant. At June 30, 1996, options for 113
shares were vested. The exercise of the options is subject to certain
restrictions.
9. COMMITMENTS AND CONTINGENCIES:
Operating Leases
At June 30, 1996, the Company was obligated under noncancelable operating
leases, including the related-party leases discussed below, for warehouse
space, office equipment and transportation equipment. These leases expire at
various times through 2007 and require minimum rentals, subject to escalation,
as follows:
F-13
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<S> <C>
1996.............................................................. $ 16,867
1997.............................................................. 16,147
1998.............................................................. 15,109
1999.............................................................. 13,647
2000.............................................................. 12,930
2001 and thereafter............................................... 34,733
--------
$109,433
========
</TABLE>
Rent expense was approximately $11,052, $12,262, $14,098, $6,630, and $8,433
for the years ended December 31, 1993, 1994, and 1995 and for the six months
ended June 30, 1995 and 1996, respectively.
The Company leases office and warehouse space at prices which, in the
opinion of management, approximate market rates from entities which are owned
by various shareholders of the Company. Rent expense on these leases was
approximately $7,036, $7,658, $8,201, $2,026, and $2,185 for the years ended
December 31, 1993, 1994, and 1995 and for the six months ended June 30, 1995
and 1996, respectively. These related party leases require minimum rentals,
subject to escalation, as follows:
<TABLE>
<S> <C>
1996............................................................... $ 8,779
1997............................................................... 8,079
1998............................................................... 7,126
1999............................................................... 6,515
2000............................................................... 6,383
2001 and thereafter................................................ 12,942
-------
$49,824
=======
</TABLE>
Other Matters
The Company has entered into a consulting agreement with a shareholder of
the Company and consulting agreements with several of the former owners of
acquired businesses (see Note 12). These agreements require the following
minimum payments:
<TABLE>
<S> <C>
1996................................................................ $ 911
1997................................................................ 140
1998................................................................ 48
1999................................................................ 40
2000................................................................ 40
2001 and thereafter................................................. 150
------
$1,329
======
</TABLE>
The Company has an agreement with a shareholder of the Company that requires
payments of $60 per year for five years upon the death of the shareholder. The
present value of this benefit has been recorded as a liability in the
accompanying balance sheets.
In December 1993, the Company borrowed $80 from a shareholder which bears
interest at 7%. The note was repaid during 1996.
F-14
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company is party to various claims arising in the ordinary course of
business. Although the ultimate outcome of these matters is presently not
determinable, management, after consultation with legal counsel, does not
believe that the resolution of these matters will have a material adverse
effect on the Company's financial position or results of operations.
10. EMPLOYEE BENEFIT PLANS:
The Company maintains a discretionary profit sharing and a 401(k) plan for
substantially all full-time employees over the age of 20 1/2 and with more
than 1,000 hours of service. Participants in the 401(k) plan may elect to
defer a specified percentage of their compensation on a pre tax basis. The
Company is required to make matching contributions equal to 25% of the
employee's contribution up to a maximum of 2% of the employee's annual
compensation. Participants become vested on the Company's matching
contribution over three to seven years. The expense relating to these plans
was $262, $506, $591, $301, and $545 for the years ended December 31, 1993,
1994 and 1995 and the six months ended June 30, 1995 and 1996, respectively.
11. STOCK PURCHASE AGREEMENTS:
The Company and its shareholders are parties to an agreement which provides
that, in the event of a shareholder's desire to transfer his ownership
interest, the other shareholders and/or the Company have the right of first
refusal to purchase the stock under the terms specified in the agreement. The
agreement also provides that, in the event of a shareholder's death, the
Company will purchase the stock from the estate of the deceased under the
terms and at the amount per share, subject to periodic adjustment, specified
in the agreement. The purchase would be funded, in part, from the proceeds of
insurance policies currently in place ($37,700 face value).
12. ACQUISITIONS:
In 1995, the Company completed five acquisitions of records management
businesses for an aggregate cash purchase price of $28,994. During the six
months ended June 30, 1996, the Company completed four acquisitions for an
aggregate cash purchase price of $19,310. Subsequent to that date, the Company
completed three additional acquisitions with an aggregate cash purchase price
of $9,828. In addition to these cash payments, one of the acquisitions in 1995
provides for a $800 noncompete obligation payable over three years. The
noncompete liability at December 31, 1995 was $717. Each of these acquisitions
was accounted for using the purchase method of accounting and, accordingly,
the results of operations for each acquisition have been included in the
consolidated results of the Company from the respective acquisition dates. The
excess of the purchase price over the underlying fair value of the assets and
liabilities acquired has been allocated to goodwill ($17,549 and $9,201 in
1995 and the six months ended June 30, 1996, respectively) and is being
amortized over the estimated benefit period of 30 years. In connection with
the acquisitions, the Company entered into consulting agreements with several
of the former owners of the acquired businesses which require aggregate
commitments of $980 at June 30, 1996 (see Note 9).
A summary of the cash consideration and allocation of the purchase price as
of the acquisition dates are as follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Fair value of assets acquired............................ $36,171 $31,541
Liabilities assumed...................................... (7,177) (2,404)
Cash acquired............................................ (639) (988)
------- -------
Net cash paid.......................................... $28,355 $28,149
======= =======
</TABLE>
Included in the 1996 amounts are $11,542 of fair value of assets acquired,
$1,715 of liabilities assumed, $224 of cash acquired and $9,603 of net cash
paid on acquisitions that were completed subsequent to June 30, 1996.
F-15
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following unaudited pro forma information shows the results of the
Company's operations for the year ended December 31, 1995 and six months ended
June 30, 1996, as though each of the completed acquisitions had occurred as of
January 1, 1995:
<TABLE>
<CAPTION>
SIX
YEAR MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ --------
<S> <C> <C>
Total revenues....................................... $123,953 $65,784
Net income (loss).................................... (488) 101
</TABLE>
The pro forma results have been prepared for comparative purposes only and
are not necessarily indicative of the actual results of operations had the
acquisitions taken place as of January 1, 1995 or the results that may occur
in the future. Furthermore, the pro forma results do not give effect to all
cost savings or incremental costs which may occur as a result of the
integration and consolidation of the acquired companies.
F-16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Pierce Leahy Corp.:
We have audited the accompanying statements of operations and cash flows of
Command Records Services Limited for each of the periods ended December 31,
1993, December 31, 1994 and October 26, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Command
Records Services Limited for each of the periods ended December 31, 1993,
December 31, 1994 and October 26, 1995 in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Philadelphia, Pa.,
June 21, 1996
F-17
<PAGE>
COMMAND RECORDS SERVICES LIMITED
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE TEN MONTHS
DECEMBER 31 ENDED OCTOBER 26
-------------------- ------------------
1993 1994 1995
--------- --------- ------------------
<S> <C> <C> <C>
REVENUES:
Storage.............................. $ 5,290 $ 6,299 $ 5,525
Service.............................. 4,618 6,453 5,447
Product.............................. 368 596 453
--------- --------- -------
10,276 13,348 11,425
--------- --------- -------
OPERATING EXPENSES:
Salaries............................. 4,277 5,472 4,020
Occupancy............................ 1,568 2,214 1,806
Archive operating.................... 1,129 1,474 1,498
Selling, general and administrative.. 1,578 1,781 2,243
Depreciation and amortization........ 848 1,012 926
Cost of product...................... 153 225 220
Restructuring expenses (Note 6)...... -- -- 670
Loss on write down and disposal of
property and equipment (Note 5)..... 526 25 105
--------- --------- -------
10,079 12,203 11,488
--------- --------- -------
Operating income (loss)............ 197 1,145 (63)
INTEREST EXPENSE....................... 198 249 300
--------- --------- -------
Income (loss) before provision for
income taxes...................... (1) 896 (363)
PROVISION FOR INCOME TAXES............. 184 531 22
--------- --------- -------
NET INCOME (LOSS)...................... $ (185) $ 365 $ (385)
========= ========= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-18
<PAGE>
COMMAND RECORDS SERVICES LIMITED
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE TEN MONTHS
DECEMBER 31 ENDED OCTOBER 26
-------------------- ------------------
1993 1994 1995
--------- --------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................... $ (185) $ 365 $ (385)
Adjustments to reconcile net income
(loss) to net cash provided by op-
erating activities--
Loss on write down and disposal of
property and equipment........... 526 25 105
Depreciation and amortization..... 848 1,012 926
Deferred income taxes............. (10) 10 63
Increase in deferred rent......... 123 25 (33)
Change in assets and liabilities
excluding effects from the pur-
chase of businesses--
(Increase) decrease in--
Accounts receivable, net...... (36) (229) (35)
Inventories................... 114 (56) 21
Prepaid expenses.............. (41) (43) 112
Income taxes receivable....... -- -- (406)
Other assets.................. 7 (37) 7
Increase (decrease) in--
Accounts payable.............. 126 26 (439)
Accrued expenses.............. 173 (89) 453
Accrued income taxes.......... 195 (58) (173)
Deferred revenues............. 167 96 112
Other deferred liabilities.... 98 (157) 33
--------- --------- ------
Net cash provided by operating
activities..................... 2,105 890 361
--------- --------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds on sale of property and
equipment.......................... 288 456 187
Capital expenditures................ (454) (983) (275)
Increase in intangible assets....... (95) (376) 1
Payments for businesses acquired,
net of cash acquired............... (1,986) -- --
--------- --------- ------
Net cash used in investing ac-
tivities....................... (2,247) (903) (87)
--------- --------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit.... -- 140 614
Due to associated companies......... (133) (524) 12
Deferred payments for businesses ac-
quired............................. 1,004 (676) (270)
--------- --------- ------
Net cash provided by (used in)
financing activities........... 871 (1,060) 356
--------- --------- ------
NET INCREASE (DECREASE) IN CASH....... 729 (1,073) 630
CASH, BEGINNING OF YEAR............... 353 1,082 9
--------- --------- ------
CASH, END OF YEAR..................... $ 1,082 $ 9 $ 639
========= ========= ======
</TABLE>
The accompanying notes are an integral part of these statements.
F-19
<PAGE>
COMMAND RECORDS SERVICES LIMITED
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. FINANCIAL STATEMENTS
On January 1, 1995, Command Records Services Limited ("CRSL"), Arcodex
Records Manager Ltd. ("ARML") and Data Repro Com Enterprises Ltd. ("DRCEL"),
amalgamated to form Command Records Services Limited (the "Company").
The financial statements include the accounts of CRSL, ARML and DRCEL. All
significant intercompany transactions and balances have been eliminated.
The Company stores and services business records for a nationwide customer
base located throughout Canada. The Company also sells storage containers and
provides records management consulting services, software products for
managing customer records and microfilming services.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Ultimate settlement of these amounts could differ from those
estimates.
Revenue Recognition
Storage revenue is recognized as storage services are provided. Deferred
revenues represent amounts invoiced for storage services in advance of the
rendering of the services. Service revenue is recognized as the services are
provided.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets.
Goodwill
Goodwill is being amortized over 10 years using the straight-line method.
The Company continually evaluates whether events or circumstances have
occurred that indicate that the remaining useful lives of the intangible
assets should be revised or that the remaining balance of such assets may not
be recoverable. As of October 26, 1995, the Company believes that no revisions
to the remaining useful lives or write downs of intangible assets are
required.
Deferred Rent
Certain of the Company's leases for warehouse space provide for scheduled
rent increases over the lease terms. The Company recognizes rent expense on a
straight-line basis over the lease terms, with the excess of the rent charged
to expense over the amount paid recorded as deferred rent in the balance
sheets.
Client Acquisition Costs
The unreimbursed costs of moving the records of new clients into the
Company's facilities have been capitalized. All such costs are being amortized
on a straight-line basis over the contract term.
F-20
<PAGE>
COMMAND RECORDS SERVICES LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
Income taxes are recorded using the liability method. Under this method
deferred tax assets and liabilities are recognized based on differences
between the financial statement and tax basis of assets and liabilities using
presently enacted tax rates.
Foreign Currency Translation
The statements have been translated from the functional currency of Canadian
dollars to U.S. dollars using the average exchange rate for the results of
operations.
3. ACQUISITIONS
On December 6, 1993, CRSL purchased 100% of the shares of ARML and DRCEL.
The acquisition has been accounted for using the purchase method. The net
assets acquired were as follows:
<TABLE>
<S> <C>
Assets............................................................... $1,692
Liabilities.......................................................... 1,237
------
455
Integration and Acquisition Costs.................................... (181)
Goodwill............................................................. 1,718
------
Purchase Price....................................................... $1,992
======
</TABLE>
ARML and DRCEL results of operations have been consolidated with Command
Records Services Limited as of December 6, 1993, the date of acquisition.
4. INCOME TAXES
The Company's provision for income taxes is made up as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- -----
<S> <C> <C> <C>
Provision for income taxes based on combined basic Canadian
federal and provincial income tax rate of 44%............. $-- $394 $(159)
Impact of permanent differences
Capital loss on disposal of property with no future tax
benefit................................................... 169 -- --
Non-deductible meals and entertainment..................... 12 27 25
Non-deductible goodwill amortization....................... -- 70 58
Non-deductible awards to employees......................... 3 10 3
Increase in valuation allowance............................ -- 30 95
---- ---- -----
Actual provision for income taxes.......................... $184 $531 $ 22
==== ==== =====
</TABLE>
5. DISPOSAL OF PROPERTY
In 1994, the Company sold its Agincourt property. The Company recorded a
write down of $509 in 1993 which is included in the loss on write down and
disposal of property and equipment. The write down was recorded when the
decision to sell the property was made by management.
F-21
<PAGE>
COMMAND RECORDS SERVICES LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. RESTRUCTURING EXPENSES
During 1995, the Company recorded a restructuring charge of $775 comprising
termination and other costs.
7. RELATED PARTY TRANSACTIONS
The accompanying consolidated statements of operations include the following
related party transactions:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Sales......................................................... $246 $198 $175
Interest expense.............................................. $198 $184 $177
Corporate charges............................................. $ 78 $ 82 $128
</TABLE>
In 1991, the Company purchased its Brampton property from its parent. The
property was transferred at the carrying value of $3,844 in consideration for
17,260 common shares of the Company.
8. COMMITMENTS AND CONTINGENCIES
Operating Leases
At October 26, 1995, the Company was obligated under non-cancelable
operating leases for warehouse space, office equipment and transportation
equipment requiring minimum rentals as follows:
<TABLE>
<S> <C>
1996.................................................................. $1,149
1997.................................................................. 913
1998.................................................................. 659
1999.................................................................. 604
2000.................................................................. 501
2001 and thereafter................................................... 958
------
$4,784
======
</TABLE>
Other Matters
The Company is party to various claims arising in the ordinary course of
business. Although the ultimate outcome of these matters is presently not
determinable, management, after consultation with legal counsel, does not
believe that the resolution of these matters will have a material adverse
effect on the Company's financial position or results of operations.
9. SUBSEQUENT EVENT
On October 27, 1995 the Company was acquired by Pierce Leahy Command Company
("PLCC"). PLCC was incorporated by Pierce Leahy Corp. for the purpose of the
acquisition. On November 6, 1995, PLCC and CRSL were amalgamated.
F-22
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Security Archives, Inc.:
We have audited the accompanying balance sheets of Security Archives, Inc.
as of June 30, 1995 and 1994, and the related statements of income and
retained earnings and of cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Security Archives, Inc. as of June 30,
1995 and 1994, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
As discussed in Notes 1, 2 and 4 to the financial statements, during 1994,
the Company changed its methods of accounting for investments in equity
securities and income taxes to conform with Statements of Financial Accounting
Standards No. 115 and No. 109, respectively.
DELOITTE & TOUCHE LLP
Dallas, Texas
August 14, 1995
F-23
<PAGE>
SECURITY ARCHIVES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
------------------------ MARCH 31,
1994 1995 1996
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............. $ 465,058 $ 387,354 $ 703,129
Accounts receivable................... 205,599 245,839 253,966
Prepaid expenses...................... 169,191 243,886 325,272
----------- ----------- -----------
Total current assets................ 839,848 877,079 1,282,367
PROPERTY, PLANT AND EQUIPMENT:
Land.................................. 1,128,822 1,128,822 1,128,822
Buildings and improvements............ 2,533,200 2,646,548 3,260,627
Equipment............................. 4,106,862 4,430,263 4,449,706
----------- ----------- -----------
7,768,884 8,205,633 8,839,155
Less accumulated depreciation......... (3,892,935) (3,849,502) (3,845,308)
----------- ----------- -----------
3,875,949 4,356,131 4,993,847
INVESTMENTS--Available for sale (Note
2)..................................... 989,795 341,264 --
DEFERRED INCOME TAXES (Note 4).......... 13,495 -- --
OTHER ASSETS............................ 112,835 136,447 123,191
----------- ----------- -----------
TOTAL ASSETS........................ $ 5,831,922 $ 5,710,921 $ 6,399,405
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt
(Note 3)............................. $ 157,564 $ -- $ --
Accounts payable...................... 76,239 243,682 92,917
Accrued expenses...................... 123,201 153,768 107,788
Deferred income taxes (Note 4)........ 51,877 52,659 55,234
Other................................. 23,000 23,000 23,000
----------- ----------- -----------
Total current liabilities........... 431,881 473,109 278,939
LONG-TERM DEBT, NET OF CURRENT
MATURITIES (Note 3).................... 1,477,994 -- --
DEFERRED INCOME TAXES (Note 4).......... -- 3,485 6,699
COMMITMENTS (Note 5)....................
STOCKHOLDERS' EQUITY (Notes 3 and 5):
Common stock--par value $50 per share;
100 shares authorized
and issued........................... 5,000 5,000 5,000
Treasury stock--56 shares, at cost.... (2,475,958) (2,475,958) (2,475,958)
Unrealized losses on investments (Note
2)................................... (46,877) (10,384) --
Retained earnings..................... 6,439,882 7,715,669 8,584,725
----------- ----------- -----------
Total stockholders' equity.......... 3,922,047 5,234,327 6,113,767
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................. $ 5,831,922 $ 5,710,921 $ 6,399,405
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-24
<PAGE>
SECURITY ARCHIVES, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEAR ENDED ENDED
JUNE 30, MARCH 31,
---------------------- ----------------------
1994 1995 1995 1996
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE:
Storage charges.............. $2,470,703 $2,812,673 $2,095,542 $2,295,615
Pickup and delivery.......... 840,040 857,638 652,376 593,938
Retrieval, refile and
catalog..................... 497,428 510,573 377,658 385,756
Document disintegration...... 293,869 363,311 272,621 225,732
Cart service................. 78,630 81,397 62,640 58,010
Deposit on boxes............. 71,326 70,151 55,112 59,601
Miscellaneous................ 105,141 287,997 162,965 322,105
---------- ---------- ---------- ----------
4,357,137 4,983,740 3,678,914 3,940,757
EXPENSES:
Storage...................... 553,977 651,482 483,724 393,011
Handling..................... 1,115,739 1,082,665 712,810 793,837
General and administrative... 1,085,490 1,192,996 1,000,197 1,462,215
---------- ---------- ---------- ----------
2,755,206 2,927,143 2,196,731 2,649,063
---------- ---------- ---------- ----------
OPERATING PROFIT............... 1,601,931 2,056,597 1,482,183 1,291,694
OTHER INCOME (EXPENSE):
Interest income.............. 69,285 87,400 20,458 9,172
Interest expense............. (154,326) (112,938) (106,068) --
Other........................ 60,684 (52,624) (16,082) 8,190
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE.......... 1,577,574 1,978,435 1,380,491 1,309,056
PROVISION FOR INCOME TAXES
(Note 4)...................... (616,491) (702,648) (485,000) (440,000)
---------- ---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRIN-
CIPLE......................... 961,083 1,275,787 895,491 869,056
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (Note
4)............................ 53,283 -- -- --
---------- ---------- ---------- ----------
NET INCOME..................... 1,014,366 1,275,787 895,491 869,056
RETAINED EARNINGS, BEGINNING OF
YEAR.......................... 5,425,516 6,439,882 6,439,882 7,715,669
---------- ---------- ---------- ----------
RETAINED EARNINGS, END OF
YEAR.......................... $6,439,882 $7,715,669 $7,335,373 $8,584,725
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
F-25
<PAGE>
SECURITY ARCHIVES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE
FOR THE YEARS ENDED MONTHS ENDED
JUNE 30, MARCH 31,
------------------------ ----------------------
1994 1995 1995 1996
----------- ----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income................. $ 1,014,366 $ 1,275,787 $ 895,491 $ 869,056
Adjustments to reconcile
net income to net cash
provided by operating
activities................
Depreciation............... 463,797 509,516 371,980 437,161
Loss (gain) on disposal of
assets.................... (44,441) 28,454 -- 61,556
Loss on sale of
investments............... 19,435 24,813 20,615 10,384
Deferred income tax
expense................... 26,400 (3,747) 17,763 5,789
Changes in operating assets
and liabilities:
(Increase) decrease in
accounts receivable..... 9,563 (40,240) (96,301) (8,127)
Decrease in income taxes
receivable.............. 31,066 -- -- --
(Increase) decrease in
prepaid expenses........ (140,247) (74,695) 1,380 (81,386)
(Increase) decrease in
other assets............ (100,758) (23,612) 19,171 13,256
Increase (decrease) in
accounts payable........ 17,107 167,443 (33,472) (150,765)
Increase (decrease) in
accrued expenses........ (73,916) 30,567 108,681 (45,980)
Increase in other
liabilities............. 23,000 -- -- --
----------- ----------- --------- -----------
Net cash provided by
operating activities.. 1,245,372 1,894,286 1,305,308 1,110,944
----------- ----------- --------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property, plant
and equipment............. (1,193,989) (1,018,150) (660,593) (1,136,433)
Proceeds from sale of
property.................. 79,771 -- -- --
Purchases of investments... (1,070,373) (58,250) (52,145) --
Proceeds from sale of
investments............... 1,012,178 739,968 20,316 341,264
----------- ----------- --------- -----------
Net cash used in
investing activities.. (1,172,413) (336,432) (692,422) (795,169)
----------- ----------- --------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES--Principal
payments of long-term debt.. (144,051) (1,635,558) (116,844) --
----------- ----------- --------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS... (71,092) (77,704) 496,042 315,775
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD......... 536,150 465,058 465,058 387,354
----------- ----------- --------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD............... $ 465,058 $ 387,354 $ 961,100 $ 703,129
----------- ----------- --------- -----------
SUPPLEMENTAL DISCLOSURE:
Cash payments for:
Interest................. $ 154,326 $ 112,938 $ 106,068 $ --
----------- ----------- --------- -----------
Income taxes............. $ 413,255 $ 485,000 $ 400,000 $ 400,000
----------- ----------- --------- -----------
Noncash Investing
activities:
Unrealized loss on
investments............. $ 46,877 $ 10,384 $ 12,576 $ --
----------- ----------- --------- -----------
</TABLE>
See notes to financial statements.
F-26
<PAGE>
SECURITY ARCHIVES, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 1995 AND 1994
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE NINE MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General--Security Archives, Inc. (the "Company"), a Texas corporation, is
engaged in the storage, delivery, retrieval and destruction of documents for
companies in the north Texas area.
Interim Consolidated Financial Statements--The consolidated balance sheets
as of March 31, 1996 and the consolidated statements of operations for the
three months ended March 31, 1995 and 1996 are unaudited and, in the opinion
of management of the Company, include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the results
for those interim periods. The results of operations for the three months
ended March 31, 1995 and 1996 are not necessarily indicative of the results to
be expected for the full year.
Investments--The Company adopted Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS 115"), effective June 30, 1994. Under SFAS 115, investments are
classified as held-to-maturity, available-for-sale, or trading, depending on
the Company's ability and intent with respect to the use of individual
securities. The Company's investments at June 30, 1995 and 1994, are
classified as available-for-sale and are carried at fair value.
Property, Plant and Equipment--Property, plant and equipment are carried at
cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets, ranging from 3 to 18 years. When
assets are retired or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
reflected in income for the period. The cost of maintenance and repairs is
charged to expense as incurred; significant renewals and betterments are
capitalized. Deductions are made for retirements resulting from the renewals
or betterments.
Income Taxes--Effective July 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), which changed the method of accounting for income taxes from the
deferred method to the liability method. Under the liability method, deferred
income taxes are recognized for the tax consequences of temporary differences
by applying enacted statutory tax rates applicable to future years to
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities.
Cash Equivalents--The Company considers all highly liquid investments with
an original maturity of three months or less to be cash equivalents.
2. INVESTMENTS
The Company adopted SFAS 115 effective June 30, 1994. Investments at June
30, 1995 and 1994, consisting of shares of the Phoenix Tax-Exempt Bond
Portfolio, are classified as available-for-sale and have a cost of $357,438
and $1,063,968 and a fair value, as determined by quoted market prices, of
$341,264 and $989,795, at June 30, 1995 and 1994, respectively. The net
unrealized losses included in stockholders' equity at June 30, 1995 and 1994,
was $10,384 and $46,877, net of income taxes of $5,790 and $27,296,
respectively.
In fiscal year 1995, the Company sold shares with a cost of $764,781 for
$739,968, resulting in a realized loss of $24,813. The losses were calculated
using the average cost method.
F-27
<PAGE>
3. LONG-TERM DEBT
Long-term debt at June 30, 1994, consisted of a 9% note payable to the
former majority stockholder for the purchase of 56 shares of common stock in
the amount of $1,635,558, of which $157,564 represented amounts due in 1995.
During June 1995, the Company paid off the note in full.
4. INCOME TAXES
Effective July 1, 1993, the Company adopted SFAS 109. The cumulative effect
of this accounting change has been credited to 1994 income as a separate item.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Current federal........................................... $641,704 $471,383
Current state............................................. 78,706 58,260
Deferred.................................................. (17,762) 86,848
-------- --------
Total..................................................... $702,648 $616,491
======== ========
</TABLE>
Deferred income taxes at June 30, 1995 and 1994, principally related to the
use of accelerated depreciation methods for tax purposes on property, plant
and equipment and prepaid insurance.
The Company's effective income tax rate differs from the federal statutory
rate primarily from state income taxes (net of federal tax benefit).
5. COMMITMENTS
During 1989, the Company entered into a stock repurchase agreement with a
stockholder. Under the terms of the agreement, the Company will purchase the
stockholder's shares upon the stockholder's death at the greater of the book
value of the shares or the amount of the life insurance proceeds received by
the Company from a policy on the stockholder's life. Payment of the purchase
price would be made in quarterly payments over four years, bearing interest at
8% per annum. At June 30, 1995, the stockholder held 12 shares of stock at a
book value of $118,962 per share. The Company owns a $500,000 face value life
insurance policy on the stockholder.
F-28
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMK Document Services, Inc.:
We have audited the accompanying statements of operations and cash flows of
AMK Document Services, Inc. (an Arizona corporation) for the ten-month period
ended October 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of operations and
cash flows are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
statements of operations and cash flows. 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 audit provides a reasonable basis for our opinion.
In our opinion, the statements of operations and cash flows referred to
above presents fairly, in all material respects, the results of operations and
cash flows of AMK Document Services, Inc. for the ten-month period ended
October 31, 1995, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Philadelphia, Pa.,
June 5, 1996
F-29
<PAGE>
AMK DOCUMENT SERVICES, INC.
STATEMENT OF OPERATIONS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1995
<TABLE>
<S> <C>
REVENUES:
Storage........................................................... $ 706,434
Service and storage materials and sales........................... 1,550,762
----------
Total revenues.................................................. 2,257,196
----------
OPERATING EXPENSES:
Cost of sales, excluding depreciation............................. 1,613,409
Selling, general and administrative............................... 348,247
Depreciation...................................................... 58,262
----------
Total operating expenses........................................ 2,019,918
----------
Operating income................................................ 237,278
INTEREST INCOME..................................................... 4,740
----------
NET INCOME.......................................................... $ 242,018
==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-30
<PAGE>
AMK DOCUMENT SERVICES, INC.
STATEMENT OF CASH FLOWS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................ $ 242,018
Adjustments to reconcile net income to net cash provided by oper-
ating activities--
Depreciation.................................................... 58,262
Increase in deferred rent....................................... 16,544
Decrease in assets--
Accounts receivable........................................... 78,948
Inventories................................................... 12,242
Prepaid expenses and other assets............................. 7,829
Increase in liabilities--
Accounts payable and accrued expenses......................... 10,548
Deferred revenues............................................. 22,194
---------
Net cash provided by operating activities..................... 448,585
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.............................................. (68,629)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholder...................................... (482,040)
---------
NET DECREASE IN CASH................................................ (102,084)
CASH, BEGINNING OF PERIOD........................................... 324,889
---------
CASH, END OF PERIOD................................................. $ 222,805
=========
</TABLE>
The accompanying notes are an integral part of this statement.
F-31
<PAGE>
AMK DOCUMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business
AMK Document Services, Inc. (the "Company"), stores, services business
records and provides microfilming services for a customer base primarily
located in Phoenix, Arizona.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
straight-line and accelerated methods over the estimated useful lives of the
assets. Property and equipment consist of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
LIFE 1995
----------- -----------
<S> <C> <C>
Leasehold improvements............................. 15-39 years $ 317,372
Warehouse equipment (primarily shelving)........... 3-7 years 329,562
Microfilming equipment............................. 5-7 years 210,422
Furniture, fixtures and office equipment........... 3-7 years 113,981
Transportation equipment........................... 3-5 years 46,841
----------
1,018,178
Less--Accumulated depreciation and amortization.... (594,642)
----------
Net property and equipment....................... $ 423,536
==========
</TABLE>
Depreciation expense was $58,262 for the ten-month period ended October 31,
1995.
Revenue Recognition
Storage and service revenues are recognized in the month the respective
service is provided. Storage material sales are recognized when shipped to the
customer. Deferred revenues represent amounts invoiced for storage services in
advance of the rendering of the services.
Deferred Rent
One of the Company's leases for warehouse space provides for scheduled rent
increases over the lease terms. The Company recognizes rent expense on a
straight-line basis over the lease terms, with the excess of the rent charged
to expense over the amount paid recorded as deferred rent.
Income Taxes
The Company is a Subchapter S corporation and, therefore, any taxable income
or loss is passed through to the shareholder. The Company reports certain
expenses in different periods for financial reporting and income tax purposes.
If the Subchapter S corporation status was terminated, deferred income taxes
would need to be recorded in the financial statements.
F-32
<PAGE>
AMK DOCUMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. COMMITMENTS AND CONTINGENCIES
Operating Leases
At October 31, 1995, the Company was obligated under a noncancelable
operating lease for warehouse space. The lease expires in 1997 and requires
minimum rentals, subject to escalation of $51,072 in 1996 and $53,760 in 1997.
The Company also leases office and warehouse space at prices which, in the
opinion of management, approximate market rates from entities which are owned
by the shareholder of the Company. These related party leases are month-to-
month leases.
Rent expense on the above leases was $352,953 for the ten-month period ended
October 31, 1995, including $287,985 paid to the related party.
3. EMPLOYEE BENEFIT PLANS:
The Company maintains a discretionary profit sharing and a 401(k) plan for
substantially all full-time employees over the age of 21 and with more than
1,000 hours of service. There was no Company contribution to these plans in
the ten-month period ended October 31, 1995.
4. SUBSEQUENT EVENT
Effective November 1, 1995, the Company, sold its assets and business to
Pierce Leahy Corp. and ceased active operations. Certain assets and
liabilities not essential to the ongoing business were retained by the
Company.
F-33
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED
HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UN-
DER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CON-
TAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... 1
Prospectus Summary....................................................... 2
Risk Factors............................................................. 16
The Exchange Offer....................................................... 21
The Company.............................................................. 31
The Transactions......................................................... 31
Use of Proceeds.......................................................... 33
Capitalization........................................................... 33
Selected Historical and Pro Forma Consolidated Statement of Operations,
Balance Sheet and Other Data............................................ 34
Pro Forma Financial Data................................................. 37
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 44
Business................................................................. 53
Management............................................................... 63
Certain Transactions..................................................... 70
Principal Shareholders................................................... 71
Description of Credit Facility........................................... 73
Description of the Notes................................................. 74
Description of Capital Stock............................................. 99
Certain Federal Income Tax Considerations................................ 100
Plan of Distribution..................................................... 100
Legal Matters............................................................ 101
Experts.................................................................. 101
Index to Financial Statements............................................ F-1
</TABLE>
-----------
UNTIL , 1997, (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDI-
TION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN SELLING EX-
CHANGE NOTES RECEIVED IN EXCHANGE FOR ORIGINAL NOTES HELD FOR THEIR OWN AC-
COUNT. SEE "PLAN OF DISTRIBUTION."
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO OF PIERCE LEAHY CORP. APPEARS HERE]
PIERCE LEAHY CORP.
OFFER TO EXCHANGE ITS 11 1/8% SENIOR SUBORDINATED NOTES DUE 2006 WHICH HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT FOR ANY AND ALL OUTSTANDING 11 1/8%
SENIOR SUBORDINATED NOTES DUE 2006
----------------------
PROSPECTUS
----------------------
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 721 of the New York Business Corporation Law provides that the
indemnification and advancement of expenses of directors and officers may be
provided by the certificate of incorporation or by-laws of a corporation, or
when authorized by the certificate of incorporation or by-laws, a resolution
of shareholders, a resolution of directors or an agreement providing for
indemnification (except in cases where a judgment or other final adjudication
establishes that such acts were committed in bad faith or were the result of
active or deliberate dishonesty and were material to the cause of action so
adjudicated or that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled).
Section 722 of the New York Business Corporation Law provides that a
corporation may indemnify any person, made, or threatened to be made, a party
to an action or proceeding other than one by or in the right of the
corporation to procure a judgment in its favor, whether civil or criminal,
including an action by or in the right of any other corporation, partnership,
joint venture, trust, employee benefit plan or other entity which any director
or officer of the corporation served in any capacity at the request of the
corporation, by reason of the fact that he was a director or officer of the
corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other entity in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses if such
director or officer acted, in good faith, for a purpose which he reasonably
believed to be in, or in the case of service for any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interests of the corporation and, in criminal acts or
proceedings, in addition, had no reasonable cause to believe that his conduct
was unlawful.
Section 722 of the New York Business Corporation Law also states that a
corporation may indemnify any person made, or threatened to be made, a party
to an action by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director or officer of the
corporation or any other corporation, partnership, joint venture, trust,
employee benefit plan or other entity at the request of the corporation,
against amounts paid in settlement and reasonable expenses actually and
necessarily incurred by him in connection with the defense or settlement of
such action, or in connection with an appeal therein if such director or
officer acted, in good faith, for a purpose which he reasonably believed to be
in, or in the case of service for any other corporation, partnership, joint
venture, employee benefit plan or other entity, not opposed to, the best
interests of the corporation, except that no indemnification shall be made in
respect of a threatened or pending action which is settled or otherwise
disposed of, or any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation, unless the court determines the
person is fairly and reasonably entitled to indemnity for such portion of the
settlement amount and expenses as the court deems proper.
Section 726 of the New York Business Corporation Law provides that a
corporation shall have the power to purchase and maintain insurance for
indemnification of directors and officers. However, no insurance may provide
for any payment, other than cost of defense, to or on behalf of any director
or officer for a judgment or a final adjudication adverse to the insured
director or officer if (i) a judgment or other final adjudication establishes
that his acts of active and deliberate dishonesty were material to the cause
of action adjudicated or that he personally gained a financial profit or other
advantage to which he was not legally entitled or (ii) if prohibited under the
insurance law of New York.
Section 724 of the New York Business Corporation Law provides that
indemnification shall be awarded by a court to the extent authorized under
Sections 722 or 723(a) of the New York Business Corporation Law
notwithstanding the failure of a corporation to provide indemnification, and
despite any contrary resolution of the board or of the shareholders.
For information regarding provisions under which a director or officer of
the Company may be insured or indemnified in any manner against any liability
which he may incur in his capacity as such, or such liability for
II-1
<PAGE>
monetary damages may be limited, reference is made to Article Seventh of the
Company's Certificate of Incorporation (included as Exhibit 3.1 to this
Registration Statement and incorporated by reference herein) and to Section
6.7 of the Company's By-laws (included as Exhibit 3.2 to this Registration
Statement and incorporated by reference herein), which provides for
indemnification to the maximum extent authorized by law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
**3.1 Certificate of Incorporation of the Company
**3.2 Amended and Restated By-laws of the Company
*4.1 Indenture dated as of July 15, 1996 between the Company and United
States Trust Company of New York, as Trustee (the "Indenture")
*4.2 Form of Original Note No. R-1 for $200,000,000
**4.3 Form of Exchange Note
*4.4 Registration Rights Agreement dated as of July 23, 1996 by and between
the Company and CIBC Wood Gundy Securities Corp. (the "Initial
Purchaser")
**5 Opinion of Cozen and O'Connor
*10.1 Securities Purchase Agreement dated as of July 17, 1996 by and between
the Company and the Initial Purchaser
**10.2 Amended and Restated Buy/Sell Agreement dated as of July 19, 1996 by
and among the Company and certain of its shareholders
**10.3 Pierce Leahy Corp. Non-Qualified Stock Option Plan
**10.4 Credit Agreement, dated as of August 13, 1996, among the Company,
Pierce Leahy Command Company, the several lenders from time to time
parties thereto, Canadian Imperial Bank of Commerce, as Canadian
Administrative Agent, and Canadian Imperial Bank of Commerce, New York
Agency, as U.S. Administrative Agent, together with certain collateral
documents attached thereto, including the form of US$ Note, the form
of Canadian$ Note, the form of the U.S. Global Guarantee and Security
Agreement made by the Company, certain of its affiliates and
subsidiaries and its shareholders in favor of the U.S. Administrative
Agent, the form of Canadian Security Agreement between Pierce Leahy
Command Company and the Canadian Administrative Agent and the form of
Pledge and Intercreditor Agreement among certain of the Company's
affiliates, the U.S. Administrative Agent and the Canadian
Administrative Agent
**10.5 Share Purchase Agreement dated September 30, 1995 between the Company
and Moore Corporation Limited
**10.6 Stock Purchase Agreement dated April 17, 1996 among the Company and
Security Archives, Inc. and Patrick G. Clayton, Carol A. Clayton and
Byron Wood Clayton
**10.7 Purchase Agreement dated as of July 31, 1996 between Pierce Family
Partnership, Ltd. and the Company
**10.8 Purchase and Sale Agreement dated as of July 31, 1996 between Pierce
Real Estate Company and the Company
*12 Statement re: Computation of Ratios
**21 Subsidiaries of the Registrant
**23.1 Consent of Cozen and O'Connor (included in Exhibit 5)
**23.2 Consent of Arthur Andersen LLP
**23.3 Consent of Deloitte & Touche LLP
**23.4 Consent of Cushman & Wakefield of New Jersey, Inc.
**23.5 Consent of Cushman & Wakefield of Georgia, Inc.
**23.6 Consent of Cushman & Wakefield of Pennsylvania, Inc.
*24 Power of Attorney (included on signature page)
*25 Statement of eligibility of Trustee, United States Trust Company of
New York, on Form T-1
*27 Financial Data Schedule
**99.1 Form of Letter of Transmittal
**99.2 Form of Notice of Guaranteed Delivery
</TABLE>
- --------
* Previously filed.
**Filed herewith.
II-2
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES
Schedule of Valuation and Qualifying Accounts
All other financial statement schedules are omitted because they either are
not applicable or the required information is included in the financial
statements or notes thereto appearing elsewhere in this Registration
Statement.
(C) NOT APPLICABLE.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(b)(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(d) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(e) The undersigned Registrant hereby undertakes; (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this Registration Statement; (i) to include any Prospectus required by Section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the Prospectus any
facts or events arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which individually or in
the aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
II-3
<PAGE>
dollar value of the securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of Prospectus filed with
the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20% change in the maximum aggregate
offering price set forth in the "calculation of registration fee" table in the
effective Registration Statement; and (iii) to include any material
information with respect to the plan of distribution not previously disclosed
in the Registration Statement or any material change to such information in
the Registration Statement; (2) that, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and (3) to remove from
registration by means of a post-effective amendment any of the securities
being offered which remain unsold at the termination of the offering.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN KING OF PRUSSIA, PENNSYLVANIA, ON
SEPTEMBER 30, 1996.
Pierce Leahy Corp.
By: /s/ J. Peter Pierce
-------------------------------
J. PETER PIERCE, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* Chairman of the September 30,
- ------------------------------------- Board of Directors 1996
LEO W. PIERCE, SR.
/s/ J. Peter Pierce President, Chief September 30,
- ------------------------------------- Executive Officer 1996
J. PETER PIERCE and Director
(Principal
Executive Officer)
* Vice President, September 30,
- ------------------------------------- Chief Financial 1996
DOUGLAS B. HUNTLEY Officer and
Director (Principal
Financial and
Accounting Officer)
* Director September 30,
- ------------------------------------- 1996
LEO W. PIERCE, JR.
/s/ Michael J. Pierce Director September 30,
- ------------------------------------- 1996
MICHAEL J. PIERCE
* Director September 30,
- ------------------------------------- 1996
ALAN B. CAMPELL
* Director September 30,
- ------------------------------------- 1996
DELBERT S. CONNER
*By: /s/ J. Peter Pierce
- -------------------------------------
ATTORNEY-IN-FACT PURSUANT TO THE
POWERS OF ATTORNEY PREVIOUSLY FILED
AS PART OF THIS REGISTRATION
STATEMENT
</TABLE>
II-5
<PAGE>
Exhibit Index
Exhibit
No. Exhibit
------- -------
**3.1 Certificate of Incorporation of the Company
**3.2 Amended and Restated By-laws of the Company
*4.1 Indenture dated as of July 15, 1996 between the Company and United
States Trust Company of New York, as Trustee (the "Indenture")
*4.2 Form of Original Note No. R-1 for $200,000,000
**4.3 Form of Exchange Note
*4.4 Registration Rights Agreement dated as of July 23, 1996 by and
between the Company and CIBC Wood Gundy Securities Corp. (the
"Initial Purchaser")
**5 Opinion of Cozen and O'Connor
*10.1 Securities Purchase Agreement dated as of July 17, 1996 by and
between the Company and the Initial Purchaser
**10.2 Amended and Restated Buy/Sell Agreement dated as of July 19, 1996 by
and among the Company and certain of its shareholders
**10.3 Pierce Leahy Corp. Non-Qualified Stock Option Plan
**10.4 Credit Agreement, dated as of August 13, 1996, among the Company,
Pierce Leahy Command Company, the several lenders from time to time
parties thereto, Canadian Imperial Bank of Commerce, as Canadian
Administrative Agent, and Canadian Imperial Bank of Commerce, New
York Agency, as U.S. Administrative Agent, together with certain
collateral documents attached thereto, including form of US$ Note,
the form of Canadian$ Note, the form of the U.S. Global Guarantee
and Security Agreement made by the Company, certain of its
affiliates and subsidiaries and its shareholders in favor of the
U.S. Administrative Agent, the form of the Canadian Security
Agreement between Pierce Leahy Command Company and the Canadian
Administrative Agent, and the form of Pledge and Intercreditor
Agreement among certain of the Company's affiliates, the U.S.
Administrative Agent and the Canadian Administrative Agent.
**10.5 Share Purchase Agreement dated September 30, 1995 between the
Company and Moore Corporation Limited
**10.6 Stock Purchase Agreement dated April 17, 1996 among the Company and
Security Archives, Inc. and Patrick G. Clayton, Carol A. Clayton and
Byron Wood Clayton
**10.7 Purchase Agreement dated as of July 31, 1996 between Pierce Family
Partnership, Ltd. and the Company
**10.8 Purchase and Sale Agreement dated as of July 31, 1996 between Pierce
Real Estate Company and the Company
*12 Statement re: Computation of Ratios
**21 Subsidiaries of the Registrant
**23.1 Consent of Cozen and O'Connor (including in Exhibit 5)
**23.2 Consent of Arthur Anderson LLP
**23.3 Consent of Deloitte & Touche
**23.4 Consent of Cushman & Wakefield of New Jersey, Inc.
**23.5 Consent of Cushman & Wakefield of Georgia, Inc.
**23.6 Consent of Cushman & Wakefield of Pennsylvania, Inc.
*24 Power of Attorney (included on signature page)
*25 Statement of eligibility of Trustee, United States Trust Company of
New York, on Form T-1
*27 Financial Data Schedule
**99.1 Form of Letter of Transmittal
**99.2 Form of Notice of Guaranteed Delivery
- ---------
* Previously filed.
** Filed herewith.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
PIERCE LEAHY CORP.
------------------
Under Section 402 of the Business Corporation Law
-------------------------------------------------
I, THE UNDERSIGNED, of the age of eighteen years or over, for the
purpose of forming a corporation pursuant to Section 402 of the Business
Corporation Law of New York, does hereby certify:
FIRST: The name of the corporation is: PIERCE LEAHY CORP.
SECOND: The purposes of which it is formed are:
To engage in any lawful act or activity for which corporations
may be organized under the New York Business Corporation Law provided
that the corporation is not formed to engage in any act or activity
which requires the consent or approval of any state official,
department, board, agency or other body, without such consent or
approval first being obtained.
THIRD: The office of the corporation is to be located in the
County of New York, State of New York.
FOURTH: The aggregate number of shares which the corporation
shall have authority to issue is 1,000,000 shares of Class A common
stock par value $.01 per share and 1,000,000 shares of Class B common
stock par value $.01 per share.
Each share of Class B common stock shall be in all respects equal
to each share of Class A common stock, except that, unless otherwise
provided by law, the holders of Class B common stock shall not have any
voting rights.
Except as otherwise provided by law, the holders of Class A
common stock shall have exclusive voting rights.
FIFTH: The Secretary of State is designated as the agent of the
corporation, upon whom process against the corporation may be served.
The post office address to which the Secretary of State shall mail a
copy of any process against the corporation served upon him is:
c/o CT Corporation System 1633 Broadway, New York, New York 10019.
SIXTH: No holder of shares of the corporation of any class, now
or hereafter authorized, shall have any preferential or preemptive right
to subscribe for, purchase or receive any shares of the corporation of
any class, now or hereafter.
<PAGE>
authorized, or any securities convertible into or exchangeable for such
shares, or any rights, warrants or options to subscribe for; purchase or
receive such shares of convertible or exchangeable securities which may
at any time be issued, sold, or offered for sale by the corporation.
SEVENTH: No director shall be personally liable to the
corporation or any of its shareholders for monetary damages for breach
of duty as a director, except for liability if judgment or other final
adjudication adverse to him establishes that these acts or omissions
were in bad faith or involved intentional misconduct or a knowing
violation of law or that he personally gained in fact a financial profit
or other advantage to which he was not legally entitled or that his acts
violated Section 719 of the New York Business Corporation Law. Any
repeal or modification of this Article SEVENTH by the shareholders of
the corporation shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to such
repeal or modification.
EIGHTH: The name and address of the registered agent which is to
be the agent of the corporation upon whom process against it may be
served, is CT Corporation System, 1633 Broadway, New York, New York
10019.
IN WITNESS WHEREOF, I have made and signed this certificate this
6th day of February, 1990 and I affirm the statements contained therein
as true under penalties of perjury.
/s/ Jeanne M. Andrews
---------------------
Jeanne M. Andrews
12th Floor Packard Building
15th and Chestnut Streets
Philadelphia, PA 19102
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<PAGE>
Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS
- of -
PIERCE LEAHY CORP.
(hereinafter called the "Corporation")
ARTICLE 1
---------
Shareholders
------------
Section 1.1 Annual Meetings. The annual meeting of shareholders for
---------------
the election of directors and the transaction of such other business as may come
before it shall be held on such date in each calendar year, and at such place,
as shall be fixed by the President and stated in the notice or waiver of notice
of the meeting.
Section 1.2 Special Meetings. Special meetings of shareholders, for any
----------------
purpose or purposes, may be called at any time by the President or the Secretary
or by resolution of the Board of Directors. Special meetings of shareholders
shall be held at such place as shall be fixed by the person or persons calling
the meeting and stated in the notice or waiver of notice of the meeting. At any
special meeting only such business may be transacted which is related to the
purpose or purposes set forth in the notice or waiver of notice of the meeting.
Section 1.3 Notice of Meetings of Shareholders. Whenever shareholders
----------------------------------
are required or permitted to take any action at a meeting, written notice shall
be given stating the place, date and hour of the meeting and unless it is the
annual meeting, indicating that it is being issued by or at the direction of the
person or persons calling the meeting. Notice of a special meeting shall also
state the purpose or purposes for which the meeting is called. If, at any
meeting, action is proposed to be taken which would, if taken, entitle
shareholders fulfilling the requirements of Section 623 of the Business
Corporation Law to receive payment for their shares, the notice of such meeting
shall include a statement of that purpose and to that effect and shall be
accompanied by a copy of said Section 623 or an outline of its material terms. A
copy of the notice of any meeting shall be given, personally, or by mail, not
less than ten (10) nor more the than fifty (50) days before the date of the
meeting, to each shareholder entitled to vote at such meeting. If mailed, such
notice is given when deposited in the United States mail, with postage thereon
prepaid, directed to the shareholder at his address as it appears on the record
of shareholders, or, if he shall have filed with the Secretary of
<PAGE>
the Corporation a written request that notices to him be mailed to some other
address, then directed to him at such other address.
When a meeting is adjourned to another time or place, it shall not be
necessary to give any notice of the adjourned meeting if the time and place to
which the meeting is adjourned are announced at the meeting at which the
adjournment is taken, and at the adjourned meeting any business may be
transacted that might have been transacted on the original date of the
meeting. However, if after the adjournment, the Board of Directors fixes a new
record date for the adjourned meeting, a notice of the adjourned meeting shall
be given to each shareholder of record on the new record date entitled to notice
under the next preceding paragraph.
Section 1.4 Waivers of Notice. Notice of meeting need not be given to
-----------------
any shareholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting. The attendance of any shareholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
Section 1.5 Quorum. The holders of a majority of the shares entitled
------
to vote thereat shall constitute a quorum at a meeting of shareholders for the
transaction of any business, provided that when a specified item of business is
required to be voted on by a class or series, voting as a class, the holders of
one third of the shares of such class or series shall constitute a quorum for
the transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any shareholders.
The shareholders present may adjourn the meeting despite the absence of
a quorum and at such adjourned meeting at which the requisite amount of voting
stock shall be represented, any business may be transacted which might have
been transacted at the meeting as originally noticed.
Section 1.6 Fixing Record Date. For the purpose of determining the
-------------------
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of shareholders. Such date shall
not be more than fifty (50) nor less than ten (10) days before the date of such
meeting, nor more than fifty (50) days prior to any other action.
-2-
<PAGE>
When a determination of shareholders of record entitled to notice of or to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date under this section for the adjourned meeting.
Section 1.7 List of Shareholders at Meetings. A list of shareholders as
--------------------------------
of the record date, certified by the corporate officer responsible for its
preparation or by a transfer agent, shall be produced at any meeting of
shareholders upon the request thereat or prior thereto of any shareholder. If
the right to vote at any meeting is challenged, the inspectors of election, or
person presiding thereat, shall require such list of shareholders to be produced
as evidence of the right of the persons challenged to a vote at such meeting,
and all persons who appear from such list to be shareholders entitled to vote
thereat may vote at such meeting.
Section 1.8 Proxies. Every shareholder entitled to vote at a meeting of
-------
shareholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact. No
proxy shall be valid after expiration of eleven (11) months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the shareholder executing it, except as otherwise provided in
this section.
The authority of the holder of a proxy to act shall not be revoked by the
incompetence or death of the shareholder who executed the proxy unless, before
the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the corporate officer responsible
for maintaining the list of shareholders.
Except when other provisions shall have been made by written agreement
between the parties, the record holder of shares which he holds as pledgee or
otherwise as security or which belong to another, shall issue to the pledgor or
to such owner of such shares, upon demand therefor and payment of necessary
expenses thereof, a proxy to vote or take other action thereon.
A shareholder shall not sell his vote or issue a proxy to vote to any
person for any sum of money or anything of value, except as authorized in this
section and Section 620 of the Business Corporation Law.
-3-
<PAGE>
A proxy which is entitled "irrevocable proxy" and which states that it
is irrevocable, is irrevocable when it is held by any of the following or a
nominee of any of the following:
(1) A pledgee;
(2) A person who has purchased or agreed to purchase the shares;
(3) A creditor or creditors of the Corporation who extend or
continue credit to the Corporation in consideration of the proxy
if the proxy states that it was given in consideration of such
extension or continuation of credit, the amount thereof, and the
name of the person extending or continuing credit;
(4) A person who has contracted to perform services as an officer of
the Corporation, if a proxy is required by the contract of
employment, if the proxy states that it was given in
consideration of such contract of employment, the name of the
employee and the period of employment contracted for;
(5) A person designated by or under an agreement under paragraph (a)
of said Section 620.
Notwithstanding a provision in a proxy, stating that it is irrevocable,
the proxy becomes revocable after the pledge is redeemed, or the debt of the
Corporation is paid, or the period of employment provided for in the contract of
employment has terminated, or the agreement under paragraph (a) of said Section
620 has terminated; and, in a case provided for in subparagraph (3) or (4)
above, becomes revocable three (3) years after the date of the proxy or at the
end of the period, if any, specified therein, whichever period is less, unless
the period of irrevocability is renewed from time to time by the execution of a
new irrevocable proxy as provided in this section. This paragraph does not
affect the duration of a proxy under the second paragraph of this section.
A proxy may be revoked, notwithstanding a provision making it
irrevocable, by a purchaser of shares without knowledge of the existence of the
provision unless the existence of the proxy and its irrevocability is noted
conspicuously on the face or back of the certificate representing such shares.
Section 1.9 Selection and Duties of Inspectors. The Board of
----------------------------------
Directors, in advance of any shareholders' meeting, may appoint one or more
inspectors to act at the meeting or any adjournment thereof. If inspectors are
not so appointed, the person presiding at a shareholders' meeting may, and on
the request of any shareholder entitled to vote thereat shall appoint one or
more inspectors. In case any person appointed fails to appear or act, the
vacancy may be filled by appointment made by
-4-
<PAGE>
the Board of Directors in advance of the meeting or at the meeting by the person
presiding thereat. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability.
The inspectors shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. On request of the person presiding at
the meeting or any shareholder entitled to vote thereat, the inspectors shall
make a report in writing of any challenge, question or matter determined by them
and execute a certificate of any fact found by them. Any report or certificate
made by them shall be prima facie evidence of the facts stated and of the vote
as certified by them.
Unless appointed by the Board of Directors or requested by a
shareholder, as above provided in this section, inspectors shall be dispensed
with at all meetings of shareholders.
Section 1.10 Qualification of Voters. Every shareholder of record
-----------------------
shall be entitled at every meeting of shareholders to one vote for every share
standing in his name on the record of shareholders, except as expressly provided
otherwise in this section and except as otherwise expressly provided in the
Certificate of Incorporation of the Corporation.
Treasury shares and shares held by another domestic or foreign
corporation of any type or kind, if a majority of the shares entitled to vote in
the election of directors of such other corporation is held by the Corporation,
shall not be shares entitled to vote or to be counted in determining the total
number of outstanding shares.
Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a trustee, may be voted by him, either in
person or by proxy, without transfer of such shares into his name. Shares held
by a trustee may be voted by him, either in person or by proxy, only after the
shares have been transferred into his name as trustee or into the name of his
nominee.
Shares held by or under the control of a receiver may be voted by him
without the transfer hereof into his name if
-5-
<PAGE>
authority so to do is contained in an order of the court by which such receiver
was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, or a
nominee of the pledgee.
Redeemable shares which have been called for redemption shall not be
deemed to be outstanding shares for the purpose of voting or determining the
total number of shares entitled to vote on any matter on and after the date on
which written notice of redemption has been sent to holders thereof and a sum
sufficient to redeem such shares has been deposited with a bank or trust company
with irrevocable instruction and authority to pay the redemption price to the
holders of the shares upon surrender of certificates therefor.
Shares standing in the name of another domestic or foreign corporation
of any type or kind may be voted by such officer, agent or proxy as the by-laws
of such corporation may provide, or, in the absence of such provision, as the
Board of Directors of such corporation may determine.
If shares are registered on the record of shareholders of the
Corporation in the name of two or more persons, whether fiduciaries, members of
a partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise, or if two or more persons have the same fiduciary relationship
respecting the same shares, unless the secretary of the Corporation is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect:
(1) If only one votes, the vote shall be accepted by the Corporation
as the vote of all;
(2) If more than one vote, the act of the majority so voting shall
be accepted by the Corporation as the vote of all;
(3) If more than one vote, but the vote is equally divided on any
particular matter, the vote shall be accepted by the Corporation
as a proportionate vote of the shares; unless the Corporation
has evidence, on the record of shareholders or otherwise, that
their shares are held in a fiduciary capacity. Nothing in this
paragraph shall alter any requirement that the exercise of
fiduciary powers be by act of a majority, contained in any law
applicable to such exercise
-6-
<PAGE>
of powers (including Section 10-10.7 of the Estates, Powers and
Trusts Laws of the State of New York);
(4) When shares as to which the vote is equally divided are
registered on the record of shareholders of the Corporation in
the name of, or have passed by operation of law or by virtue of
any deed of trust or other instrument to two or more
fiduciaries, any court having jurisdiction of their accounts,
upon petition by any of such fiduciaries or by any party in
interest, may direct the voting of such shares for the best
interest of the beneficiaries. This paragraph shall not apply in
the case where the instrument or order of the court appointing
fiduciaries shall otherwise direct how such shares shall be
voted; and
(5) if the instrument or order furnished to the Secretary of the
Corporation shows that a tenancy is held in unequal interests, a
majority or equal division for the purposes of this paragraph
shall be a majority or equal division in interest.
Notwithstanding the foregoing paragraphs of this section, the
Corporation shall be protected in treating the persons in whose names shares
stand on the record of shareholders as the owners thereof for all purposes.
Section 1.11 Vote of Shareholders. Directors shall be elected by a
--------------------
plurality of the votes cast at a meeting of shareholders by the holders of
shares entitled to vote in the election. Whenever any corporate action, other
than the election of directors, is to be taken by vote of the shareholders, it
shall, except as otherwise required by the Business Corporation Law or by the
Certificate of Incorporation of the Corporation, be authorized by a majority of
the votes cast at a meeting of shareholders by the holders of shares entitled to
vote thereon.
The vote upon any question before any shareholders' meeting need not
be by ballot.
Section 1.12 Written consent of Shareholders. Whenever
-------------------------------
shareholders are required or permitted to take any action by vote, such action
may be taken without a meeting on written consent, setting forth the action so
taken, signed by the holders of all outstanding shares entitled to vote thereon.
This paragraph shall not be construed to alter or modify the provisions of any
section of the Business Corporation Law or any provision in the Certificate of
Incorporation of the Corporation not inconsistent with the Business Corporation
Law under the
-7-
<PAGE>
written consent of the holders of less than all outstanding shares is sufficient
for corporate action.
Written consent thus given by the holders of all outstanding shares
entitled to vote shall have the same effect as a unanimous vote of
shareholders.
ARTICLE 2
---------
Directors
---------
Section 2.1 Management of Business; Qualification of Directors.
--------------------------------------------------
The business of the Corporation shall be managed under the direction of its
Board of Directors. Each member of the Board of Directors shall be at least
eighteen years of age.
Directors need not be stockholders.
The Board of Directors, in addition to the powers and authority
expressly conferred upon it by statute, by the Certificate of Incorporation of
the Corporation, by these By-Laws and otherwise, is hereby empowered to exercise
all such powers as may be exercised by the Corporation, except as expressly
provided otherwise by the Constitution and statutes of the State of New York, by
the Certificate of Incorporation of the Corporation and by these By-Laws.
Section 2.2 Number. The number of directors which shall constitute
------
the entire Board of Directors shall be not less than three (3), nor more than
ten (10) as determined by a majority of the Board of Directors; provided,
however, this number may be increased and subsequently again increased or
decreased by an amendment to these By-Laws, except that the number shall never
be less than three (3) and that no decrease shall shorten the term of any
incumbent director.
Section 2.3 Election and Term. At each annual meeting of
-----------------
shareholders, directors shall be elected to hold office until the next annual
meeting, subject to the provisions of Section 2.5 hereof. Each director shall
hold office until the expiration of the term for which he is elected, and until
his successor has been elected and qualified.
Section 2.4 Resignations. Any director of the Corporation may
------------
resign at any time by giving written notice to the Board of Directors, the
President or the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, if any, or if no time is specified
therein, then upon receipt of such notice by the addressee; and, unless
otherwise provided therein, the acceptance of such resignation shall not be
necessary to make it effective.
-8-
<PAGE>
Section 2.5 Removal of Directors. Any or all of the directors may
--------------------
be removed at any time (a) for cause by vote of the shareholders or by action of
the Board of Directors or (b) without cause by vote of the shareholders, except
as expressly provided otherwise by Section 706 of the Business Corporation Law.
Section 2.6 Newly Created Directorships and Vacancies. Newly
-----------------------------------------
created directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason may be filled by
vote of the Board of Directors. If the number of directors then in office is
less than a quorum, such newly created directorships and vacancies may be filled
by vote of a majority of the directors then in office. The Board of Directors
shall fill vacancies occurring in the Board of Directors by reason of the
removal of directors without cause.
A director elected to fill a vacancy shall hold office until the next
meeting of shareholders at which the election of directors is in the regular
order of business, and until his successor has been elected and qualified.
Section 2.7 Quorum and Vote of Directors. At all meetings of the
----------------------------
Board of Directors, a majority of the entire Board of Directors shall be
necessary and sufficient to constitute a quorum for the transaction of business.
The vote of a majority of the directors present at the time of the vote, if a
quorum is present at such time, shall be the act of the Board of Directors,
except as expressly provided otherwise in these By-Laws and by the statutes of
the State of New York.
A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting of the Board of Directors to another time and
place. Notice of any adjournment need not be given if such time and place are
announced at the meeting.
Section 2.8 Annual Meeting. The newly elected Board of Directors
---------------
shall meet immediately following the adjournment of the annual meeting of
shareholders in each year at the same place and no notice of such meeting shall
be necessary.
Section 2.9 Regular Meetings. Regular meetings of the Board of
-----------------
Directors may be held at such times and places as shall from time to time be
fixed by the Board of Directors and no notice thereof shall be necessary.
Section 2.10 Special Meetings. Special meetings may be called at
-----------------
any time by the President, any Vice President, the Treasurer or the Secretary or
by resolution of the Board of Directors. Special meetings shall be held at such
places as
-9-
<PAGE>
shall be fixed by the person or persons calling the meeting and stated in the
notice or waiver of notice of the meeting.
Special meetings of the Board of Directors shall be held upon notice to
the directors. Notice of a special meeting need not be given to any director
who submits a signed waiver of notice whether before or after the meeting, or
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
Unless waived, notice of each special meeting of the Board of Directors,
stating the date, time and place of the meeting, shall be given to each director
by delivered letter, by telegram or by personal communication either over the
telephone or otherwise, in each such case not later than the second day prior to
the meeting, or by mailed letter deposited in the United States mail with
postage thereon prepaid not later than the seventh day prior to a the meeting.
Notices of special meetings of the Board of Directors and waivers thereon need
not state the purpose or purposes of the meeting.
Section 2.11 Telephonic Meetings. A member of the Board of Directors
--------------------
or any committee thereof may participate in a meeting of the Board of Directors
or of such committee by means of a conference telephone or similar
communications, equipment allowing all persons participating in the meeting to
hear each other at the same time, and participation in a meeting by such means
shall constitute presence in person at such meeting.
Section 2.12 Compensation. Directors shall receive such fixed sums and
-------------
expenses of attendance for attendance at each meeting of the Board of Directors
or of any committee and such salary as may be determined from time to time by
the Board of Directors; provided that nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 2.13 Committees. The Board of Directors, by resolution adopted
-----------
by a majority of the entire Board of Directors, may designate from among its
members an Executive Committee and other committees, each consisting of three
(3) or more directors, and each of which, to the extent provided in the
resolutions, shall have all the authority of the Board of Directors, except that
no such committee shall have authority as to the following matters:
(a) The submission to shareholders of any action that needs
shareholders' approval under the Business Corporation Law.
(b) The filling of vacancies in the Board of Directors or in any
committee.
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<PAGE>
(c) The fixing of compensation of the directors for serving on the
Board of Directors or on any committee.
(d) The amendment or repeal of the By-Laws, or the adoption of new
By-Laws.
(e) The amendment or repeal of any resolution of the Board of Directors
which by its terms shall not be so amenable or repealable.
The Board of Directors may designate one or more directors as alternate
members of any such committee, who may replace any absent member or members at
any meeting of such committee. Each such committee shall serve at the pleasure
of the Board of Directors.
Regular meetings of any such committee shall be held at such dates,
times and places as shall from time to time be fixed by such committee and no
notice thereof shall be necessary. Special meetings may be called at any time
by the President or Secretary of the Corporation or any member of such
committee. Notice of each special meeting of each such committee shall be given
(or waived) in the same manner as notice of a special meeting of the Board of
Directors. A majority of the members of any such committee shall constitute a
quorom for the transaction of business and the act of a majority of the members
present at the time of the vote, if a quorom is present at such time, shall be
the act of the committee.
Section 2.14 Interested Directors. No contract or other transaction
--------------------
between the Corporation and one or more, of its directors, or between the
Corporation and any other corporation, firm, association or other entity in
which one or more of the Corporation's directors are directors or officers, or
have a substantial financial interest, shall be either void or voidable for this
reason alone or by reason alone that such director or directors are present at
the meeting of the Board of Directors, or of a committee thereof, which approves
such contract or transaction, or that his or their votes are counted for such
purpose:
(1) If the material facts as to such director's interest in such
contract or transaction and as to any such common directorship,
officership or financial interest are disclosed in good faith or
known to the Board of Directors or committee, and the Board of
Directors or committee approves such contract or transaction by a
vote sufficient for such purpose without counting the vote of such
interested director or, if the votes of the disinterested directors
are insufficient to
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<PAGE>
constitute an act of the Board of Directors as defined in
Section 708 of the Business Corporation Law, by unanimous vote
of the disinterested directors; or
(2) If the material facts as to such directors's interest in such
contract or transaction and as to any such common directorship,
officership or financial interest are disclosed in good faith or
known to the shareholders entitled to vote thereon, and such
contract or transaction is approved by vote of such
shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which approves such contract or transaction.
Section 2.15 Loans to Directors. A loan shall not be made by the
------------------
Corporation to any director unless it is authorized by vote of the shareholders.
For this purpose, the shares of the director who would be the borrower shall not
be shares entitled to vote. A loan made in violation of this section shall be a
violation of the duty to the Corporation of the directors approving it, but the
obligation of the borrower with respect to the loan shall not be affected
thereby.
ARTICLE 3
---------
Officers
--------
Section 3.1 Election or Appointment; Number. The officers of the
-------------------------------
Corporation shall be elected or appointed by the Board of Directors. The
officers shall be a President, a Secretary, a Treasurer, and such number of
Vice-Presidents, Assistant Secretaries and Assistant Treasurers, and such other
officers, as the Board of Directors may from time to time determine. Any person
may hold two (2) or more offices at the same time, except the offices of
President and Secretary. Any officer may, but no officer need, be chosen from
among the Board of Directors.
Section 3.2 Term. Subject to the provisions of Section 3.3 hereof, all
----
officers shall be elected or appointed to hold office until the meeting of the
Board of Directors following the next annual meeting of shareholders, and each
officer shall hold office for the term for which he is elected or appointed and
until his successor has been elected or appointed and qualified.
The Board of Directors may require any officer to give security for the
faithful performance of his duties.
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<PAGE>
Section 3.3 Removal. Any officer elected or appointed by the Board
-------
of Directors may be removed by the Board of directors with or without cause.
The removal of an officer without cause shall be without prejudice to
his contract rights, if any. The election or appointment of an officer shall
not of itself create contract rights.
Section 3.4 Authority.
---------
3.4.1 The President. The President shall be the
-------------
chief executive officer and, unless otherwise determined by the Board of
Directors, the chief operating officer of the Corporation, shall preside at all
meetings of the shareholders and the Board of Directors, shall have general and
active management of the business of the Corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect.
He shall execute bonds, mortgages and other
contracts requiring a seal under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the Corporation.
3.4.2 The Vice President(s). The Vice-President
---------------------
or, if there shall be more than one (1), the Vice-Presidents in the order
determined by the Board of Directors, shall, in the absence or disability of the
President, perform the duties and exercise the powers of the President and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
3.4.3 The Secretary and Assistant Secretaries. The
---------------------------------------
Secretary shall attend all meetings of the Board of Directors and all meetings
of the shareholders and record all the proceedings of the meetings of the
Corporation and of the Board of Directors in a book to be kept for that purpose
and shall perform like duties for the standing committees when required. He
shall give, or cause to be given, notice of all meetings of the shareholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President, under whose
supervision he shall be. He shall have custody of the corporate seal of the
Corporation and he, or an Assistant Secretary, shall have authority to affix the
same to any instrument requiring it and, when so affixed, it may be attested by
his signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to
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<PAGE>
affix the seal of the Corporation and to attest the affixing by his signature.
The Assistant Secretary or, if there be more
than one (1), the Assistant Secretaries in the order determined by the Board of
Directors, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
3.4.4 The Treasurer Assistant Treasurer.
---------------------------------
The Treasurer shall have the custody of the corporate funds and securities and
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the corporation and shall deposit all monies and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board of Directors.
He shall disburse the funds of the Corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation.
If required by the Board of Directors, he
shall give the Corporation a bond in such sum and with such surety or sureties
as shall be satisfactory to the Board of Directors for the faithful performance
of the duties of his office and for the restoration to the Corporation, in case
of his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession or
under his control belonging to the Corporation.
The Assistant Treasurer, or, if there shall be
more than one (1), the Assistant Treasurers in the order determined by the Board
of Directors, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
Section 3.5 Voting Securities Owned by the
------------------------------
Corporation. Powers of attorney, proxies, waivers of notice of meeting,
- -----------
consents and other instruments relating to securities owned by the Corporation
may be executed in the name of and on behalf of the Corporation by the President
or any Vice-President and any such officer may, in the name of and on behalf of
the Corporation, take all such action as that officer may deem
-14-
<PAGE>
advisable to vote in person or by proxy at any meeting of security holders of
any corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and powers incident to
the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
ARTICLE 4
---------
Capital Stock
-------------
Section 4.1 Stock: Certificated and Uncertificated Shares. The
----------------------------------------------
shares of the Corporation shall be represented by certificates or shall be
uncertificated shares. Certificates shall be signed by the Chairman or Vice
Chairman of the Board of Directors or the President or a Vice-President and the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer
of the Corporation and may be sealed with the seal of the Corporation or a
facsimile thereof. The signatures of the officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or registered
by a registrar other than the Corporation itself or its employee. In case any
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer at the date of issue.
Each certificate representing shares shall also set forth such
additional material as is required by subdivisions (b) and (c) of Section 508 of
the Business Corporation Law.
The Board of Directors may provide by resolution that some or all of
any or all classes and series of the Corporation's shares shall be
uncertificated shares, provided that such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Within a reasonable time after the issuance or transfer of
uncertificated shares, the Corporation shall send to the registered owner
thereof a written notice containing the information required to be set forth or
stated on certificates pursuant to subdivisions (b) and (c) of section 508 of
the Business Corporation Law. Except as otherwise expressly provided by law,
the rights and obligations of the holders of uncertificated shares and the
rights and obligations of holders of certificates representing shares of the
same class and series shall be identical.
Section 4.2 Transfers. Stock of the Corporation shall be
---------
transferable in the manner prescribed by the laws of the
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<PAGE>
State of New York and in these By-Laws. Transfers of stock shall be made on the
books of the Corporation (1) in the case of certificated shares, only by the
person named in the stock certificate or by such person's attorney lawfully
constituted in writing and upon the surrender of the certificate therefor, which
shall be canceled before the new certificate shall be issued, or (2) in the
case of uncertificated shares, only by the person named on the books of the
Corporation as the registered owner of the uncertificated share or by such
person's attorney lawfully constituted in writing.
Section 4.3 Registered Holders. The Corporation shall be entitled
------------------
to treat and shall be protected in treating the persons in whose names shares or
any warrants, rights or options stand on the record of shareholders, warrant
holders, right holders or option holders, as the case may be, as the owners
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to, or interest in, any such share, warrant, right or option on the
part of any other person, whether or not the Corporation shall have notice
thereof, except as expressly provided otherwise by the statutes of the State of
New York.
Section 4.4 New Certificates. The Corporation may issue a new
----------------
certificate for shares in the place of any certificate theretofore issued by it,
alleged to have been lost or destroyed, and the Board of Directors may, in its
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond sufficient (in the judgment of
the directors) to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss or destruction of any such certificate
or the issuance of such new certificate. A new certificate may be issued
without requiring any bond when, in the judgment of the directors, it is proper
so to do.
ARTICLE 5
---------
Financial Notices to Shareholders
---------------------------------
Section 5.1 Dividends. When any dividend is paid or any other
---------
distribution is made, in whole or in part, from sources other than earned
surplus, it shall be accompanied by a written notice (1) disclosing the amounts
by which such dividend or distribution affects stated capital, capital surplus
and earned surplus, or (2) if such amounts are not determinable at the time of
such notice, disclosing the approximate effect of such dividend or distribution
upon stated capital, capital surplus and earned surplus and stating that such
amounts are not yet determinable.
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<PAGE>
Section 5.2 Share Distribution and Changes. Every distribution to
------------------------------
shareholders of shares, whether certificated or uncertificated, or a change of
shares which affects stated capital, capital surplus or earned surplus shall be
accompanied by a written notice (1) disclosing the amounts by which such
distribution or change affects stated capital, capital surplus and earned
surplus, or (2) if such amounts are not yet determinable at the time of such
notice, disclosing the approximate effect of such distribution or change upon
stated capital, capital surplus and earned surplus and stating that such
amounts are not yet determinable.
When issued shares are changed in any manner which affects stated
capital, capital surplus or earned surplus, and no distribution to shareholders
of any shares, whether certificated or uncertificated, resulting from such
change is made, disclosure of the effect of such change upon the stated capital,
capital surplus and earned surplus shall be made in the next financial statement
covering the period in which such change is made that is furnished by the
Corporation to holders of shares of the class or series so changed or, if
practicable, in the first notice of dividend or share distribution or change
that is furnished to such shareholders between the date at the change of shares
and the next such financial statement, and in any event within six months of the
date of such change.
Section 5.3 Cancellation of Reacquired Shares. When reacquired
---------------------------------
shares other than converted shares are cancelled, the stated capital of the
Corporation is thereby reduced by the amount of stated capital then represented
by such shares plus any stated capital not theretofore allocated to any
designated class or series which is thereupon allocated to the shares cancelled.
The amount by which stated capital has been reduced by cancellation of
reacquired shares during a stated period of time shall be disclosed in the next
financial statement covering such period that is furnished by the Corporation to
all its shareholders or, if practicable, in the first notice of dividend or
share distribution that is furnished to the holders of each class or series of
its shares between the end of the period and the next such financial statement,
and in any event to all its shareholders within six (6) months of the date of
the reduction of capital.
Section 5.4 Reduction of Stated Capital. When a reduction of stated
---------------------------
capital has been effected under Section 516 of the Business Corporation Law, the
amount of such reduction shall be disclosed in the next financial statement
covering the period in which such reduction is made that is furnished by the
Corporation to all its shareholders or, if practicable, in the first notice of
dividend or share distribution that is furnished to the holders of each class or
series of its shares between the date of such reduction and the next such
financial statement, and
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<PAGE>
in any event to all its shareholders within six (6) months of the date of such
reduction.
Section 5.5 Application of Capital Surplus to Elimination of a
--------------------------------------------------
Deficit. The Corporation may apply any part or all at its capital surplus to
- -------
the elimination of any deficit in the earned surplus account, upon approval by
vote of the shareholders. The application of capital surplus to the elimination
of a deficit in the earned surplus account shall be disclosed in the next
financial statement covering the period in which such elimination is made that
is furnished by the Corporation to all its shareholders or, if practicable, in
the first notice of dividend or share distribution that is furnished to holders
of each class or series of its shares between the date of such elimination and
the next such financial statement, and in any event to all its shareholders
within six (6) months of the date of such action.
Section 5.6 Conversion of Shares. Should the Corporation issue any
--------------------
convertible shares, then, when shares have been converted, they shall be
cancelled and disclosure of the conversion of shares during a stated period of
time and its effect, if any, upon stated capital shall be made in the next
financial statement covering such period that is furnished by the Corporation to
all its shareholders or, it practicable, in the first notice of dividend or
share distribution that is furnished to the holders of each class or series of
its shares between the end of such period and the next such financial statement,
and in any event to all its shareholders within six months of the date of the
conversion of shares.
ARTICLE 6
Miscellaneous
-------------
Section 6.1 Offices. The principal office of the Corporation shall
-------
be located at such place as the Board of Directors shall, from time to time,
determine. The Corporation may also have offices at other places, within and/or
without the State of New York.
Section 6.2 Seal. The Corporate seal shall have inscribed thereon
----
the name of the Corporation, the year of its incorporation and the words
"Corporate Seal of New York."
Section 6.3 Checks. All checks or demands for money shall be signed
------
by such person or persons as the Board of Directors may from time to time
determine.
Section 6.4 Fiscal Year. The fiscal year of the Corporation shall
-----------
be fixed by resolution of the Board of Directors.
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<PAGE>
Section 6.5 Books and Records. The Corporation shall keep correct
-----------------
and complete books and records of account and shall keep minutes of the
proceedings of its shareholders, Board of Directors and each committee thereof,
if any, and shall keep at such place or places as the Board of Directors may
from time to time determine, except for such records which are required by law
to be kept within the State of New York.
Section 6.6 Duty of Directors. A director shall perform his duties
-----------------
as a director, including his duties as a member of any committee of the Board of
Directors upon which he may serve, in good faith and with that degree of care
which an ordinarily, prudent person in a like position would use under similar
circumstances. In performing his duties, a director shall be entitled to rely on
information, opinions, reports, or statements including financial statements and
other financial data, in each case prepared or presented by:
(a) one (1) or more officers or employees of the Corporation or of
any other corporation of which at least fifty percent (50%) of
the outstanding shares of stock entitling the holders thereof to
vote for the election of directors is owned directly or
indirectly by the Corporation, whom the director believes to be
reliable and competent in the matters presented,
(b) counsel, public accountants or other persons as to matters which
the director believes to be within such person's professional or
expert competence, or
(c) a Committee of the Board of Directors upon which he does not
serve, duly designated in accordance with a provision or the
Certificate of Incorporation of these By-Laws, as to matters
within its designated authority, which committee the director
believes to merit confidence, so long as in so relying he shall
be acting in good faith and with such degree of care, but he
shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause
such reliance to be unwarranted. A person who so performs his
duties shall have no liability by reason of being or having been
a director of the Corporation
Section 6.7 Idemnification of Directors and Officers. The
----------------------------------------
Corporation shall indemnify any person made, or threatened to be made, a party
to any action or proceeding, whether civil or criminal, by reason of the fact
that he is or was a director or officer of the Corporation, or served any other
corporation in
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<PAGE>
any capacity at the request of the Corporation while he was such a director or
officer, to the maximum extent authorized and in the manner prescribed by the
Business Corporation Law.
The foregoing provisions of this section shall be deemed to be a
contract between the Corporation and each director and officer of the
Corporation who serves in such capacity at any time while this section and the
relevant provisions of the Business Corporation Law are in effect, and any
repeal or modification of this section or such provisions of the Business
Corporation Law shall not affect any rights or obligations then existing with
respect to any state of facts then or theretofore existing as it relates to any
action or proceeding theretofore or thereafter brought or threatened based in
whole or in part upon any such state of facts; provided, however, that the right
of indemnification provided in this section shall not be deemed exclusive of any
other rights to which any director or officer of the Corporation may now be or
hereafter become entitled apart from this section.
Section 6.8 When Notice or Lapse of Time Unnecessary; Notices
--------------------------------------------------
Dispensed with when Delivery is Prohibited. Whenever, under the Business
- ------------------------------------------
Corporation Law or the Certificate of Incorporation of the Corporation or these
By-Laws or by the terms of any agreement or instrument, the Corporation or the
Board of Directors or any committee thereof is authorized to take any action
after notice to any person or persons or after the lapse of a prescribed period
of time, such action may be taken without notice and without the lapse of such
period of time, if at any time before or after such action is completed the
person or persons entitled to such notice or entitled to participate in the
action to be taken or, in the case of a shareholder, by his attorney-in-fact,
submit a signed waiver of notice of such requirements .
Whenever any notice or communication is required to be given to any
person by the Business Corporation Law, the Certificate of Incorporation of the
Corporation or these By-Laws, or by the terms of any agreement or instrument, or
as a condition precedent to taking any corporate action and communication with
such person is then unlawful under any statute of the State of New York or of
the United States or any regulation, proclamation or order issued under said
statutes, the giving of such notice of communication to such person shall not be
required and there shall be no duty to apply for license or other permission to
do so. Any affidavit, certificate or other instrument which is required to be
made or filed as proof of the giving of any notice of communication required
under the Business Corporation Law shall, if such notice or communication to any
person is dispensed with under this paragraph, include a statement that such
notice or communication was not given to any person with whom communication is
unlawful. Such affidavit, certificate or other
-20-
<PAGE>
instrument shall be as effective for all purposes as though such notice of
communication had been personally given to such person.
Whenever any notice of Capital communication is required or permitted
to be given by mail, it shall, except as otherwise expressly provided in the
Business Corporation Law, be mailed to the person to whom it is directed at the
address designated by him for that purpose or, if none is designated, at his
last known address. Such notice or communication is given when deposited, with
postage thereon prepaid, in a post office or official depository under the
exclusive care and custody of the United States post office department. Such
mailing shall be by first class mail except where otherwise required by the
Business Corporation Law.
Section 6.9 Entire Board of Directors. As used in these By-Laws, the
-------------------------
term "entire Board of Directors" means the total number of directors which the
Corporation would have if there were no vacancies.
Section 6.10 Amendment of By-Laws. These By-Laws may be amended or
--------------------
repealed and new By-Laws adopted by the Board of Directors or by vote of the
holders of the shares at the time entitled to vote in the election of any
directors, except that any amendment by the Board changing the number of
directors shall require the vote of a majority of the entire Board of Directors
and except that any By-law adopted by the Board of Directors may be amended or
repealed by the shareholders entitled to vote thereon as provided in the
Business Corporation Law.
If any By-law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set forth
in the notice of the next meeting of shareholders for the election of directors
the By-Law so adopted, amended or repealed, together with a concise statement of
the changes made.
Section 6.11 Section Headings and Statutory References. The
-----------------------------------------
headings of the Articles and Sections of these By-Laws have been inserted for
convenience of reference only and shall not be deemed to be a part of these
By-Laws.
-21-
<PAGE>
Exhibit 4.3
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A
DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER
THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
<PAGE>
R-_____ CUSIP Number ______________
PIERCE LEAHY CORP.
11 1/8% SENIOR SUBORDINATED NOTE DUE 2006
Pierce Leahy Corp., a New York corporation (the "Company", which
term includes any successor corporation), for value received promises to pay to
___________________or registered assigns the principal sum of $________________
Dollars, on July 15, 2006.
Interest Payment Dates: January 15 and July 15, commencing January 15, 1997
Record Dates: January 1 and July 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
PIERCE LEAHY CORP.
By:___________________________
By:___________________________
[SEAL]
Certificate of Authentication:
This is one of the 11 1/8% Senior
Subordinated Notes due 2006 referred to in
the within-mentioned Indenture
Dated:
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By: _____________________________________
Authorized Signatory
<PAGE>
PIERCE LEAHY CORP.
11 1/8% SENIOR SUBORDINATED NOTE DUE 2006
1. INTEREST.
Pierce Leahy Corp., a New York corporation (the "Company"),
promises to pay interest on the principal amount of this Note semiannually on
January 15 and July 15 of each year (each an "Interest Payment Date"),
commencing on January 15, 1997, at the rate of 11 1/8% per annum. Interest will
be computed on the basis of a 360-day year of twelve 30-day months. Interest on
the Notes will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from the date of the original issuance of the
Notes.
The Company shall pay interest on overdue principal, and on
overdue premium, if any, and overdue interest, to the extent lawful, at the rate
equal to 1% per annum in excess of the rate borne by the Notes.
2. METHOD OF PAYMENT.
The Company will pay interest on this Note provided for in
Paragraph 1 above (except defaulted interest) to the person who is the
registered Holder of this Note at the close of business on the January 1 or July
1 preceding the Interest Payment Date (whether or not such day is a Business
Day). The Holder must surrender this Note to a Paying Agent to collect principal
payments. The Company will pay principal, premium, if any, and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts; provided, however, that the Company may pay principal,
-------- -------
premium, if any, and interest by check payable in such money. It may mail an
interest check to the Holder's registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, United States Trust Company of New York, a New York
corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to the Holders of the
Notes. Neither the Company nor any of its Subsidiaries or Affiliates may act as
Paying Agent but may act as registrar or co-registrar.
4. INDENTURE; RESTRICTIVE COVENANTS.
The Company issued this Note under an Indenture dated as of July
15, 1996 (the "Indenture") by and between the Company and the Trustee. The terms
of this Note include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code SS.SS.
77aaa-77bbbb) as in effect on the date of the Indenture. This Note is subject to
all such terms, and the Holder of this Note is referred to the Indenture and
said Trust Indenture Act for a statement of them. All capitalized terms in this
Note, unless otherwise defined, have the meanings assigned to them by the
Indenture.
The Notes are general unsecured obligations of the Company
limited to up to $200,000,000 aggregate principal amount. The Indenture imposes
certain restrictions on, among other things, the incurrence of indebtedness, the
incurrence of liens and the issuance of preferred stock by the Company and its
subsidiaries, mergers and sale of assets, the payments of dividends on, or the
repurchase of, capital stock of the Company and its subsidiaries, certain other
restricted payments by the Company
<PAGE>
and its subsidiaries, certain transactions with, and investments in, its
affiliates, certain sale and lease-back transactions and a provision regarding
change-of-control transactions. The restrictions are subject to a number of
important qualifications and exceptions.
5. SUBORDINATION.
The Indebtedness represented by the Notes is, to the extent and
in the manner provided in the Indenture, subordinated in right of payment to the
prior indefeasible payment and satisfaction in full in cash of all existing and
future Senior Indebtedness as defined in the Indenture, and this Note is issued
subject to such provisions. Each Holder of this Note, by accepting the same,
(a) agrees to and shall be bound by such provisions, (b) authorizes and directs
the Trustee, on behalf of such Holder, to take such action as may be necessary
or appropriate to effectuate the subordination as provided in the Indenture and
(c) appoints the Trustee attorney-in-fact of such Holder for such purpose;
provided, however, that the Indebtedness evidenced by this Note shall cease to
- -------- -------
be so subordinate and subject in right of payment upon any defeasance of this
Note referred to in Paragraph 18 below.
6. OPTIONAL REDEMPTION.
The Company may redeem the Notes, in whole or in part, at any
time on or after July 15, 2001 at the redemption prices set forth in
Section 3.07 of the Indenture, together, in each case, with accrued and unpaid
interest to the redemption date.
In addition, the Company may redeem Notes out of the Net Proceeds
of one or more Public Equity Offerings at the redemption price, in the amount
and under the terms set forth in the Indenture.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at least
30 days but not more than 60 days prior to the redemption date to each Holder of
Notes to be redeemed at its registered address as it shall appear on the
register of the Notes maintained by the Registrar. On and after any Redemption
Date, interest will cease to accrue on the Notes or portions thereof called for
redemption unless the Company shall fail to redeem any such Note.
8. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales be
used, subject to further limitations contained therein, to make an offer to
purchase certain amounts of Notes in accordance with the procedures set forth in
the Indenture. The Company is also required to make an offer to purchase Notes
upon occurrence of a Change of Control in accordance with procedures set forth
in the Indenture.
9. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in denominations
of $1,000 and integral multiples thereof. A Holder may register the transfer or
exchange of Notes in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any Note
selected for redemption or register the transfer of or exchange any Note for a
period of 15 days before a selection of Notes to be redeemed or any Note after
it is called for redemption in whole or in part, except the unredeemed portion
of any Note being redeemed in part.
<PAGE>
10. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner of
it for all purposes.
11. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on any
Note remains unclaimed for two years, the Trustee or Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to money
must look to the Company for payment as general creditors unless an "abandoned
property" law designates another person.
12. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be
modified, amended or supplemented by the Company, the Guarantors, if any, and
the Trustee with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding and any existing default or compliance with
any provision may be waived in a particular instance with the consent of the
Holders of a majority in principal amount of the Notes then outstanding. Without
the consent of Holders, the Company, the Guarantors, if any, and the Trustee may
amend the Indenture or the Notes or supplement the Indenture for certain
specified purposes including providing for uncertificated Notes in addition to
certificated Notes, and curing any ambiguity, defect or inconsistency, or making
any other change that does not materially and adversely affect the rights of any
Holder.
13. SUCCESSOR ENTITY.
When a successor corporation assumes all the obligations of its
predecessor under the Notes and the Indenture and immediately before and
thereafter no Default exists and certain other conditions are satisfied, the
predecessor corporation will be released from those obligations.
14. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Section 6.01(6) or (7) of
the Indenture with respect to the Company) occurs and is continuing, the Trustee
by notice to the Company, or the Holders of not less than 25% in aggregate
principal amount of the Notes then outstanding by written notice to the Company
and the Trustee, may declare to be immediately due and payable the entire
principal amount of all the Notes then outstanding plus accrued but unpaid
interest to the date of acceleration and (i) such amounts shall become
immediately due and payable or (ii) if there are any amounts outstanding under
or in respect of the Credit Facility, such amounts shall become due and payable
upon the first to occur of an acceleration of amounts outstanding under or in
respect of the Credit Facility or five Business Days after receipt by the
Company and the Representative of notice of the acceleration of the Notes;
provided, however, that after such acceleration but before judgment or decree
based on such acceleration is obtained by the Trustee, the Holders of a majority
in aggregate principal amount of the outstanding Notes may rescind and annul
such acceleration and its consequences if all existing Events of Default, other
than the nonpayment of principal, premium or interest that has become due solely
because of the acceleration, have been cured or waived and if the rescission
would not conflict with any judgment or decree. No such rescission shall affect
any subsequent Default or impair any right consequent thereto. In case an Event
of Default specified in Section 6.01(6) or (7) of the Indenture with respect to
the Company occurs, such principal amount, together with premium, if any, and
interest with respect to all of the Notes, shall be due and payable immediately
without any declaration or other act on the part of the Trustee or the Holders
of the Notes.
<PAGE>
The Trustee may withhold from Holders notice of any continuing default (except a
default in payment of principal, premium, if any, or interest) if it determines
that withholding notice is in their interests.
15. TRUSTEE DEALINGS WITH THE COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company, any Guarantor or their Affiliates, and may otherwise deal with the
Company, any Guarantor or their Affiliates, as if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee, partner, affiliate, beneficiary or stockholder, as such, of the
Company or any Guarantor shall not have any liability for any obligations of the
Company or any Guarantor under the Notes or the Indenture or for any claim based
on, in respect or by reason of, such obligations or their creation. The Holder
of this Note by accepting this Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of this Note.
17. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Note and for defeasance of certain covenants in the
Indenture upon compliance by the Company with certain conditions set forth in
the Indenture.
18. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder of a
Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants
by the entireties), JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
19. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Note Identification Procedures, the Company has caused CUSIP numbers to
be printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of the Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
20. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
<PAGE>
THE COMPANY WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN
REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE
MADE TO: PIERCE LEAHY CORP., 631 Park Avenue, King of Prussia, Pennsylvania
19406, Attention: Chief Financial Officer.
21. AUTHENTICATION
This Note shall not be valid until the Trustee manually signs the
Certificate of Authentication on the face of this Note.
<PAGE>
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
Date: Your Signature:
-------------------------- ---------------------------------
(Sign exactly as your name
appears on the face of this Note)
Signature Guarantee:
---------------------------------------
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note
purchased by the Company pursuant to Section 4.10 or Section 4.19 of the
Indenture, check the appropriate box:
Section 4.10 Section 4.19
[_] [_]
If you want to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.19 of the Indenture, state the
amount you elect to have purchased:
$
-----------------------
(multiple of $1,000)
Date:
-------------------
Your Signature:
--------------------------------------
(Sign exactly as your name appears
on the face of this Note)
- ----------------------
Signature Guaranteed
<PAGE>
Exhibit 5
[LETTERHEAD OF COZEN AND O'CONNOR]
October 2, 1996
---------
Pierce Leahy Corp.
631 Park Avenue
King of Prussia, PA 19406
Re: Registration Statement on Form S-4
File No. 333-9963
----------------------------------
Ladies and Gentlemen:
As counsel to Pierce Leahy Corp. (the "Company"), we have
assisted in the preparation of the Company's Registration Statement on Form S-4,
File No. 333-9963 (the "Registration Statement"), filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended. The
Registration Statement covers $200,000,000 principal amount of the Company's
11-1/8% Senior Subordinated Notes due 2006 (the "Exchange Notes") to be issued
under an Indenture dated as of July 15, 1996 (the "Indenture") between the
Company and United States Trust Company of New York, as trustee (the "Trustee").
In connection therewith, we have examined the originals or
copies, certified or otherwise identified to our satisfaction, of the Company's
Certificate of Incorporation, its Amended and Restated By-laws, minutes and
resolutions of its Board of Directors and shareholders, the Indenture and such
other documents and corporate records relating to the Company and the issuance
of the Exchange Notes covered by the Registration Statement as we have deemed
necessary or appropriate for purposes of rendering this opinion.
In our examinations of documents, instruments and other papers,
we have assumed the genuineness of all signatures on original and certified
documents and the conformity to original and certified documents of all copies
submitted to us as conformed, photostatic and other copies. As to matters of
fact which have not been independently established, we have relied upon
representations of officers of the Company.
Based upon the foregoing examination, information and
assumptions, it is our opinion that upon execution of the Exchange Notes by the
Company, authentication of the Exchange Notes by the Trustee and issuance and
delivery of the Exchange Notes in the manner provided in the Indenture and the
Registration Statement, the Exchange Notes will constitute valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits provided by the
Indenture.
<PAGE>
Pierce Leahy Corp.
October 2, 1996
Page 2
- -------------------------
The opinion set forth above is subject to the qualification that
the enforceability of the Exchange Notes and the Indenture may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, moratorium and other
laws affecting the rights of creditors generally and by equitable principles.
We hereby consent to the reference to our firm in the
Registration Statement under the Prospectus caption "Legal Matters" and to the
inclusion of this opinion as Exhibit 5 to the Registration Statement.
Very truly yours,
COZEN AND O'CONNOR
<PAGE>
Exhibit 10.2
AMENDED AND RESTATED
CORPORATE BUY-SELL AGREEMENT
----------------------------
Parties: Pierce Leahy Corp., a New York corporation ("Corporation")
- -------
Leo W. Pierce, Jr., individually and for the benefit of Kate
Pierce, Alexandra Pierce and Julia Pierce; Eve Bullitt Pierce,
for the benefit of Kate Pierce, Alexandra Pierce and Julia
Pierce; J. Peter Pierce, individually and for the benefit of
Matthew Pierce; John P. Pierce, Jr.; Michael J. Pierce,
individually and for the benefit of Michael A. Pierce; Mary E.
Pierce; Barbara Quinn, individually and for the benefit of Sarah
Quinn, Daniel J. Quinn, Jr., Conor Quinn and Dylan Quinn;
Constance P. Buckley, individually and for the benefit of Hilary
Buckley and Hannah Buckley; Kathryn Cox, individually and for the
benefit of Christopher Cox, Adrian Cox, Brendan Cox, Deirdre Cox,
Timothy Cox, and Conor Cox; Maurice Cox, Jr.; Monica Cox Durfee;
Constance Cox; Andrea J. Cox; Suzanne Cox; Maurice Cox, III; and
Gregory Cox (each individually an "Owner" and collectively
"Owners")
Date: As of October 25, 1985
- ----
Background: Owners own or hold certain shares of the issued and outstanding
- ---------- capital stock of Corporation, as stated on Exhibit A to this
Agreement. Pursuant to an agreement dated October 25, 1985, the
Parties imposed certain restrictions on themselves and on Owners'
stock of Corporation in order to promote their mutual interests
and to provide for the continuity of management of Corporation;
the Parties desire to amend and restate the Agreement.
INTENDING TO BE LEGALLY BOUND, and in consideration of the mutual
agreements stated below, the parties agree as follows:
SECTION 1: DEFINED TERMS
-------------------------
1.1 "Permitted Transferee" means any lineal descendant of Leo W. Pierce,
--------------------
Sr. and Marjorie L. Pierce, any trust for the benefit of any such lineal
descendant provided that at least one trustee of such trust at all times must be
Leo W. Pierce, Sr. or a lineal descendent of Leo W. Pierce, Sr. and Marjorie L.
Pierce, or any trust for the benefit of a spouse of any lineal descendant of Leo
W. Pierce, Sr. and Marjorie L. Pierce provided that at least one trustee of such
trust at all times must be Leo W. Pierce, Sr. or a lineal descendent of Leo W.
Pierce, Sr. and Marjorie L. Pierce. Additionally, transfers to a lineal
descendant of Leo W. Pierce, Sr. and Marjorie L. Pierce who has not attained age
21, may be made to the spouse of a lineal descendant of Leo W. Pierce, Sr. and
Marjorie L. Pierce as custodian under a Uniform Transfers to Minors Act.
1.2 "Stock" means any share of any class of capital stock of corporation
-----
which is now or hereafter owned or held, beneficially or as trustee or
custodian, by any Owner. Shares of voting Stock and shares of non-voting Stock
shall be treated the same for all purposes of this Agreement.
<PAGE>
1.3 "Person" means any individual, partnership, corporation,
------
association, trust, estate, custodianship, government, or other entity.
1.4 "Transfer" means any method, direct or indirect, absolute or
--------
conditional, voluntary or involuntary, of selling, assigning, transferring,
disposing of, parting with, pledging, encumbering, giving, bequeathing or
abandoning all or any interest in property.
1.5 "Owner" means each of the individual parties to this Agreement and
-----
each other individual who becomes a party to this Agreement as an Owner, whether
under Section 2.3, 3.1, 3.2 or 5.1 or otherwise, for as long as such individual
owns or holds any Stock.
SECTION 2: GENERAL RESTRICTIONS
--------------------------------
2.1 Transfers. No share of Stock shall be Transferred to any Person
---------
except in accordance with the provisions of this Agreement.
2.2 Issuance. No share of Stock or other equity security of Corporation
--------
or security convertible or exchangeable into stock or an equity security of the
corporation shall be issued or sold by Corporation to any Person who does not
first agree in writing to become a party to and be bound by this Agreement as an
Owner.
2.3 Stock Held in Trust or Custodianship. Any Stock held by trustee or
------------------------------------
custodian for the benefit of any Person,whether under a State's Uniform Gift to
Minors Act or otherwise, shall be treated as owned by such trustee or custodian
as an Owner for purposes of this Agreement. When any person for whom shares are
held in trust or custodianship reaches the age of majority, or when shares are
distributed to such person, the Corporation shall request that such person
become a party to this Agreement as an Owner, by signing an amendment in the
form of Exhibit B to this Agreement; no such person shall have any rights as a
shareholder of Corporation until such person has signed such amendment. Upon
signing of any such amendment, the signatory thereof shall become a party to
this Agreement as an Owner, without any further action or consent by any of the
parties hereto.
SECTION 3: PERMITTED TRANSFERS
-------------------------------
3.1 Lifetime Transfers. Subject to Section 12 hereof, any Owner may at
------------------
any time and from time to time make lifetime Transfers of any share of Stock,
provided that (a) the transferee is a Permitted Transferee, (b) the Permitted
Transferee (if not already a party to this Agreement) agrees in writing to
become a party to and be bound by this Agreement as an Owner, by signing an
amendment in the form of Exhibit B to this Agreement, which shall have the same
effect as amendments signed in accordance with Section 2.3, and (c) Corporation
and the other Owners receive notice of the Transfer.
3.2 Testamentary Transfers. Subject to Section 12 hereof, any Owner may
----------------------
make testamentary Transfers of any share of Stock, provided that (a) the
transferee is a Permitted Transferee, and (b) the Permitted Transferee (if not
already a party to this Agreement) agrees in writing to become a party to and be
bound by this Agreement as an Owner, by signing an amendment in the form of
Exhibit B to this Agreement, which shall have the same effect as amendments
signed in accordance with Section 2.3. Upon the death of any Owner, any shares
of his Stock which are subject to testamentary Transfers permitted under this
Section 3.2 shall not be considered to be owned by him on the date of his death,
but shall instead be considered to be owned by the Permitted Transferee as of
that date and accordingly shall not be subject to the option or the mandatory
purchase under Section 5.1.
<PAGE>
SECTION 4: TRIGGERING EVENTS
-----------------------------
4.1 Definition. The following events are "Triggering Events" with
respect to the Owner to whom the event relates (sometimes referred to as an
"Affected Owner"):
(a) The receipt by an Owner (sometimes referred to as a "Selling
Owner") of a bona fide written offer by a Person other than a Permitted
Transferee, acceptable to him, to acquire all, but not less than all, of his
Stock ("Offer"). It is expressly understood that the receipt by an Owner of an
offer to acquire less than all of his Stock shall not constitute a Triggering
Event, and, except in the case of an offer from a Permitted Transferee, that
such offer may not be accepted by such Owner.
(b) The death of an individual Owner (sometimes referred to as a
"Deceased Owner").
(c) The commencement of bankruptcy or similar proceedings by an
Owner, the commencement of bankruptcy or similar proceedings against an Owner
which are not terminated within 120 days after commencement, the appointment of
a bankruptcy or other judicial representative for an Owner, his Stock or any
material part of his properties, provided that any such appointment which was
involuntary is not terminated within 120 days, the attachment of, execution
against, levy upon or other seizure of the Stock of an Owner (other than an
attachment solely for jurisdictional purposes) unless and only as long as
Corporation's counsel determines that the same is being contested in good faith,
an assignment by an Owner for the benefit of creditors, an admission by an Owner
in writing of his inability to pay his debts as they become due, or the
attempted rejection of this Agreement by a bankruptcy or other judicial
representative who succeeds to the Stock of an Owner.
(d) The Transfer or attempted Transfer by an Owner or any party
acting on behalf of an Owner of any of his Stock in violation of any provision
of this Agreement, or any material breach by an Owner of any provision of this
Agreement.
4.2 Notice of Occurrence. Within 15 days after the occurrence of any
--------------------
Triggering Event, the Affected Owner (or his personal representative) shall give
notice of the occurrence ("Notice") to Corporation and the other Owners
(sometimes referred to as "Remaining Owners"). Failure to give the Notice shall
neither prevent nor relieve any of the parties from exercising their rights or
satisfying their obligations under this Agreement, and any other party to this
Agreement may at any time give the Notice on behalf of the Affected Owner (or
his legal or personal representative). If the Affected Owner is a Selling
Owner, then the Notice shall include a copy of the Offer stating the name of the
offeror ("Offeror") and the price ("Offer Price") and other terms ("Offer
Terms") of the Offer.
SECTION 5: OPTIONAL AND MANDATORY PURCHASES
--------------------------------------------
5.1 Upon the occurrence of any Triggering Event:
(a) Option to Corporation. Corporation shall have the option to
---------------------
purchase all or any shares of the Stock owned by the Affected Owner on the date
the Triggering Event occurred, for the Purchase Price (as defined in Section 8)
and on the Payment Terms (as defined in Section 9), by giving notice, within 60
days after the date of the Notice, to the Affected Owner (or his personal
representative) and to the Remaining Owners of the exercise of its option.
-3-
<PAGE>
(b) Option to Remaining Owners. The Remaining Owners shall have the
--------------------------
option to purchase all or any shares of the Affected Owner's Stock ("Remaining
Stock") that was not purchased by Corporation in accordance with Section 5.1(a),
for the Purchase Price and on the Payment Terms. Each Remaining Owner shall
have the option to purchase his proportionate share (calculated by dividing the
number of shares of Stock owned by him by the total number of shares of Stock
owned by all Remaining Owners) of the Remaining Stock by giving notice, within
90 days after the date of the Notice, to the Affected Owner (or his personal
representative), Corporation, and the other Remaining Owners of the exercise of
his option. If any Remaining Owner does not purchase his entire proportionate
share of the Remaining Stock, then the other Remaining Owners shall have the
option to purchase the balance, in such proportions as they may agree, by giving
notice, within 120 days after the date of the Notice, to the Affected Owner (or
his personal representative) and Corporation.
(c) Mandatory Purchase by Corporation. If the Affected Owner is a
---------------------------------
Deceased Owner, then Corporation shall purchase and the Deceased Owner's
personal representative shall sell all of the Deceased Owner's Stock that was
not purchased in accordance with Section 5.1(a) or Section 5.1(b), for the
Purchase Price and on the Payment Terms. If Corporation is prohibited by law or
agreement from purchasing and paying for any such Stock, then the Remaining
Owners shall use their reasonable best efforts to remedy that situation provided
that the Remaining Owners shall not be required to contribute capital or loan
funds to remedy the situation. If that situation cannot be remedied within 180
days after the Triggering Event occurred, then, at the end of that 180-day
period, Corporation's obligation to purchase and pay for any such Stock shall be
assumed proportionately by the Remaining Owners.
(d) Selling Owner's Right to Sell. If the Affected Owner is a
-----------------------------
Selling Owner, then, unless he otherwise agrees, no exercise of any option under
this Section 5.1 shall be effective unless an option or options to purchase all,
and not less than all, of the Selling Owner's Stock are exercised in accordance
with this Section 5.1. If an option or options to purchase all of the Selling
Owner's Stock are not exercised under this Section 5.1, then the Selling Owner
may, within 180 days after the date of the Notice, sell his Stock to the
Offeror, provided that (i) all, and not less than all, of his Stock is sold to
the Offeror for the Offer price and on the Offer Terms, and (ii) the Offeror
agrees in writing to become a party to and be bound by this Agreement as an
Owner, by signing an amendment in the form of Exhibit B to this Agreement, which
shall have the same effect as amendments signed in accordance with Section 2.3.
5.2 Testamentary Seller Option. Upon the occurrence of a testamentary
--------------------------
Transfer to a Permitted Transferee, for a period of 270 days after the Transfer,
the Permitted Transferee shall have the option (the "Testamentary Seller
Option"), and the Corporation shall be required to purchase, for the Purchase
Price and on the Payment Terms, all or any part of the Stock that was acquired
in such testamentary Transfer which the Permitted Transferee elects to sell. The
Permitted Transferee who sells pursuant to this Section is referred to
hereinafter as a "Testamentary Seller." Testamentary Seller shall exercise the
Testamentary Seller Option by providing notice of such exercise ("Testamentary
Seller Option Exercise") within 270 days of the testamentary Transfer. If
Corporation is prohibited by law or agreement from purchasing and paying for any
such Stock, then the Owners shall use their reasonable best efforts to remedy
that situation provided that the Owners shall not be required to contribute
capital or loan funds to remedy the situation. If that situation cannot be
remedied within 180 days after the Testamentary Seller Option Exercise, then, at
the end of that 180-day period, Corporation's obligation to purchase and pay for
any such Stock shall be assumed proportionately by the Owners.
-4-
<PAGE>
SECTION 6: DATE OF DELIVERY
----------------------------
6.1 Definition. "Date of Delivery" means any mutually agreeable date
----------
within 180 days after the date of the Notice or Testamentary Seller Option
Exercise as the case may be or, if the parties are unable to agree, the 180th
day after the date of the Notice or Testamentary Seller Option Exercise as the
case may be (or, if such 180th day falls on a weekend or legal holiday, the
first business day thereafter).
6.2 Deliverables. If an option or options to purchase all or any of
------------
an Affected Owner's Stock have been exercised under Section 5, or if Corporation
is required to purchase the Affected Owner's or Testamentary Seller's Stock
under Section 5, then, on the Date of Delivery:
(a) The Affected Owner (or his personal representative) or
Testamentary Seller shall deliver to Corporation (at its then principal office)
the certificates for such Stock, duly endorsed for Transfer or with duly
executed assignments separate from certificate attached.
(b) If the Affected Owner is not a Deceased Owner, the Affected
Owner shall, unless otherwise instructed by Corporation, deliver to Corporation
(at its then principal office) his duly signed resignation as a director and
officer of Corporation, as applicable.
6.3 Failure to Deliver. If an Affected Owner (or his personal
------------------
representative) or Testamentary Seller does not assign, transfer and deliver his
Stock, or does not submit his resignation, as required by this Section 6, then
each officer of Corporation shall have the right to perform such actions in the
name of and on behalf of the Affected Owner (or his personal representative) or
Testamentary Seller. Each Owner hereby grants to each officer of Corporation
(as the same may change from time to time) an irrevocable power to make
assignments and transfers on corporation's records and to sign resignations in
accordance with this Section 6.
SECTION 7: AGREED VALUE
------------------------
7.1 Initial Value. The parties acknowledge their agreement that the
-------------
fair market value of one share of Stock on the date of this Amendment and
Restatement is $4,500.00 ("Agreed Value"). The Agreed Value of each share of
Stock shall in all events be equal.
7.2 Periodic Adjustments. At least annually, the Corporation shall
--------------------
select a qualified third party appraiser (which may include the Corporation's
regular accounting firm) to determine the "Fair Market Value" of the Corporation
("Periodic Adjustment"). "Fair Market Value" shall equal the amount which a
willing buyer would be willing to pay to purchase, and which the sellers would
be willing to accept to sell, all of the stock of the Company assuming that the
buyer is not under compunction to purchase and the Corporation is not under
compunction to sell. Upon receipt of such determination, the Agreed Value will
be adjusted to equal the Fair Market Value divided by the number of shares
outstanding and discounted to reflect the sale of a minority interest in the
Corporation. The appropriate minority discount shall be determined by the third
party appraiser selected in accordance with the terms of this Section 7.2. The
Agreed Value as redetermined from time to time may be evidenced by a certificate
in the form of Exhibit C to this Agreement ("Certificate of Agreed Value");
provided that the failure of any Owner to execute a Certificate of Agreed Value
shall not affect the Periodic Adjustment. In the event that no such appraisal
has been obtained within 12 months of the date upon which Purchase
-5-
<PAGE>
Price is determined under Section 8, the seller of such Stock can demand that
the Corporation obtain such an appraisal of value as of the pertinent date under
Section 8 as soon as practicable prior to the sale of such Stock pursuant to
Section 5.1 or Section 5.2 hereof, which appraisal will be the basis for the
Agreed Value for such Stock. In the event of demand for an appraisal under this
section, the Seller and the Corporation shall mutually agree on the third party
appraiser who will conduct the appraisal; if the Seller and the Corporation
cannot agree on a third party appraiser, each will select an appraiser and such
appraisers shall select the appraiser who will conduct the appraisal. The cost
of such appraisal shall be borne by the Corporation. If an appraisal under this
provision is required prior to the purchase of Stock, the Date of Delivery will
be a mutually agreeable date within 90 days of the receipt of such appraisal or,
if the parties are unable to agree, the 90th day after the date of the Notice or
Testamentary Seller Option Exercise as the case may be (or, if such 90th day
falls on a weekend or legal holiday, the first business day thereafter).
7.3 Other Adjustments. Appropriate adjustments to the Agreed Value
-----------------
shall be made to take into account any purchase, redemption, issuance or sale of
stock by corporation, any stock dividend or distribution by Corporation, or any
split-up, combination of shares, recapitalization or reorganization involving
Corporation which occurs after the date of this Amendment and Restatement or the
date of the most recent Periodic Adjustment, whichever is later.
SECTION 8: PURCHASE PRICE
--------------------------
8.1 Affected Owner Purchase Price. As used in this Agreement, the
-----------------------------
"Purchase Price" of any Stock owned by an Affected Owner means:
(a) Deceased Owner. If the Affected Owner is a Deceased Owner, the
--------------
Agreed Value (in effect on the date the Triggering Event occurred) multiplied by
the number of shares of such Stock.
(b) Selling Owner. If the Affected Owner is a Selling Owner, either
-------------
the price calculated in accordance with Section 8.1(a) as if the Selling Owner
were a Deceased Owner, or the Offer Price (as defined in Section 4.2), at the
purchaser's option.
(c) Other Affected Owners. If the Affected Owner is not a Deceased
---------------------
Owner or a Selling Owner, 75% of the Purchase Price calculated in accordance
with Section 8.1(a) as if the Affected Owner were a Deceased Owner.
8.2 Testamentary Seller Purchase Price. As used in this Agreement,
----------------------------------
the "Purchase Price" of any Stock owned by a Testamentary Seller means the
Agreed Value on the date of the testamentary Transfer (which shall be the date
of the death of the transferor to such Testamentary Seller) multiplied by the
number of shares of Stock.
SECTION 9: PAYMENT TERMS
-------------------------
As used in this Agreement, "Payment Terms" means the following terms:
9.1 Pay-Out. Except as otherwise provided in this Section 9, the
-------
Purchase Price shall be paid in 40 equal consecutive quarterly installments
beginning three months after the Date of Delivery, together
-6-
<PAGE>
with interest on the outstanding principal balance accruing from the Date of
Delivery at the minimum annual rate then necessary to avoid the application of
the imputed interest provisions of the Internal Revenue Code of 1986, as
amended, or if no imputed interest provisions are applicable, at the rate of 8%
per annum. This indebtedness shall be evidenced by a nonnegotiable promissory
note, in the form of Exhibit D to this Agreement, which shall be duly executed
by the purchaser and delivered to the Affected Owner (or his personal
representative) or Testamentary Seller on the Date of Delivery.
9.2 Insurance. Notwithstanding Section 9.1, if the Affected Owner is
---------
a Deceased Owner or dies during the pay-out period, and Corporation and/or one
or more Remaining Owners receive proceeds of any life insurance policies on the
Affected Owner which are listed on Exhibit E to this Agreement, then, within 30
days after receipt of any such proceeds, the full amount thereof shall be paid
to the personal representative of the Affected Owner, up to but not exceeding
the total Purchase Price or the then outstanding principal balance of the
Purchase Price. All such payments shall be applied on account of the Purchase
Price and the balance due, if any, shall be paid as provided under Section 9.1.
If the Corporation and/or one or more remaining Owners receive
proceeds of any life insurance policies on the transferor to any Testamentary
Seller which are listed on Exhibit E to this Agreement, then within 30 days
after receipt of any such proceeds the full amount thereof shall be paid to the
Testamentary Seller up to but not exceeding the total purchase price or then
outstanding balance of the Purchase Price. All such payments shall be applied
on account of the Purchase Price and the balance due, if any, shall be paid as
provided under Section 9.1.
9.3 Small Purchase Price. If the Purchase Price is less than
--------------------
$10,000, then it shall be paid in full on the Date of Delivery.
9.4 Selling Owners. If the Affected Owner is a Selling Owner and the
--------------
purchaser elects (in accordance with Section 8.2) to have the Purchase Price be
the Offer Price, then the Purchase Price shall be paid on the Offer Terms (as
defined in Section 4.2).
9.5 Indebtedness. Any indebtedness of the Affected Owner or
------------
Testamentary Seller to Corporation and/or any Remaining Owners shall be
liquidated by the application to such indebtedness of such portion of the
Purchase Price as is necessary, beginning with the first installment. Any
indebtedness of Corporation and/or any Remaining Owners to the Affected Owner or
Testamentary Seller shall be added to the Purchase Price and payable therewith
on the terms stated in this Section 9.
9.6 Restrictions Pending Full Payment. For as long as any Stock
---------------------------------
purchased under this Agreement has not been paid for in full, Corporation shall
not cause or permit any of the following, except with the prior written consent
of the Person to whom the unpaid portion of the Purchase Price is payable, which
consent shall not be unreasonably withheld:
(a) The sale or issuance of any new stock or other securities of
Corporation, other than a public offering under federal securities law.
(b) The dissolution, liquidation or other termination of
Corporation.
(c) The discontinuance of the normal operations of Corporation with
intention to dissolve or liquidate.
-7-
<PAGE>
(d) The sale, assignment or other disposition of all or
substantially all of the assets of Corporation.
(e) The merger or consolidation of Corporation with any unrelated
Person, or any other reorganization involving Corporation and any unrelated
Person.
SECTION 10: INSURANCE
----------------------
10.1 Insurance Subject to Agreement. Corporation and any Owner may
------------------------------
purchase life insurance policies on any Owner for the purpose of funding or
partially funding the purchase of the Stock of the insured Owner under this
Agreement. The Owners shall cooperate with Corporation and each other in any
manner reasonably necessary to obtain such insurance coverage, including without
limitation preparing applications and submitting to physical examinations. All
insurance policies to be subject to this Agreement must be listed on Exhibit E
to this Agreement. If two or more Owners agree to maintain policies on each
other and to list the policies on Exhibit E, then no such policy shall be
deleted from Exhibit E unless all such Owners agree to the deletion or unless
the Owner insured thereunder no longer owns any Stock. Otherwise, any party may
at any time add to or delete from Exhibit E any policy owned by him, by giving
notice to the other parties of the addition or deletion.
10.2 Claims. If any party maintains insurance for the purpose of
------
funding or partially funding the purchase of Stock under this Agreement, then
such party shall promptly submit all applications for benefits to the
appropriate insurers after the occurrence of any insurable incident relating to
this Agreement. Notwithstanding the provisions of Section 9, if any party is
unable to meet the Payment Terms due to a delay in receiving any such benefits
for a reason not within such party's reasonable control, then the Payment Terms
shall be extended for a period of up to 90 days until such benefits are
received.
SECTION 11: OTHER PROVISIONS
-----------------------------
11.1 Endorsements. Each certificate of Stock shall be endorsed as
------------
follows:
ALL SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
AGREEMENT OR AGREEMENTS CONTAINING RESTRICTIONS UPON TRANSFERS,
COPIES OF WHICH ARE ON FILE AT THE CORPORATION'S PRINCIPAL OFFICE
AND WILL BE PROVIDED TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
11.2 Notices. All notices, consents and other communications required or
-------
permitted under this Agreement shall be in writing, and shall be (a) delivered
personally, (b) mailed by first class certified mail, postage prepaid, return
receipt requested, or (c) sent by a nationally recognized express courier
service, postage or delivery charges prepaid, to the Owners at their respective
addresses stated on Exhibit A to this Agreement or to Corporation at its
principal office. Any party may change its address for notices by giving notice
of a new address to each other party in accordance with this Section 11.2.
11.3 Further Assurances. Each party shall sign and deliver such documents
------------------
as any other party reasonably requests in order to carry out the purposes of
this Agreement.
-8-
<PAGE>
11.4 Entire Agreement. This Agreement (together with the Exhibits to
----------------
this Agreement) constitutes the entire agreement among the parties with respect
to its subject matter and supersedes all earlier and contemporaneous oral and
written communications and agreements with respect to the same subject matter.
Without limiting the foregoing, the parties hereby terminate, effective
immediately, any and all existing buy-sell, shareholders or similar agreements
to which any or all of them are parties to the extent any such agreement governs
any Stock. This Agreement shall not be amended except as provided in Sections
2.3, 3.1, 3.2, 5.1(d) and 7.2, or in a written document signed by parties
holding 75% of the Corporation's Class A shares and 75% of the Corporation's
Class B shares.
11.5 Parties Bound. This Agreement shall bind, benefit and be
-------------
enforceable by or against each Owner and his heirs, legal and personal
representatives, estate, beneficiaries and assigns, and Corporation and its
successors and assigns.
11.6 Counterparts. This Agreement may be executed in counterparts, all
------------
of which together shall constitute one agreement.
11.7 Governing Law and Construction. This Agreement shall be governed by
------------------------------
Pennsylvania law. The gender and number of words used in this Agreement shall
be interchangeable as the context requires or permits. Section headings are for
convenience only, do not constitute a part of this Agreement, and shall not
affect the interpretation of this Agreement. The invalidity of any of the
provisions of this Agreement shall not affect the validity of the other
provisions. This Agreement shall supersede any prior Agreement between the
parties hereto relative to the transfer of Stock.
11.8 Voting Limitations. In the event that Shares are held in trust or
------------------
custodianship, in any vote of stockholders of the Corporation such shares may be
voted only by a trustee or custodian who is Leo W. Pierce, Sr. or a lineal
descendant of Leo W. Pierce, Sr. and Marjorie L. Pierce.
11.9 Neutral Construction. The parties have negotiated this Agreement and
--------------------
all of the terms and conditions contained in this Agreement in good faith and at
arms' length. No term, condition, or provision contained in this Agreement shall
be construed against any party or in favor of any party (i) because such party
or such party's counsel drafted, revised, commented upon, or did not comment
upon, such term, condition, or provision; or (ii) because of any presumption as
to any inequality of bargaining power between or among the parties. Furthermore,
all terms, conditions, and provisions contained in this Agreement shall be
construed and interpreted in a manner which is consistent with all other terms,
conditions, and provisions contained in this Agreement.
11.10 Termination upon Public Offering. The provisions of this
--------------------------------
agreement, other than the obligations existing under Sections 9.1 and 12.5,
shall terminate upon the closing of a public offering of the Company's shares
registered under the Securities Act of 1933, as amended.
SECTION 12: SUBCHAPTER S PROVISIONS
------------------------------------
12.1 Definition. "Subchapter S" means the provisions of Section 1361 et
---------- --
seq. of the Internal Revenue Code of 1986, as amended (the "IRC"), and any
- ---
regulations, rulings and opinions thereunder, along with any successor
provisions, regulations, rulings and opinions as may be applicable to Subchapter
S corporations.
-9-
<PAGE>
12.2 Restriction on Transfers. Notwithstanding the provisions of Section
------------------------
3 or any other provisions of this Agreement, no Owner shall Transfer any share
of Stock to any Person if such Transfer would cause, directly or indirectly,
Corporation's Subchapter S election to terminate. Transfers prohibited under
this Section 12.2 include, without limitation, Transfers (a) to any Person which
would cause the Corporation to have more than 35 shareholders, (b) to any
nonresident alien, (c) to any Person not permitted to be a shareholder of a
Subchapter S corporation under the IRC, or (d) to any Person which would in any
other way cause a termination of the Corporation's Subchapter S election.
12.3 Representations. Each Owner represents and warrants to each other
---------------
Owner that his or her will and other estate planning documents and techniques do
not and will not provide for any Transfer of Stock in violation of Section 12.2
or any other provision of this Agreement.
12.4 Void Transfer. Corporation shall not record in its books or
-------------
otherwise recognize any purported or intended Transfer of Stock, whether by
operation of law or otherwise, and such purported or intended Transfer shall be
null, void and of no force or effect, if in the opinion of counsel to
Corporation it is to a transferee whose status as a shareholder of Corporation
would cause, directly or indirectly, the termination of Corporation's S
election.
12.5 Indemnification for Breach. If an Owner's breach of any provision of
--------------------------
this Agreement causes Corporation's Subchapter S election to terminate, such
Owner (the "Indemnitor") shall indemnify each nonbreaching Owner (the
"Indemnitee") for the Indemnitee's loss, during the period in which Corporation
is ineligible to make a Subchapter S election, of any Federal, state and local
income tax benefits resulting from the termination, including all items of
income, loss, deduction, and credit ("Tax Items") which would have been passed
to such Indemnitee but for the termination, and for any distributions not made
by Corporation to the Indemnitee as a result of the termination. For the
purposes of this Section 12.5, Federal, state and local income tax benefits mean
the excess of (a) the Indemnitee's share of Federal, state and local income
taxes on Corporation's dividend distributions, assuming such distributions are
made by Corporation, over (b) the Indemnitee's share of Federal, state and local
income taxes that would have been imposed on Corporation as a Subchapter S
corporation if it had the same Tax Items that it had as a C corporation, plus
the amount of Federal, state and local income taxes that the Indemnitee would
have paid on the Tax Items which would have been passed through to him or her
had Corporation been a Subchapter S corporation.
12.6 Dividend Payments. The Board of Directors of Corporation will
-----------------
declare dividends from time to time in order to enable the Owners to pay all
Federal, state and local taxes on their shares of Corporation's taxable income.
Such dividends will be declared in amounts sufficient to enable the Owners to
pay such taxes as if all of the Owners were subject to tax at the highest
marginal income tax rates then in effect and, thereafter, in proportion to their
shareholdings in Corporation.
12.7 Termination of Owner's Interest. In the event that any Owner
-------------------------------
terminates his or her interest in the Corporation during a taxable year, and in
the event that the Board of Directors votes to so recommend, each of the Owners
hereby agrees to elect to allocate the taxable income of the Corporation for
such year as if the taxable year consisted of two taxable years, as provided in
Section 1377(a)(2) of the IRC.
WITNESS THE DUE EXECUTION AND DELIVERY HEREOF ON THE 19th DAY OF
July, 1996.
-10-
<PAGE>
Pierce Leahy Corp.
/s/ Leo W. Pierce, Jr. /s/ Eve Bullitt Pierce
By: -------------------------------------------- ----------------------------
Leo W. Pierce, Jr., individually and for the Eve Bullitt Pierce, for the
benefit of Kate Pierce, benefit of Kate Pierce,
Alexandra Pierce and Julia Pierce Alexandra Pierce and Julia
Pierce
/s/ J. Peter Pierce /s/ John P. Pierce, Jr.
-------------------------------------------- ----------------------------
J. Peter Pierce, individually and for the John P. Pierce, Jr.
benefit of Matthew Pierce
/s/ Michael J. Pierce /s/ Mary E. Pierce
-------------------------------------------- ----------------------------
Michael J. Pierce, individually and for the Mary E. Pierce
benefit of Michael A. Pierce
/s/ Barbara Quinn /s/ Constance P. Buckley
-------------------------------------------- ----------------------------
Barbara Quinn, individually and for the Constance P. Buckley,
benefit of Sarah Quinn, Daniel J. Quinn, Jr., individually and for the
Conor Quinn and Dylan Quinn benefit of Hilary Buckley
and Hannah Buckley
/s/ Kathryn Cox /s/ Maurice Cox, Jr.
-------------------------------------------- ----------------------------
Kathryn Cox, individually and for the benefit Maurice Cox, Jr.
of Christopher Cox, Adrian Cox, Brendan Cox,
Deirdre Cox, Timothy Cox, and Conor Cox
/s/ Monica Cox Durfee /s/ Constance Cox
-------------------------------------------- ----------------------------
Monica Cox Durfee Constance Cox
/s/ Andrea J. Cox /s/ Suzanne Cox
-------------------------------------------- ----------------------------
Andrea J. Cox Suzanne Cox
/s/ Maurice Cox, III /s/ Gregory Cox
-------------------------------------------- ----------------------------
Maurice Cox, III Gregory Cox
-11-
<PAGE>
EXHIBIT 10.3
NONQUALIFIED STOCK OPTION PLAN
OF
PIERCE LEAHY CORP.
1. Purpose. The purpose of this Nonqualified Stock Option Plan is to give
-------
Key Employees of the Company an opportunity to acquire shares of Common Stock of
the Company, to provide an incentive for Key Employees to continue to promote
the best interests of the Company and enhance its long-term performance, and to
provide an incentive for Key Employees to join or remain with the Company. It is
the intention of the Company that no Stock Option awarded pursuant to this Plan
shall be an "incentive stock option" within the meaning of Section 422 of the
Code.
2. Definitions. The following definitions shall apply for purposes of this
-----------
Plan and any agreement evidencing an award of a Stock Option hereunder:
(a) "Beneficiary" shall mean the person or persons designated by a Key
Employee, in such form as the Board shall prescribe, to receive the balance
payable to the Key Employee pursuant to Section 8, below, in the event of his
death. In the absence of a valid Beneficiary designation or if the designated
Beneficiary does not survive the Key Employee, the Key Employee's Beneficiary
shall be his estate.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated and the rulings issued
thereunder.
(d) "Committee" shall mean the committee of Board members appointed to
administer the Plan pursuant to Section 3(a), below.
(e) "Common Stock" shall mean shares of Class B common stock issued by
the Company, or such class of shares to which such shares are converted
hereafter.
(f) "Company" shall mean Pierce Leahy Corp.
(g) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, P.L. 93-406, as amended from time to time, and the regulations promulgated
and the rulings issued thereunder.
(h) "Indebtedness" shall mean (i) all indebtedness (including
principal, interest, fees and charges) of the Company for borrowed money or for
the deferred purchase price of property
<PAGE>
or services; excluding amounts deferred and that are owing on account of
consulting or non-competition agreements arising out of acquisitions of
businesses or from consulting and non-competition agreements existing on June
30, 1994, (ii) the maximum amount available to be drawn under all letters of
credit issued for the account of the Company and all unpaid drawings in respect
of such letters of credit, (iii) all indebtedness of the types described in
clauses (i), (ii), (iv), (v), (vi) or (vii), hereof secured by a lien on any
property owned by the Company, whether or not such indebtedness has been assumed
by the Company, (iv) rental obligations which, under generally accepted
accounting principles, are or will be required to be capitalized on the books of
the Company, (v) all obligations of the Company to pay a specified purchase
price for goods or services, whether or not delivered or accepted, (vi) all
obligations of the Company in the nature of guarantees, and (vii) all
obligations of the Company under any hedging agreement; provided, however, that
"Indebtedness" shall not include accrued expenses and current trade accounts
payable, in each case, incurred in the ordinary course of business.
(i) "Interest Expense" shall mean, for any period, the total interest
expense of the Company payable during such period in respect of all Indebtedness
for such period plus, without duplication, that portion of the obligations
described in Section 2(h)(iv), above, representing the interest factor for such
period.
(j) "Key Employee" shall mean any employee of the Company who is a
member of a select group of management or highly compensated employees.
(k) "Net Income" shall mean, for any period, the Company's net income
for such period (i) before Interest Expense and provision for taxes and, for so
long as the Company is an S Corporation, dividends paid to the Company's
shareholders equal to their taxes on the Company's income for such period, and
(ii) adjusted by adding thereto the amount of all amortization of intangibles,
depreciation and any management fees, bonuses, or consulting or directors' fees
not in excess of $2,000,000, in the aggregate, paid on and after June 30, 1994
but before June 30, 1997 by the Company to Pierce Family Partnership, Ltd.,
Pierce Real Estate Company, the Pierce Group or their successors and assigns.
(l) "Plan" shall mean the Nonqualified Stock Option Plan of Pierce
Leahy Corp., as evidenced hereby, or as amended from time to time.
(m) "Stock Option" shall mean an option issued pursuant to this Plan.
2
<PAGE>
(n) "S Corporation" shall mean a corporation which is eligible to make
the election described in Section 1362(a) of the Code and for which such
election is in effect.
(o) "Termination for Cause" shall mean termination of employment of a
Key Employee due to (i) disloyalty, including, but not limited to, intentional
unauthorized divulgence of Company records, secrets, or the like, (ii)
dishonesty, including, but not limited to, theft or falsification of records or
the like, (iii) insubordination, or (iv) the commission of a crime.
(p) "Total and Permanent Disability" shall mean a physical or mental
condition of a Key Employee resulting from a bodily injury or disease or mental
disorder which renders him incapable of continuing in the employment of the
Company as certified by a qualified physician selected or approved by the Board.
(q) "Valuation Date" shall mean December 31, 1994 and the last day of
each calendar quarter thereafter.
(r) "Vested Percentage" shall mean, with respect to a Stock Option
granted to a Key Employee, 100% in the case of a Key Employee who terminates
employment on account of death or Total and Permanent Disability. In all other
cases, the Key Employee's Vested Percentage shall be determined in accordance
with the terms of the Stock Option agreement; or in the absence of any specific
provision in the Stock Option agreement with respect to the determination of the
Key Employee's Vested Percentage, in accordance with the following schedule:
<TABLE>
<CAPTION>
Years from Date of Grant Vested Percentage
------------------------ -----------------
<S> <C>
less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 or more 100%
</TABLE>
3. Administration.
--------------
(a) Board of Directors. The Plan shall be administered by the Board;
------------------
provided, however, the Board may delegate its powers with respect to the
administration of the Plan (except its powers under Section 13(c)) to the
Committee, the members of which shall be appointed by the Board and shall
consist of not less than three members of the Board. If the Board chooses to
appoint a Committee, references herein to the Board (except in Section 13(c))
shall be deemed to refer to the Committee. The Board or the Committee, if the
Committee is appointed to carry out the
3
<PAGE>
Board's responsibilities hereunder, shall be the "plan administrator" with
respect to the Plan within the meaning of ERISA.
(b) Powers. Within the limits of the express provisions of the Plan,
------
the Board shall determine:
(i) the Key Employees to whom awards hereunder shall
be granted,
(ii) the time or times at which such awards shall be
granted,
(iii) the amount and form of any awards, and
(iv) the limitations, restrictions and conditions
applicable to any such award.
In making such determinations, the Board may take into account the nature of the
services rendered by such employees, or classes of employees, their present and
potential contributions to the Company's success and such other factors as the
Board in its discretion shall deem relevant.
(c) Interpretations. Subject to the express provisions of the Plan, the
---------------
Board may interpret the Plan, prescribe, amend and rescind rules and regulations
relating to it, determine the terms and provisions of the respective awards and
make all other determinations it deems necessary or advisable for the
administration of the Plan. The Board shall have discretionary authority to
construe the terms of the Plan.
(d) Determinations. The determinations of the Board on all matters
--------------
regarding the Plan shall be conclusive.
(e) Nonuniform Determinations. The Board's determinations under the
-------------------------
Plan, including without limitation, determinations as to the persons to receive
awards, the terms and provisions of such awards and the agreements evidencing
the same, need not be uniform and may be made by it selectively among persons
who receive or are eligible to receive awards under the Plan, whether or not
such persons are similarly situated.
4. Maximum Limitations. The aggregate number of shares of Common Stock
-------------------
available for grant under the Plan is 1,141 shares, subject to adjustment
pursuant to Section 10. Shares of Common Stock issued upon exercise of Stock
Options may be either authorized but unissued shares or shares now or hereafter
held in the treasury of the Company. In the event that, prior to the end of the
period during which Stock Options may be granted under the Plan, any Stock
Option under the Plan expires unexercised or is
4
<PAGE>
terminated, surrendered or canceled, without being exercised, in whole or in
part, for any reason, the number of shares theretofore subject to such Stock
Option, or the unexercised, terminated, forfeited or unearned portion thereof,
shall be added to the remaining number of shares of Common Stock available for
grant as a Stock Option under the Plan, including a grant to a former holder of
such Stock Option, upon such terms and conditions as the Board shall determine,
which terms may be more or less favorable than those applicable to such former
Stock Option.
5. Conditions of Options. Each Stock Option shall be granted pursuant to a
---------------------
written agreement between the Company and the Key Employee which shall set forth
the following conditions and such other restrictions and limitations as the
Board, in its discretion, shall determine:
(a) Exercise Price. Each Stock Option shall grant the right to purchase
--------------
the number of shares set forth therein at a price which is equal to or greater
than the fair market value of the Common Stock as of the Valuation Date
immediately coinciding with or preceding the date of the grant.
(b) S Corporation Status. In no event shall a Key Employee be permitted
--------------------
to exercise any Stock Option while the Company is an S Corporation.
6. Loan Feature. The Board, in its discretion, may direct the Company to
------------
make a loan to a Key Employee whose Vested Percentage with respect to one or
more Stock Options is at least 60%. The maximum amount of any such loan shall be
25% of the amount which would be payable to the Key Employee pursuant to Section
8, below, if he had terminated employment other than on account of death or
Total and Permanent Disability as of the date of the loan, minus the amount of
any outstanding loans to the Key Employee pursuant to this Section 6. Any loan,
when added to the outstanding balance of all other loans from the Company to the
Key Employee, in excess of $10,000 shall bear interest at a variable rate equal
to the Federal short-term rate in effect under Section 1274(d) of the Code,
compounded semiannually. Any such loan shall be evidenced by a written
instrument, and shall be payable in full at any time on the demand of the
Company and shall be subject to any additional terms and conditions as the
Board, in its discretion, may prescribe; provided, however, that any such loan
shall in all events be repaid in full either -
(a) before the Key Employee acquires any shares of Common
Stock pursuant to the exercise of any Stock Option or,
5
<PAGE>
(b) immediately after the Key Employee acquires any shares of
Stock pursuant to the exercise of any Stock Option by means of
a reduction in the number of shares issued to the Key Employee
pursuant to such exercise by the number of shares having a
fair market value equal to the outstanding balance of the
loan.
7. Exercise of Stock Options. Stock Options may be exercised by an
-------------------------
optionee by giving written notice to the Secretary of the Company stating the
number of shares of Common Stock with respect to which the Stock Option is being
exercised and tendering payment therefor. At the time that a Stock Option or any
part thereof is exercised, payment for the Common Stock issuable thereupon shall
be made in full either -
(a) by check (subject to collection), or
(b) if the Board in its discretion agrees to accept, in
shares of Common Stock (the number of such shares paid
for each share subject to the Stock Option, or part
thereof, being exercised shall be determined by
dividing the exercise price by the fair market value
per share of the Common Stock on the date of exercise);
provided that the Board shall accept shares of Common
Stock after the Common Stock has become readily
tradeable on an established securities market only if
such shares have been held by the optionee for more
than six months.
As soon as practicable following such exercise, a certificate representing
shares of Common Stock purchased, registered in the name of the optionee, shall
be delivered to the optionee.
8. Termination of Employment.
-------------------------
(a) Automatic Expiration of Options. Immediately upon the termination
-------------------------------
of employment with the Company for any reason (including death) of a Key
Employee who holds one or more Stock Options, such Key Employee's Stock Options,
to the extent unexercised, shall expire; provided, however, that if a Key
Employee terminates employment after the Common Stock has become readily
tradeable on an established securities market, other than pursuant to a
Termination for Cause, his Stock Options shall not expire until the end of the
90-day period following the date of his termination. To the extent provided in
Section 8(b) below, the Key Employee (or his Beneficiary in the event of his
death), shall be entitled to payments pursuant to such Section.
6
<PAGE>
(b) Payment of Option Value.
-----------------------
(i) Upon termination of employment with the
Company, except as provided in Section
8(b)(iv), below, the Key Employee (or his
Beneficiary, in the event of his death) shall
be entitled to receive the Vested Percentage
of the value (if any), as of the Valuation
Date coinciding with or immediately preceding
his termination of employment, of Stock
Options which were held by the Key Employee
as of the date of his termination of
employment or death. For this purpose, the
value of the Key Employee's Stock Options
shall be equal to (I) the aggregate fair
market value of the unacquired shares of
Common Stock to which such Options relate,
minus (II) the principal amount of any
outstanding loan pursuant to Section 6,
above, minus (III) the aggregate exercise
price of such unacquired shares under such
Options.
(ii) The amount determined pursuant to Section
8(b)(i), above, shall be paid to the Key
Employee (or his Beneficiary, in the event of
his death) by the Company in cash in five
equal installments, without interest. The
first installment shall be payable as soon as
practicable following the date of the Key
Employee's termination of employment, and
each succeeding installment shall be paid on
the next four anniversaries of the date of
his termination of employment, or as soon as
practicable thereafter. Notwithstanding the
foregoing, the Board, in its sole discretion,
may direct the Company to pay the Vested
Percentage of the value of the Key Employee's
Stock Options in a single lump sum as soon as
practicable following his termination of
employment, or in the event that installment
payments have commenced pursuant to this
Section 8(b), may direct the Company to pay
the balance thereof in a single lump sum.
7
<PAGE>
(iii) Payments pursuant to Section 8(b)(ii), above,
shall be suspended for so long as such
payments are inconsistent with the terms of
any negative covenants, representations, or
warranties set forth in any loan or financing
agreement between the Company and one or more
persons; and, in that event, no Key Employee
shall have any recourse against the Company
or any officer, director, shareholder,
employee or agent thereof.
(iv) This Section 8(b) shall be ineffective in
the case of a Key Employee whose termination
of employment with the Company (I) is a
Termination for Cause, or (II) occurs while
the Common Stock is readily tradeable on an
established securities market.
9. Transferability. No Stock Option may be transferred, assigned, pledged
---------------
or hypothecated (whether by will or the applicable laws of descent or
distribution or otherwise). No Stock Option shall be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of a Stock Option, or levy of attachment or
similar process upon the Stock Option not specifically permitted herein shall be
null and void and without effect. A Stock Option may be exercised only by a Key
Employee during his or her lifetime while employed by the Company.
10. Adjustment Provisions. The aggregate number of shares of Common Stock
---------------------
with respect to which Stock Options may be granted, the aggregate number of
shares of Common Stock subject to each outstanding Stock Option, and the option
price per share of each such Stock Option, may all be appropriately adjusted as
the Board may determine for any increase or decrease in the number of shares of
issued Common Stock resulting from a division or consolidation of shares,
whether through reorganization, recapitalization, stock split-up, stock
distribution or combination of shares, or the payment of a share dividend or
other increase or decrease in the number of such shares outstanding effected
without receipt of consideration by the Company. Adjustments under this Section
10 shall be made according to the sole discretion of the Board, and its
decisions shall be binding and conclusive.
8
<PAGE>
11. Dissolution, Merger and Consolidation. Upon the dissolution or
-------------------------------------
liquidation of the Company, or upon a merger or consolidation of the Company in
which the Company is not the surviving corporation, each Stock Option granted
hereunder shall expire as of the effective date of such transaction, in which
case each Key Employee to whom one or more Stock Options have been granted shall
be entitled to receive payments equal to the payments which would have been made
pursuant to Section 8, above, if the Key Employee had terminated employment (for
reasons other than death or Total and Permanent Disability) immediately before
the dissolution, liquidation, merger or consolidation.
12. Claims Procedures.
-----------------
(a) In General. If a claim for payment or other benefits under this
----------
Plan made by a Key Employee or Beneficiary ("claimant") is denied, notice of
such denial shall be given in accordance with Section 12(b), below, within a
reasonable period of time after receipt of the claim by the Board. If such
notice is not furnished in accordance with the requirements of Section 12(b),
below, within a reasonable period of time after receipt of the claim, the claim
shall be deemed denied and the claimant shall be permitted to proceed to the
review stage described in Section 12(c), below. For purposes of this Section
12(a), a period of time is reasonable only if it is not longer than 90 days,
unless special circumstances require a period of not more than 180 days and
written notice of such extension is given to the claimant before expiration of
this initial 90-day period.
(b) Content of Notice of Denial. The Board shall provide
---------------------------
to a claimant written notice setting forth in a manner calculated
to be understood by the claimant:
(i) the specific reason or reasons for the
denial;
(ii) specific reference to pertinent Plan
provisions on which the denial is based;
(iii) a description of any additional material or
information necessary for the claimant to
perfect the claim and an explanation of why
such material or information is necessary;
and
(iv) appropriate information as to the steps to be
taken if the claimant wishes to submit the
claim for review.
9
<PAGE>
(c) Review Procedures. The claimant or his duly authorized
-----------------
representative shall have a reasonable opportunity to appeal a denied claim to
the Board. The claimant or his duly authorized representative may:
(i) request a review upon written application to
the Plan within 60 days after receipt by the
claimant of written notification of denial of
his claim;
(ii) review pertinent documents; and
(iii) submit issues and comments in writing.
The Board's decision shall be made no later than 60 days after its receipt of
the claimant's request for review, unless special circumstances require an
extension of no more than an additional 60 days. The Board's decision on review
shall be in writing and shall include specific reasons for its decision and
references to the pertinent Plan provisions on which the decision is based.
13. Miscellaneous.
-------------
(a) Legal and Other Requirements. The obligation of the Company to sell
----------------------------
and deliver Common Stock under the Plan shall be subject to all applicable laws,
regulations, rules and approvals, including, but not by way of limitation, the
effectiveness of a registration statement under the Securities Act of 1933 if
deemed necessary or appropriate by the Company. Certificates for shares of
Common Stock issued hereunder may be legended as the Board shall deem
appropriate.
(b) No Obligation To Exercise Options. The granting of a Stock Option
---------------------------------
shall impose no obligation upon an optionee to exercise such Stock Option.
(c) Termination and Amendment of Plan. The Board may from time to time
---------------------------------
alter, amend or suspend the Plan, or may at any time terminate the Plan, for any
reason, subject to the approval of the Company's shareholders if such approval
is required by law.
(d) Application of Funds. The proceeds received by the Company from the
--------------------
sale of Common Stock pursuant to Stock Options will be used for general
corporate purposes.
(e) Withholding Taxes. Upon the exercise of any Stock Option,the
-----------------
Company shall have the right to require the optionee to remit to the Company an
amount sufficient to satisfy all federal, state and local withholding tax
requirements then applicable prior to the delivery of any certificate or
certificates for shares of Common Stock.
10
<PAGE>
(f) Right To Terminate Employment. Nothing in the Plan or any agreement
-----------------------------
entered into pursuant to the Plan shall confer upon any Key Employee or other
optionee the right to continue in the employment of the Company or any
subsidiary or affect any right which the Company or any subsidiary may have to
terminate the employment of such Key Employee or other optionee.
(g) Rights as a Shareholder. No optionee shall have any right as a
-----------------------
shareholder unless and until certificates for shares of Common Stock are issued
to him or her.
(h) Leaves of Absence. The Board shall be entitled to make such rules,
-----------------
regulations and determinations as it deems appropriate under the Plan in respect
of any leave of absence taken by any Key Employee. Without limiting the
generality of the foregoing, the Board shall be entitled to determine:
(i) whether or not any such leave of absence shall constitute a
termination of employment within the meaning of the Plan, and
(ii) the impact, if any, of any such leave of absence on awards
under the Plan theretofore made to any Key Employee who takes
such leave of absence.
(i) Fair Market Value. Whenever the fair market value of Common Stock
-----------------
is to be determined under the Plan as of a given Valuation Date, such fair
market value (of all outstanding shares of Common Stock) shall be equal to x
plus y minus z, where
x equals the product of the Company's Net Income for its most
recent period of four consecutive calendar quarters
multiplied by eight (8),
y equals the value of the cash and cash equivalents held by the
Company as of such Valuation Date, and
z equals the Indebtedness as of such Valuation Date and such
other obligations existing as of such Valuation Date as are
typically subtracted from the Company's gross value in
determining the Company's net equity.
(j) Notices. Every direction, revocation or notice authorized or
-------
required by the Plan shall be deemed delivered to the Company on the date it is
personally delivered to the Secretary of the Company at its principal executive
offices or three business days after it is sent by registered or certified mail,
postage prepaid, addressed to the Secretary at such offices, and shall be deemed
delivered to an optionee on the date it is personally delivered to him or her or
three business days after it is sent by registered or certified mail, postage
11
<PAGE>
prepaid, addressed to him or her at the last address shown for him or her on the
records of the Company.
(k) Applicable Law. All questions pertaining to the validity,
--------------
construction and administration of the Plan and Stock Options granted hereunder
shall be determined in conformity with the laws of the Commonwealth of
Pennsylvania, to the extent not superseded by federal law.
(l) Elimination of Fractional Shares. If under any provision of the
--------------------------------
Plan which requires a computation of the number of shares of Common Stock
subject to a Stock Option, the number so computed is not a whole number of
shares of Common Stock, such number of shares of Common Stock shall be rounded
down to the next whole number.
* * * * *
I, Michael J. Pierce, Secretary of Pierce Leahy Corp. (the
"Corporation"), hereby certify that a resolution adopting the foregoing
Nonqualified Stock Option Plan of Pierce Leahy Corp. was approved at a duly
convened meeting of the Board of Directors of the Corporation held on September
23, 1994.
Michael J. Pierce Sept. 23, 1994
------------------------------------
signature date
12
<PAGE>
AMENDMENT NO. 1
TO THE
NONQUALIFIED STOCK OPTION PLAN
OF
PIERCE LEAHY CORP.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Board of Directors of Pierce Leahy Corp. ("Employer")
adopted the Nonqualified Stock Option Plan of Pierce Leahy Corp. ("Plan") on
September 23, 1994; and
WHEREAS, the Employer wishes to amend the Plan to correct a clerical
error made in the drafting of the Plan document, and to conform the written
terms of the Plan to the intent of the Employer in establishing the Plan and in
granting options thereunder.
NOW, THEREFORE, subsection (b) of Section 5 of the Plan is hereby
clarified by revising such subsection to read as follows:
(b) Time of Exercise. In no event shall any option granted
----------------
hereunder, to the extent it is vested, be exercisable before the
earlier of the tenth (10th) anniversary of the date of this grant or
the first date on which the Company ceases to qualify as an S
Corporation.
* * * * *
I, Michael J. Pierce, Secretary of Pierce Leahy Corp. ("Corporation"),
hereby certify that a resolution adopting the foregoing amendment to the
Nonqualified Stock Option Plan of Pierce Leahy Corp. was approved at a duly
convened meeting of the Board of Directors of the Corporation held
on December 15, 1995.
/s/ Michael J. Pierce 12/5/95
--------------------------------------
signature date
<PAGE>
EXHIBIT 10.4
================================================================================
$100,000,000
C$35,000,000
CREDIT AGREEMENT
Dated as of August 13, 1996
PIERCE LEAHY CORP.
and
PIERCE LEAHY COMMAND COMPANY,
as Borrowers
The Several Lenders
from Time to Time Parties Hereto
CANADIAN IMPERIAL BANK OF COMMERCE
as Canadian Administrative Agent
and
CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY
as US Administrative Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS............................................................. 1
1.1 Defined Terms............................................................. 1
1.2 Other Definitional Provisions............................................. 26
SECTION 2. THE US COMMITMENTS...................................................... 26
2.1 The US Commitments........................................................ 26
2.2 Procedure for US$ Loan Borrowing.......................................... 27
2.3 Conversion and Continuation Options....................................... 27
2.4 Minimum Amounts and Maximum Number of Eurodollar Tranches................. 28
SECTION 3. THE CANADIAN COMMITMENTS................................................ 28
3.1 The Canadian Commitments.................................................. 28
3.2 Procedure for C$ Loan Borrowing........................................... 28
3.3 Bankers' Acceptances...................................................... 29
3.4 Conversion Option......................................................... 32
3.5 Circumstances Making Bankers' Acceptances Unavailable..................... 33
SECTION 4. GENERAL PROVISIONS...................................................... 33
4.1 Repayment of Loans; Evidence of Debt...................................... 33
4.2 Commitment Fee............................................................ 34
4.3 Termination or Reduction of Commitments................................... 35
4.4 Optional and Mandatory Prepayments........................................ 36
4.5 Interest Rates and Payment Dates.......................................... 39
4.6 Computation of Interest and Fees.......................................... 41
4.7 Inability to Determine Eurodollar Rate.................................... 41
4.8 Pro Rata Treatment and Payments........................................... 42
4.9 Illegality................................................................ 43
4.10 Requirements of Law...................................................... 43
4.11 Taxes.................................................................... 45
4.12 Indemnity................................................................ 46
4.13 Change of Lending Office................................................. 47
SECTION 5. REPRESENTATIONS AND WARRANTIES.......................................... 47
5.1 Financial Condition....................................................... 47
5.2 No Change................................................................. 48
5.3 Corporate Existence; Compliance with Law.................................. 48
5.4 Corporate Power; Authorization; Enforceable Obligations................... 48
5.5 No Legal Bar.............................................................. 49
5.6 No Material Litigation.................................................... 49
5.7 No Default................................................................ 49
5.8 Ownership of Property; Liens.............................................. 49
5.9 Intellectual Property..................................................... 49
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.10 No Burdensome Restrictions............................................ 50
5.11 Taxes................................................................. 50
5.12 Margin Regulations.................................................... 50
5.13 ERISA................................................................. 50
5.14 Investment Company Act; Other Regulations............................. 51
5.15 Environmental Matters................................................. 52
5.16 Regulation H.......................................................... 52
5.17 Capitalization........................................................ 53
5.18 Subsidiaries.......................................................... 53
5.19 Restrictions on or Relating to Subsidiaries........................... 53
5.20 Subchapter S Status................................................... 53
5.21 Leases................................................................ 53
5.22 Related Agreements.................................................... 54
SECTION 6. CONDITIONS PRECEDENT................................................. 54
6.1 Conditions to Effectiveness............................................ 54
6.2 Conditions to Initial Loans............................................ 56
6.3 Additional Conditions for Acquisition Loans............................ 57
6.4 Conditions to Each Loan................................................ 59
SECTION 7. AFFIRMATIVE COVENANTS................................................ 59
7.1 Financial Statements, Etc.............................................. 60
7.2 Certificates; Other Information........................................ 60
7.3 Books, Records and Inspections......................................... 61
7.4 Maintenance of Property, Insurance..................................... 62
7.5 Corporate Franchises................................................... 62
7.6 Compliance with Statutes, etc.......................................... 62
7.7 Compliance with Environmental Laws..................................... 62
7.8 ERISA; Canadian Pension Plans.......................................... 63
7.9 End of Fiscal Years; Fiscal Quarters................................... 65
7.10 Performance of Obligations............................................ 65
7.11 Payment of Taxes...................................................... 65
7.12 Use of Proceeds....................................................... 65
7.13 Notices............................................................... 65
7.14 Tax Status............................................................ 66
7.15 Additional Mortgages.................................................. 66
7.16 Additional Stock Pledges.............................................. 67
7.17 Additional Guarantee and Security Agreements.......................... 68
7.18 Mortgaged Properties Documentation.................................... 69
SECTION 8. NEGATIVE COVENANTS................................................... 70
8.1 Liens.................................................................. 70
8.2 Consolidation, Merger, Purchase or Sale of Assets, etc................. 72
8.3 Limitation on Restricted Payments...................................... 73
8.4 Indebtedness........................................................... 73
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.5 Advances, Investments and Loans.......................................... 74
8.6 Transactions with Affiliates............................................. 74
8.7 Capital Expenditures..................................................... 75
8.8 Fixed Charge Coverage Ratio.............................................. 76
8.9 Interest Coverage Ratio.................................................. 76
8.10 Leverage Ratio.......................................................... 76
8.11 Limitation on Voluntary Payments and Modifications of Indebtedness
and Certain Other Agreements; etc....................................... 77
8.12 Limitation on Issuance of Capital Stock................................. 77
8.13 Business................................................................ 78
8.14 Designation of "Designated Senior Indebtedness"......................... 78
SECTION 9. EVENTS OF DEFAULT...................................................... 78
SECTION 10. THE ADMINISTRATIVE AGENTS............................................. 81
10.1 Appointment............................................................. 81
10.2 Delegation of Duties.................................................... 81
10.3 Exculpatory Provisions.................................................. 82
10.4 Reliance by Administrative Agent........................................ 82
10.5 Notice of Default....................................................... 82
10.6 Non-Reliance on Administrative Agents and Other Lenders................. 83
10.7 Indemnification......................................................... 83
10.8 Administrative Agents in Their Individual Capacity...................... 84
10.9 Successor Administrative Agent.......................................... 84
SECTION 11. MISCELLANEOUS......................................................... 84
11.1 Amendments and Waivers.................................................. 84
11.2 Notices................................................................. 86
11.3 No Waiver; Cumulative Remedies.......................................... 87
11.4 Survival of Representations and Warranties.............................. 87
11.5 Payment of Expenses and Taxes........................................... 87
11.6 Successors and Assigns; Participations and Assignments.................. 88
11.7 Adjustments; Set-off.................................................... 90
11.8 Counterparts............................................................ 91
11.9 Severability............................................................ 91
11.10 Integration............................................................ 91
11.11 GOVERNING LAW.......................................................... 91
11.12 Submission To Jurisdiction; Waivers.................................... 91
11.13 Foreign Currency Judgments............................................. 92
11.14 Acknowledgements....................................................... 92
11.15 WAIVERS OF JURY TRIAL.................................................. 93
11.16 Confidentiality...................................................... 93
11.17 Conflicts............................................................ 93
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SCHEDULES:
Schedule 1.1 Lenders, Commitments and Addresses for Notices
Schedule 5.1 Financial Condition
Schedule 5.2 No Change
Schedule 5.3 Jurisdictions
Schedule 5.8 Real Property
Schedule 5.11 Tax Matters
Schedule 5.15 Environmental Matters
Schedule 5.17 Shareholders
Schedule 5.18 Subsidiaries
Schedule 6.1 Existing Indebtedness
Schedule 7.4 Insurance
Schedule 8.1 Existing Liens
EXHIBITS:
Exhibit A-1 Form of US$ Note
Exhibit A-2 Form of C$ Note
Exhibit B Form of Draft
Exhibit C-1 Form of US$ Borrowing Certificate
Exhibit C-2 Form of C$ Borrowing Certificate
Exhibit D Form of US Global Guarantee and Security Agreement
Exhibit E-1 Form of Canadian Security Agreement
Exhibit E-2 Form of Canadian Demand Debenture
Exhibit E-3 Form of Canadian Debenture Pledge Agreement
Exhibit E-4 Form of Canadian Hypothec
Exhibit F Form of US Mortgage
Exhibit G Form of Pledge and Intercreditor Agreement
Exhibit H-1 Form of Opinion of Special Counsel to Borrowers and Shareholders
Exhibit H-2 Form of Opinion of Canadian Counsel to Canadian Borrower
Exhibit I Form of Assignment and Acceptance
</TABLE>
-iv-
<PAGE>
CREDIT AGREEMENT, dated as of August 13, 1996, among PIERCE LEAHY
CORP., a New York corporation (the "Company"), PIERCE LEAHY COMMAND COMPANY, a
-------
company organized and existing under the laws of the Province of Nova Scotia
(the "Canadian Borrower" and, together with the Company, the "Borrowers"), the
----------------- ---------
several banks and other financial institutions from time to time parties to this
Agreement (the "Lenders"), Canadian Imperial Bank of Commerce, New York Agency,
-------
as US Administrative Agent (as hereinafter defined) for the US$ Lenders
hereunder and Canadian Imperial Bank of Commerce, as Canadian Administrative
Agent (as hereinafter defined) for the C$ Lenders hereunder.
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
-------------
shall have the following meanings:
"Acceptance Fee": the fee payable in C$ to each C$ Lender in respect
--------------
of Bankers' Acceptances computed in accordance with subsection 3.3(e).
"Acquisition Documents": in connection with any Permitted Acquisition,
---------------------
any asset purchase agreement, stock purchase agreement, merger agreement or
similar agreement and all other documents entered into or delivered in
connection therewith.
"Acquisition Loan": any Loan the proceeds of which are used to
----------------
finance all or any portion of the purchase price of (and to pay fees and
expenses, and refinance existing Indebtedness in connection with) a
Permitted Acquisition.
"Adjusted EBITDA": for any period, with respect to the Company and
---------------
its Subsidiaries on a consolidated basis, EBITDA of the Company and its
Subsidiaries for such period determined on a pro forma basis after giving
effect to the following adjustments:
(a) any business acquired during such period pursuant to a
Permitted Acquisition shall be deemed to have been acquired on the
first day of such period (and EBITDA attributable to such business
shall be calculated on the basis of the available financial statements
of such business);
(b) any business disposed of during such period pursuant to a
Disposition shall be deemed to have been disposed of on the first day
of such period; and
(c) if, in connection with any Permitted Acquisition, the Company
shall in good faith adopt a program which can reasonably be expected
to result in quantifiable improvements in the operating results of the
acquired
<PAGE>
2
business, the Company (so long as (i) it shall have delivered to the
Lenders a description of such program, setting forth in reasonable
detail the terms and conditions thereof and (ii) the aggregate amount
of such quantifiable improvements in operating results from such
Permitted Acquisition shall not exceed 15% of the Company's EBITDA for
the then most recently ended period of twelve consecutive months for
which financial statements shall have been delivered to the Lenders
pursuant to the subsection 7.1(a), (b) or (c)) shall be entitled to
assume that the improved operating results projected to result from
such program shall have occurred from the first day of such period to
the date of such Permitted Acquisition.
"Adjustment Date": the second Business Day following receipt by the
---------------
US Administrative Agent of both (a) the financial statements required to be
delivered pursuant to subsection 7.1(a) or 7.1(b), as the case may be, for
the most recently completed fiscal period and (b) the related Compliance
Certificate required to be delivered pursuant to subsection 7.2(b) with
respect to such fiscal period.
"Administrative Agents": the collective reference to the US
---------------------
Administrative Agent and the Canadian Administrative Agent.
"Administrative Office": the Canadian Administrative Office or the US
---------------------
Administrative Office, as applicable.
"Affiliate": with respect to any Person, any other Person directly or
---------
indirectly controlling (including but not limited to all directors and
officers of such Person), controlled by, or under direct or indirect common
control with, such Person; provided, however, that for purposes of
-------- -------
subsection 8.6, an Affiliate of the Company shall include (a) any
Shareholder and any member of the Pierce Group, any spouse of such
Shareholder or such member, such Shareholder's or such member's issue and
any lineal descendants of any such Shareholder or such member or any trust
for the benefit of any such Shareholder or such member or for any spouse,
issue or lineal descendant of such Shareholder or such member and (b) any
Person that directly or indirectly owns more than 5% of any class of the
voting Capital Stock of the Company. A Person shall be deemed to control
another Person if such Person possesses, directly or indirectly, the power
to direct or cause the direction of the management and policies of such
other Person, whether through the ownership of voting securities, by
contract or otherwise.
"Affiliate Contracts": collectively, all contracts or agreements
-------------------
entered into between the Company or any of its Subsidiaries, on the one
hand, and any of its Affiliates, on the other hand.
"Agreement": this Credit Agreement, as amended, supplemented,
---------
restated or otherwise modified from time to time.
<PAGE>
3
"Applicable BA Discount Rate": with respect to any C$ Lender, as
---------------------------
applicable to a Bankers' Acceptance being purchased by such C$ Lender on
any day, the CDOR Rate in effect on such day with respect to such Bankers'
Acceptance.
"Applicable Margin": the rate for the respective Type of Loan set
-----------------
forth opposite the range in which the Leverage Ratio in effect on the
initial Borrowing Date (as determined from the certificate delivered on
such Borrowing Date pursuant to subsection 6.2(a)) shall fall, provided
--------
that if on any Adjustment Date occurring after the initial Borrowing Date
the Leverage Ratio determined from the financial statements relating to
such Adjustment Date (and based upon the Total Net Debt on the date of the
balance sheet included in such financial statements) shall fall within any
of the ranges set forth below then the Applicable Margin for all Loans will
be adjusted on such Adjustment Date (each such adjustment to be effective
until the next succeeding Adjustment Date) to the rate for the respective
Type of Loan set forth opposite the range in which such Leverage Ratio
falls:
<TABLE>
<CAPTION>
Applicable Margin (% per annum)
----------------------------------
Range of
Leverage Ratio Base Rate Loans/ Eurodollar Loans/
-------------- C$ Prime Bankers'
Loans Acceptances
-------------- ----------------
<S> <C> <C>
greater than 5.50
to 1.00 1.75% 2.50%
greater than 5.00 to 1.00
but less than or equal to
5.50 to 1.00 1.50% 2.25%
greater than 4.25 to 1.00
but less than or equal to
5.00 to 1.00 1.25% 2.00%
greater than 3.75 to 1.00
but less than or equal to
4.25 to 1.00 1.00% 1.75%
greater than 3.25 to 1.00
but less than or equal to
3.75 to 1.00 0.75% 1.50%
less than or equal
to 3.25 to 1.00 0.50% 1.25%;
</TABLE>
<PAGE>
4
provided, however, that, the Applicable Margin for any Loan shall not be
-------- -------
reduced pursuant to the immediately preceding proviso for any period during
which a Default or Event of Default shall have occurred and be continuing;
provided, further that:
-------- -------
(a) if on or prior to the thirtieth day following the occurrence
of a Default or Event of Default which arises under subsection 9(b),
(c) or (d), such Default or Event of Default has been cured or waived,
then the Applicable Margin during the thirty-day period during which
such Default or Event of Default existed shall be deemed to have been
the Applicable Margin with the applicable reduction determined in
accordance with the table set forth above absent such Default or Event
of Default, and any excess payments of interest made by the applicable
Borrower as a result of the unavailability of the reduction in the
Applicable Margin pursuant to the immediately preceding proviso, so
long as there exists no other Default or Event of Default, shall be
credited by the applicable Lenders to the next interest payment due
from such Borrower in the amount of such excess; and
(b) if any Default or Event of Default referred to in paragraph
(a) above shall not have been cured or waived prior to the thirtieth
day following its occurrence, then, for the period from the date upon
which such Default or Event of Default shall have occurred until two
Business Days following the date upon which such Default or Event of
Default is cured, the Applicable Margin in respect of Loans shall be
1.75% per annum, in the case of Base Rate Loans and C$ Prime Loans,
and 2.50% per annum, in the case of Eurodollar Loans and Bankers'
Acceptances.
"Assignee": as defined in subsection 11.6(c).
--------
"Available Canadian Commitment": as to any C$ Lender, at a particular
-----------------------------
time, an amount equal to the excess, if any, of (a) the amount of such
Lender's Canadian Commitment at such time over (b) the aggregate principal
----
amount of all C$ Loans made by such Lender then outstanding.
"Available US Commitment": as to any US$ Lender, at a particular
-----------------------
time, an amount equal to the excess, if any, of (a) the amount of such
Lender's US Commitment at such time over (b) the aggregate principal amount
----
of all US$ Loans made by such Lender then outstanding.
"BA Discount Proceeds": in respect of any Bankers' Acceptance to be
--------------------
purchased by a C$ Lender on any day under subsection 3.3, an amount
(rounded to the nearest whole Canadian cent, and with one-half of one
Canadian cent being rounded up) calculated on such day by dividing:
(a) the face amount of such Bankers' Acceptance; by
(b) the sum of one plus the product of:
<PAGE>
5
(i) the Applicable BA Discount Rate (expressed as a decimal)
applicable to such Bankers' Acceptance; and
(ii) a fraction, the numerator of which is the number of days
remaining in the term of such Bankers' Acceptance and the
denominator of which is 365;
with such product being rounded up or down to the fifth
decimal place and .000005 being rounded up.
"Bankers' Acceptance": a bill of exchange denominated in C$ drawn by
-------------------
the Canadian Borrower and accepted by a C$ Lender pursuant to subsection
3.3.
"Base Rate": on any particular date, a rate of interest per annum
---------
equal to the higher of: (a) the rate of interest most recently announced
by CIBC as its prime rate (which rate is not necessarily intended to be the
lowest rate of interest charged by CIBC in connection with extensions of
credit) for loans denominated in US Dollars; and (b) the Federal Funds Rate
for such date plus .50%.
"Base Rate Loans": US$ Loans the rate of interest applicable to which
---------------
is based upon the Base Rate.
"Borrowing Date": any Business Day specified in a notice pursuant to
--------------
subsection 2.2, 3.2 or 3.3(b)(1) as a date on which a Borrower requests the
relevant Lenders to make Loans hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on
------------
which commercial banks in New York City are authorized or required by law
to close, except that (a) when used in connection with a Eurodollar Loan,
"Business Day" shall mean any Business Day on which dealings in foreign
currencies and exchange between banks may be carried on in London, England
and New York, New York and (b) when used in connection with a C$ Loan,
"Business Day" shall mean a day on which banks are open for business in
Toronto, Ontario, Canada but excludes Saturday, Sunday and any other day
which is a legal holiday in Toronto, Ontario, Canada.
"Canadian Administrative Agent": Canadian Imperial Bank of Commerce,
-----------------------------
together with its affiliates, as the agent for the C$ Lenders under this
Agreement and the other Loan Documents.
"Canadian Administrative Office": the Canadian Administrative Agent's
------------------------------
office located at Commerce Court West 7, Toronto, Ontario, Canada or such
other office in Canada as may be designated as such by the Canadian
Administrative Agent by written notice to the Borrower and the Lenders.
<PAGE>
6
"Canadian Commitment": as to any C$ Lender, its obligation to make C$
-------------------
Loans to and purchase Bankers' Acceptances from the Canadian Borrower
hereunder in an aggregate principal amount at any one time outstanding not
to exceed the amount set forth opposite such Lender's name on Schedule 1.1
as such Lender's "Canadian Commitment", as such amount may be changed from
time to time as provided herein. The original aggregate principal amount of
the Canadian Commitments is C$35,000,000.
"Canadian Debenture Pledge Agreements": the Debenture Pledge
------------------------------------
Agreements to be executed and delivered by the Canadian Borrower,
substantially in the form of Exhibit E-3, as the same may be amended,
supplemented or otherwise modified from time to time.
"Canadian Demand Debentures": the Demand Debentures to be executed
--------------------------
and delivered by the Canadian Borrower, substantially in the form of
Exhibit E-2, as the same may be amended, supplemented or otherwise modified
from time to time.
"Canadian Dollars" or "C$": lawful currency of Canada.
---------------- --
"Canadian Exchange Rate": on a particular date, the rate at which C$
----------------------
may be exchanged into US Dollars, determined by reference to the Bank of
Canada noon rate as published on the Reuters Screen page BOFC. In the
event that such rate does not appear on such Reuters page, the "Canadian
--------
Exchange Rate" shall be determined by reference to any other means (as
-------------
selected by the Canadian Administrative Agent) by which such rate is quoted
or published from time to time by the Bank of Canada (in each case as in
effect at or about 12:00 Noon, Toronto time, on the Business Day
immediately preceding the relevant date of determination); provided, that
--------
if at the time of any such determination, for any reason, no such exchange
rate is being quoted or published, the Canadian Administrative Agent may
use any reasonable method as it deems applicable to determine such rate,
and such determination shall be prima facie evidence of the accuracy
thereof.
"Canadian Hypothec": the moveable hypothec to be executed and
-----------------
delivered by the Canadian Borrower, substantially in the form of Exhibit E-
4, as the same may be amended, supplemented or otherwise modified from time
to time.
"Canadian Lending Office": as to each C$ Lender, the office in Canada
-----------------------
specified as the "Canadian Lending Office" of such Lender on Schedule 1.1
or in an Assignment and Acceptance or such other office in Canada as may be
designated by such Lender by written notice to the Company and the Canadian
Administrative Agent.
<PAGE>
7
"Canadian Mortgage": a mortgage to be provided by the Canadian
-----------------
Borrower or a Subsidiary thereof with respect to a Canadian Mortgaged
Property pursuant to the provisions set forth in the relevant Canadian
Demand Debenture and Canadian Debenture Pledge Agreement.
"Canadian Mortgaged Properties": all real property listed and
-----------------------------
identified as such in Part B of Schedule 5.8 and designated as such.
"Canadian Pension Plan": any plan, program, arrangement or
---------------------
understanding that is a pension plan for the purposes of any applicable
pension benefits or tax laws of Canada (whether or not registered under any
such laws) which is maintained or contributed to by (or to which there is
or may be an obligation to contribute of), any Borrower or any Subsidiary
of the Company in respect of any person's employment in Canada or a
province or territory thereof with the Company or any Subsidiary of the
Company and all related agreements, arrangements and understandings in
respect of, or related to, any benefits to be provided thereunder or the
effect thereof on any other compensation or remuneration of any employee.
"Canadian Security Agreement": the Canadian Security Agreement to be
---------------------------
executed and delivered by the Canadian Borrower, substantially in the form
of Exhibit E-1, as the same may be amended, supplemented or otherwise
modified from time to time.
"Canadian Security Documents": the collective reference to the
---------------------------
Canadian Demand Debentures, Canadian Debenture Pledge Agreements, the
Canadian Hypothec, and the Canadian Security Agreement and all other
security documents hereafter delivered to the Canadian Administrative Agent
granting a Lien on any asset or assets of the Canadian Borrower or any
Canadian Subsidiary to secure the obligations and liabilities of the
Canadian Borrower hereunder and under any of the other Loan Documents or to
secure any guarantee by any Canadian Subsidiary of any such obligations and
liabilities.
"Canadian Subsidiary": any Subsidiary that is incorporated or
-------------------
organized under the laws of Canada or any province thereof.
"Capital Expenditures": as defined in subsection 8.7.
--------------------
"Capital Stock": any and all shares, interests, participations or
-------------
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"Capitalized Lease Obligations": Indebtedness represented by
-----------------------------
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP; the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in
accordance with GAAP.
<PAGE>
8
"Cash Equivalents": (i) securities issued or directly and fully
----------------
guaranteed or insured by the United States or any agency or instrumentality
thereof or Canada or any province thereof (provided that the full faith and
--------
credit of the United States or Canada or any province thereof is pledged in
support thereof) having maturities of not more than six months from the
date of acquisition, (ii) time deposits and certificates of deposit of any
Lender or any commercial bank incorporated in the United States or Canada
of recognized standing having capital and surplus in excess of
US$200,000,000 and having, or which is the principal banking subsidiary of
a bank holding company having, a long-term unsecured debt rating of at
least "A" or the equivalent thereof from Standard and Poor's Ratings
Services ("S&P") or "A-2" or the equivalent thereof from Moody's Investors
---
Service, Inc. ("Moody's"), or at least A or the equivalent thereof by
-------
Canadian Bond Rating Service Limited or at least A Middle or the equivalent
thereof by Dominion Bond Rating Service Limited with maturities of not more
than six months from the date of acquisition by such Person, (iii)
repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered
into with any bank meeting the qualifications specified in clause (ii)
above, (iv) commercial paper issued by any Lender or any Person
incorporated in the United States or Canada rated at least A-1+ or the
equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's or at least A-1+ or the equivalent thereof by Canadian Bond Rating
Service Limited or at least R-I (Middle or High) or the equivalent thereof
by Dominion Bond Rating Service Limited and in each case maturing not more
than six months after the date of acquisition by such Person and (v)
investments in money market funds substantially all of the assets of which
are comprised of securities of the types described in clauses (i) through
(iv) above.
"Casualty Event": with respect to any property or assets of any
--------------
Person, any loss of or damage to, or any condemnation or other taking of,
such property (other than in the ordinary course of business) for which
such Person or any of its Subsidiaries receives insurance proceeds, or
proceeds of a condemnation award or other compensation.
"C$ Commitment Percentage": as to any C$ Lender at any time, the
------------------------
percentage of the aggregate Canadian Commitments then constituted by such
Lender's Canadian Commitment.
"C$ Equivalent": on any date of determination, with respect to any
-------------
amount in US$, the equivalent in C$ of such amount determined by the
Canadian Administrative Agent using the US$ Exchange Rate then in effect.
"C$ Lender": each Lender designated as a "C$ Lender" on Schedule 1.1,
---------
as such Schedule may be modified from time to time as provided herein.
"C$ Loans": the collective reference to C$ Prime Loans and Bankers'
--------
Acceptances; for the purposes of this Agreement, the principal amount of
any C$
<PAGE>
9
Loan constituting a Bankers' Acceptance shall be deemed to be the
undiscounted face amount of such Bankers' Acceptance.
"C$ Note": as defined in subsection 4.1(g).
-------
"C$ Prime Loans": C$ Loans at such time as they bear interest at a
--------------
rate based upon the C$ Prime Rate.
"C$ Prime Rate": with respect to a C$ Prime Loan, on any day, the
-------------
greater of (a) the annual rate of interest announced from time to time by
CIBC as its reference rate then in effect for determining interest rates on
C$ denominated commercial loans in Canada and (b) the annual rate of
interest equal to the sum of (i) the CDOR Rate and (ii) 0.50% per annum.
"CDOR Rate": on any date, the per annum rate of interest which is the
---------
rate based on the rate applicable to C$ bankers' acceptances for a term of
30 days (in the case of the definition of "C$ Prime Rate") or for a term
equivalent to the term of, and for amounts comparable to the amount of, the
relevant Bankers' Acceptances (in the case of the definition of "Applicable
BA Discount Rate") appearing on the "Reuters Screen CDOR Page" (as defined
in the International Swap Dealer Association, Inc. definitions, as modified
and amended from time to time) for acceptances of Schedule I banks under
the Bank Act (Canada) as of 10:00 A.M., Toronto time, on such date, or if
such date is not a Business Day, then on the immediately preceding Business
Day; provided, however, that if no such rate appears on the Reuters Screen
-------- -------
CDOR Page as contemplated, then the CDOR Rate on any date shall be
calculated as the arithmetic mean of the rates for the term and amount
referred to above applicable to C$ bankers' acceptances quoted by CIBC as
of 10:00 A.M., Toronto time, on such date or, if such date is not a
Business Day, then on the immediately preceding Business Day.
"CERCLA": the Comprehensive Environmental Response Compensation and
------
Liability Act of 1980, as the same may be amended from time to time, 42
U.S.C. (S)9601 et seq.
-- ---
"Change of Control": with respect to the Company: (a) any Person
-----------------
(including a Person's Affiliates and associates), other than a Permitted
Holder, becomes the beneficial owner (as defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of more
than 50% of the total voting power of the Company's Common Stock;
(b) any Person (including a Person's Affiliates and associates), other
than a Permitted Holder, becomes the beneficial owner of more than 33-1/3%
of the total voting power of the Company's Common Stock, and the Permitted
Holders beneficially own, in the aggregate, a lesser percentage of the
total voting power of the Common Stock of the Company than such other
Person and do not have the
<PAGE>
10
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the Company;
or
(c) J. Peter Pierce shall cease to be the President of the Company;
provided, however, that such event will not constitute a Change of Control
-------- -------
if the Company appoints a successor to J. Peter Pierce within 60 days of
the occurrence of such event and such successor is satisfactory to the
Required Lenders.
"CIBC": Canadian Imperial Bank of Commerce, a Canadian chartered
----
bank, or one or more of its agencies, branches or affiliates in its or
their respective capacity or capacities, as the case may be, as a Lender or
Lenders hereunder.
"Claims": as defined in the definition of "Environmental Claims."
------
"Class A Common Stock" as defined in subsection 5.17.
--------------------
"Class B Common Stock" as defined in subsection 5.17.
--------------------
"Client Acquisition Costs": the capitalized unreimbursed costs of
------------------------
acquiring and moving records of new clients into the facilities of either
Borrower or any Subsidiary thereof.
"Closing Date": the date on which the conditions precedent set forth
------------
in subsection 6.1 shall be satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time to
----
time.
"Collateral": all assets of the Loan Parties, now owned or
----------
hereinafter acquired, upon which a Lien is purported to be created by any
Security Document.
"Commitment": with respect to any Lender, such Lender's US Commitment
----------
or Canadian Commitment, as the case may be.
"Commitment Percentage": as to any Lender at any time, the percentage
---------------------
which such Lender's Commitment then constitutes of the aggregate
Commitments (or, at any time after the Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such
Lender's Loans then outstanding constitutes of the aggregate principal
amount of the Loans then outstanding); all amounts denominated in C$ shall
be included in any computations pursuant to this definition at the US$
Equivalent thereof.
"Commitment Period": as to the Commitment of any Lender, the period
-----------------
from and including the Closing Date to but not including the Termination
Date or such earlier date as the Commitments shall terminate as provided
herein.
<PAGE>
11
"Common Stock": all Capital Stock of such Person that is generally
------------
entitled to (i) vote in the election of directors of such Person or (ii) if
such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will
control the management and policies of such Person.
"Commonly Controlled Entity": an entity, whether or not incorporated,
--------------------------
which is under common control with the Company within the meaning of
Section 4001 of ERISA or is part of a group which includes the Company and
which is treated as a single employer under Section 414 of the Code.
"Compliance Certificate": as defined in subsection 7.2(b).
----------------------
"Contractual Obligation": as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Corporate Buy-Sell Agreement": the Amended and Restated Corporate
----------------------------
Buy-Sell Agreement between the Company and Constance P. Buckley, Katheryn
Cox, Maurice E. Cox, Jr., Christopher Pierce, J. Peter Pierce, Leo W.
Pierce, Jr., Mary E. Pierce, Michael Pierce and Barbara P. Quinn,
individually and, if applicable, for the benefit of their respective
children, dated as of July 19, 1996, amending and restating the Corporate
Buy-Sell Agreement dated as of October 25, 1985 and as further amended,
supplemented or otherwise modified in accordance with subsection 8.11.
"Current Disposition": as defined in subsection 4.4(b).
-------------------
"Default": any of the events specified in Section 9, whether or not
-------
any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Disposition": any transaction, or series of related transactions,
-----------
pursuant to which either Borrower and/or any of its Subsidiaries sells,
assigns, transfers or otherwise disposes (other than sales of equipment or
inventory in the ordinary course of business) of any property (whether now
owned or hereafter acquired) to any other Person, in each case whether or
not the consideration therefor to be received by such Borrower or a
Subsidiary consists of cash, securities or the swap or exchange of assets
owned by the acquiring Person, except any such transaction between or among
the Borrowers and their Subsidiaries or between or among any such
Subsidiaries of the Borrowers.
"Domestic Subsidiary": with respect to any Person, any Subsidiary of
-------------------
such Person that is incorporated or organized under the laws of the United
States or any state thereof.
<PAGE>
12
"Draft": a blank bill of exchange, within the meaning of the Bills of
-----
Exchange Act (Canada), in substantially the form set forth in Exhibit B
hereto, drawn by the Canadian Borrower on a C$ Lender, denominated in C$
and bearing such distinguishing letters and numbers as such Lender may
determine, but which at such time, except as otherwise provided herein, has
not been completed or accepted by such Lender.
"Drawing": the creation and purchase of Bankers' Acceptances and/or
-------
the purchase of completed Drafts, by the C$ Lenders pursuant to subsection
3.2.
"EBITDA": for any period for any Person, the consolidated Net Income
------
of such Person and its Subsidiaries, plus, to the extent deducted in
determining such Net Income for such period, (a) Interest Expense, (b)
amortization of intangibles and deferred financing fees, (c) depreciation,
(d) provisions for taxes, and, in the case of the Company, all Tax
Distributions, (e) any extraordinary, unusual or non-recurring gains or
losses or charges, (f) any other non-cash items reducing such Net Income,
all as determined on a consolidated basis in accordance with GAAP and (g)
any amounts charged against such Net Income with respect to payments to
Permitted Holders not exceeding of US$700,000 in any period of twelve
consecutive months; provided that, for purposes of determining EBITDA for
--------
any period that includes any one or more of the calendar months occurring
during the period from August 1, 1995 through July 31, 1996, EBITDA for
such period shall be increased for each such calendar month by an amount
equal to US$170,000.
"Environmental Claims": any and all administrative, regulatory or
--------------------
judicial actions, suits, written directives, claims, liens, notices of
noncompliance or violation, investigations or proceedings relating in any
way to any Environmental Law or any permit issued, or any approval given,
under any such Environmental Law (hereafter, "Claims"), including, without
------
limitation, (a) any and all Claims by Governmental Authorities for
enforcement, cleanup, removal, response, remedial or other actions or
damages pursuant to any applicable Environmental Laws and (b) Claims by any
third party pursuant to Environmental Laws seeking damages, contributions,
indemnification, cost recovery, compensation or injunctive relief resulting
from Hazardous Materials or arising from alleged injury or threat of injury
to health, safety or the environment.
"Environmental Costs": any and all costs, fines, penalties, expenses,
-------------------
damages and liabilities, including, without limitation, the fees of
attorneys and environmental consultants, arising directly under
Environmental Laws.
"Environmental Law": any Federal, state, provincial, foreign or local
-----------------
statute, law, rule, regulation, ordinance or rule of common law now or
hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to the
environment, or Hazardous Materials, including, without limitation, CERCLA;
RCRA; the Hazardous Materials Transportation Act, as amended, 49
<PAGE>
13
U.S.C. (S) 1801 et seq.; the Federal Water Pollution Control Act, as
-- ---
amended, 33 U.S.C. (S) 1251 et seq.; the Toxic Substances Control Act, 15
-- ---
U.S.C. (S) 2601 et seq.; the Clean Air Act, 42 U.S.C. (S) 7401 et seq.; the
-- --- -- ---
Safe Drinking Water Act, 42 U.S.C. (S) 3808 et seq.; the Oil Pollution Act
-- ---
of 1990, 33 U.S.C. (S) 2701 et seq.; the Emergency Planning and Community
-- ---
Right-To-Know-Act of 1986, 42 U.S.C. (S) 11001 et seq.; any applicable
-- ---
state and local or foreign counterparts or equivalents; and any Canadian
federal, provincial, municipal or local counterparts or equivalents
thereof, including the Canadian Environmental Protection Act, as amended,
the Environmental Protection Act (Ontario), as amended, and the Ontario
Water Resources Act and any foreign counterparts or equivalents thereof;
and the terms and conditions of any environmental permit issued pursuant to
any Environmental Law to either Borrower or its Subsidiaries or any
facility owned or operated by such Borrower or its Subsidiaries.
"ERISA": the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
---------------------------------
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities"
in Regulation D of such Board) maintained by a member bank of such System.
"Eurodollar Base Rate": with respect to each day during each Interest
--------------------
Period pertaining to a Eurodollar Loan, the rate per annum determined by
the US Administrative Agent to be the arithmetic mean (rounded to the
nearest 1/100th of 1%) of the offered rates for deposits in US Dollars with
a term comparable to such Interest Period that appears on the Telerate
British Bankers Assoc. Interest Settlement Rates Page (as defined below) at
approximately 11:00 A.M., London time, on the second full Business Day
preceding the first day of such Interest Period; provided, however, that if
-------- -------
there shall at any time no longer exist a Telerate British Bankers Assoc.
Interest Settlement Rates Page, "Eurodollar Base Rate" shall mean, with
respect to each day during each Interest Period pertaining to a Eurodollar
Loan, the rate per annum equal to the rate at which CIBC is offered US
Dollar deposits at or about 10:00 A.M., New York City time, two Business
Days prior to the beginning of such Interest Period in the interbank
eurodollar market where the eurodollar and foreign currency and exchange
operations in respect of its Eurodollar Loans are then being conducted for
delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its
Eurodollar Loan to be outstanding during such Interest Period. "Telerate
--------
British Bankers Assoc. Interest Settlement Rates Page" shall mean the
-----------------------------------------------------
display designated as Page 3750 on the Telerate System Incorporated Service
(or
<PAGE>
14
such other page as may replace such page on such service for the purpose of
displaying the rates at which US Dollar deposits are offered by leading
banks in the London interbank deposit market).
"Eurodollar Loans": US$ Loans the rate of interest applicable to
----------------
which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
---------------
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar Loans
------------------
the then current Interest Periods with respect to all of which begin on the
same date and end on the same later date (whether or not such Loans shall
originally have been made on the same day).
"Event of Default": any of the events specified in Section 9,
----------------
provided that any requirement for the giving of notice, the lapse of time,
--------
or both, or any other condition, has been satisfied.
"Exchange Act": the Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations promulgated thereunder.
"Existing Credit Agreement": the Second Amended and Restated Credit
-------------------------
Agreement, dated as of February 4, 1993, as amended and restated as of June
30, 1994 and further amended and restated as of October 27, 1995, among the
Borrowers, the banks parties thereto and Banque Paribas, New York Branch,
as agent thereunder.
"Federal Funds Rate": for any particular date, an interest rate per
------------------
annum equal to the interest rate (rounded upward to the nearest 1/16th of
1%) offered in the interbank market to CIBC as the overnight Federal Funds
Rate at or about 10:00 A.M., New York City time, on such day (or, if such
day is not a Business Day, for the next preceding Business Day).
"Fixed Charge Coverage Ratio": for any period, the ratio of (a)
---------------------------
EBITDA of the Company for such period to (b) Fixed Charges for such period.
"Fixed Charges": for any period, the sum of the following for such
-------------
period: (a) Interest Expense, (b) the excess, if any, of the aggregate
principal amount of Loans outstanding on the first day of such period over
the maximum aggregate amount of the Commitments on the last day of such
period, giving effect to the
<PAGE>
15
scheduled reductions required under subsection 4.3(a) and 4.3(b), (c)
income taxes paid by the Company and its Subsidiaries, (d) Tax
Distributions and (e) the amount of Capital Expenditures relating to the
Company's normal maintenance program.
"Foreign Subsidiary": any Subsidiary organized under the laws of any
------------------
jurisdiction outside the United States of America.
"GAAP": generally accepted accounting principles in the United States
----
of America in effect from time to time.
"Governmental Authority": any nation or government, any state or
----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
-------------------- -------------------
without duplication, any obligation of (a) the guaranteeing person or (b)
another Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has issued
a reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "primary obligations") of any other third Person
-------------------
(the "primary obligor") in any manner, whether directly or indirectly,
---------------
including, without limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or
any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; provided,
--------
however, that the term Guarantee Obligation shall not include endorsements
-------
of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the stated
or determinable amount of the primary obligation in respect of which such
Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, unless such primary obligation and the
maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee
Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Company in
good faith.
"Hazardous Materials": (a) any petroleum or petroleum products,
-------------------
radioactive materials, asbestos in any form that is friable, urea
formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of
<PAGE>
16
polychlorinated biphenyls, and radon gas in excess of four picocuries per
liter; (b) any chemicals, materials or substances defined as or included in
the definition of "hazardous substances," "hazardous waste," "hazardous
materials," "extremely hazardous waste," "restricted hazardous waste,"
"toxic substances," "toxic pollutants," "contaminants," or "pollutants," or
words of similar import, under any applicable Environmental Law; and (c)
any other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority.
"Indebtedness": of any Person at any date, without duplication, (a)
------------
all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than accounts payable or
trade payables and other accrued liabilities incurred in the ordinary
course of business and payable in accordance with customary practices),
provided that amounts deferred and owing with respect to non-competition or
--------
consulting agreements with respect to Permitted Acquisitions or existing on
the Closing Date up to an aggregate amount of $5,000,000 at any one time
outstanding shall not constitute Indebtedness, (b) any other indebtedness
of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all obligations of such Person in respect of
acceptances issued or created for the account of such Person, (d) all
Capitalized Lease Obligations of such Person, (e) for purposes of
subsection 8.4 and Section 9(e), all obligations of such Person in respect
of any Interest Rate Protection Agreements, and (f) all liabilities secured
by any Lien on any property owned by such Person in circumstances where
such Person has not assumed or otherwise become liable for the payment
thereof, which Indebtedness shall be limited to the lesser of the value of
the property or the amount of the liability.
"Insolvency": with respect to any Multiemployer Plan, the condition
----------
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
---------
"Interest Expense": for any period for any Person, the total
----------------
consolidated interest expense of such Person and its Subsidiaries for such
period (calculated on an accrual basis without regard to any limitations on
the payment thereof and excluding amortization of deferred financing costs)
in respect of all Indebtedness of such Person for such period plus, without
duplication, that portion of Capitalized Lease Obligations of such Person
and its Subsidiaries representing the interest factor for such period.
"Interest Payment Date": (a) as to any Base Rate Loan or C$ Prime
---------------------
Loan, the last day of each March, June, September and December, (b) as to
any Eurodollar Loan having an Interest Period of three months or less, the
last day of such Interest Period and (c) as to any Eurodollar Loan having
an Interest Period longer than three months, the day which is three months
after the first day of such Interest Period and the last day of such
Interest Period.
<PAGE>
17
"Interest Period": with respect to any Eurodollar Loan:
---------------
(a) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan and ending one, two, three or six months thereafter, as selected
by the Company in its notice of borrowing or notice of conversion, as
the case may be, given with respect thereto; and
(b) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such Eurodollar Loan
and ending one, two, three or six months thereafter, as selected by
the Company by irrevocable notice to the US Administrative Agent not
less than three Business Days prior to the last day of the then
current Interest Period with respect thereto;
provided that, all of the foregoing provisions relating to Interest Periods
--------
are subject to the following:
(i) if any Interest Period pertaining to a Eurodollar Loan would
otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest Period
into another calendar month in which event such Interest Period shall
end on the immediately preceding Business Day;
(ii) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date;
(iii) any Interest Period pertaining to a Eurodollar Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day
of a calendar month; and
(iv) the Company shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
"Interest Rate Protection Agreement": any interest rate protection
----------------------------------
agreement, interest rate future, interest rate option, interest rate cap or
collar or other interest rate hedge arrangement, to or under which the
Company or any of its Subsidiaries is a party or a beneficiary.
"Leverage Ratio": at any date of determination thereof, the ratio of
--------------
(a) Total Net Debt at such date to (b) Adjusted EBITDA for the then most
recently ended period of (i) in the case of the calculation of the
Applicable Margin, four consecutive fiscal quarters, or (ii) in the case of
subsection 8.10(a), twelve
<PAGE>
18
consecutive calendar months, for which financial statements shall have been
delivered to the Lenders pursuant to subsection 5.1, 7.1(a), 7.1(b) or
7.1(c), as the case may be.
"Lien": any mortgage or deed of trust, pledge, hypothecation,
----
assignment, deposit arrangement, security interest, lien, charge, easement,
encumbrance, preference, priority, or other security agreement or
preferential arrangement of any kind or nature whatsoever on or with
respect to such property or assets (including without limitation, any
Capitalized Lease Obligation, conditional sale, or other title retention
agreement having substantially the same economic effect as any of the
foregoing).
"Limited Partnership": collectively, PLC Command I, L.P. and PLC
-------------------
Command II, L.P., each a limited partnership organized and existing under
the laws of the Commonwealth of Pennsylvania.
"Loan Documents": this Agreement, each Draft, each Bankers'
--------------
Acceptance, any Notes, the Security Documents and any document, agreement
or certificate executed or delivered in connection herewith.
"Loan Parties": each Borrower, each Shareholder and each Subsidiary
------------
of the Company which is a party to a Loan Document.
"Loans": the collective reference to the US$ Loans and the C$ Loans.
-----
"Local Time": (a) in the case of matters relating to US$ Loans, New
----------
York City time, and (b) in the case of matters relating to C$ Loans,
Toronto time.
"Management Services Agreement": collectively, the Management and
-----------------------------
Administrative Services Agreement and the Software and Technology Services
Agreement, each dated as of October 27, 1995, between the Company and the
Canadian Borrower pursuant to which certain services are obligated to be
provided by the Company to the Canadian Borrower for which services the
Canadian Borrower is obligated to pay to the Company certain fees as
provided in such Agreements, as such Agreements may be amended,
supplemented or otherwise modified in accordance with subsection 8.11.
"Material Adverse Effect": a material adverse effect on (a) the
-----------------------
business, operations, property, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole or (b) the
validity or enforceability of this or any of the other Loan Documents or
the rights or remedies of the Administrative Agents or the Lenders
hereunder or thereunder.
"Montreal Property": the real property located at 1655 Fleetwood,
-----------------
Laval, Quebec, Canada.
<PAGE>
19
"Mortgages": the collective reference to all US Mortgages and all
---------
Canadian Mortgages.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
------------------
in Section 4001(a)(3) of ERISA.
"Net Income": with respect to any Person for any period, the
----------
consolidated net income of such Person and its Subsidiaries for such period
determined in accordance with GAAP, excluding any foreign currency
translation gains or losses added or deducted, as applicable, in the
computation of Net Income.
"Net Proceeds":
------------
(a) in the case of any Disposition, the aggregate amount of all
cash payments received by the relevant Borrower and its Subsidiaries
directly or indirectly in connection with such Disposition; provided
--------
that (i) Net Proceeds shall be net of (x) the amount of any legal,
title and recording tax expenses, commissions and other fees and
expenses paid by such Borrower and its Subsidiaries in connection with
such Disposition and (y) any federal, state, provincial and local
income or other taxes estimated to be payable by such Borrower and its
Subsidiaries (or, to the extent such Borrower is a Subchapter S
corporation, by such Borrower and/or the Shareholders) as a result of
such Disposition (but only to the extent that such estimated taxes are
in fact paid to the relevant federal, state, provincial or local
Governmental Authority) and (ii) Net Proceeds shall be net of any
repayments by such Borrower or any of its Subsidiaries of Indebtedness
to the extent that (x) such Indebtedness is secured by a Lien on the
property that is subject to such Disposition (which Indebtedness shall
be valued at the lesser of the value of the property or the amount of
the Indebtedness) and (y) the transferee of (or holder of a Lien on)
such property requires that such Indebtedness be repaid as a condition
to the purchase of such property; and
(b) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance (other than business interruption insurance),
condemnation awards and other compensation received by the relevant
Borrower and its Subsidiaries in respect of such Casualty Event net of
(i) reasonable expenses incurred by such Borrower and its Subsidiaries
in connection therewith, (ii) contractually required repayments on
Indebtedness (other than Indebtedness hereunder) to the extent secured
by a Lien on such property, (iii) any income and transfer taxes
payable by such Borrower or any of its Subsidiaries (or, to the extent
such Borrower is a Subchapter S corporation, by such Borrower and/or
its Shareholders) in respect of such Casualty Event and (iv) costs
resulting from the use of alternate facilities or warehouses by such
Borrower and/or any Subsidiaries as a result of such Casualty Event.
<PAGE>
20
"Non-Excluded Taxes": as defined in subsection 4.11.
------------------
"Notes": the collective reference to the US$ Notes and C$ Notes.
-----
"Participant": as defined in subsection 11.6(b).
-----------
"Partnership Agreement": the PLC Command I, L.P. Limited Partnership
---------------------
Agreement dated as of October 23, 1995 between PLC Command I, Inc. as
general partner and the Company as limited partner, as amended,
supplemented or modified thereto, and the PLC Command II, L.P. Limited
Partnership Agreement dated as of October 23, 1995 between PLC Command II,
Inc. as general partner and the Company as general partner, as amended,
supplemented or modified thereto.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
----
to Subtitle A of Title IV of ERISA.
"Permitted Acquisition": any acquisition by the Company or any Wholly
---------------------
Owned Subsidiary, on or after the Closing Date, whether through a purchase
of Capital Stock or assets or through a merger, consolidation or
amalgamation, of another Person or the assets constituting an entire
business or operating business unit of another Person, provided that:
--------
(a) the assets so acquired or, as the case may be, the assets of the
Person so acquired shall be in or related to the archives records
management business;
(b) no Default or Event of Default shall have occurred and be
continuing at the time thereof or would result therefrom;
(c) the Company shall have delivered to the US Administrative Agent,
as soon as available but in no event later than the earlier of (i) 10
days after the execution thereof and (ii) 3 Business Days prior the
closing of such acquisition, a copy of the executed purchase agreement
with respect thereto (without exhibits, except to the extent available
and requested by the US Administrative Agent) or the most recent draft
thereof;
(d) if the Purchase Price of such Permitted Acquisition would exceed
US$25,000,000 (or the equivalent thereof in other currencies), the
Required Lenders shall have consented in writing to such Permitted
Acquisition, provided, however, that no consent shall be required for
-------- -------
an acquisition consummated by a Borrower prior to the initial
borrowing hereunder;
(e) if, after giving effect to such acquisition, the aggregate amount
of the proceeds of Acquisition Loans made in any fiscal year of the
Company that are used to fund Permitted Acquisitions shall exceed
US$65,000,000, (i) the Required Lenders shall have consented in
writing to such Permitted
<PAGE>
21
Acquisition and (ii) the Company shall, not less than five Business
Days prior to the closing of such Permitted Acquisition, have provided
updated financial projections for the then remaining life of this
Agreement and delivered a compliance certificate of a Responsible
Officer demonstrating pro forma compliance with subsections 8.8, 8.9
and 8.10 for the then remaining life of this Agreement; and
(f) such acquisition shall be effected in such manner so that the
acquired Capital Stock or assets are owned either by the Company or a
Wholly Owned Subsidiary and, if effected by merger, consolidation or
amalgamation, the Company or a Wholly Owned Subsidiary shall be the
continuing, surviving or resulting entity.
"Permitted Holders": collectively, Leo W. Pierce, Sr., his children
-----------------
or other lineal descendants (whether adoptive or biological), the spouses
of any of the foregoing and any probate estate of any such individual and
any trust, so long as one or more of the foregoing individuals is the
principal beneficiary of such trust, and any partnership, corporation or
other entity all of the partners, shareholders, members or owners of which
are any one or more of the foregoing.
"Permitted Intercompany Indebtedness": (a) loans and advances from
-----------------------------------
the Company to the Canadian Borrower, (b) loans and advances from the
Canadian Borrower to the Company, and (c) accrued but unpaid fees owing by
the Canadian Borrower to the Company pursuant to the Management Services
Agreement.
"Permitted Mortgage Debt": Indebtedness of the Company permitted by
-----------------------
subsection 8.4(c).
"Person": an individual, partnership, corporation, business trust,
------
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Pierce Family Partnership": Pierce Family Partnership Ltd., a
-------------------------
limited partnership created under the laws of the Commonwealth of
Pennsylvania.
"Pierce Group": include one or more of each of Constance P. Buckley,
------------
Katheryn Cox, Maurice E. Cox, Jr., J. Peter Pierce, Leo W. Pierce, Sr., Leo
W. Pierce, Jr., Mary E. Pierce, Michael J. Pierce, Barbara P. Quinn, Monica
Cox Durfee, Constance Cox, Andrea J. Cox, Deirdre Cox, Maurice Cox, III,
Gregory Cox, Christopher Cox, Adrien Cox, Brendan Cox, Timothy Cox, Conor
Cox, Suzanne Cox, Sarah Quinn, Michael A. Pierce, Matthew Pierce, Daniel J.
Quinn, Jr., Marjorie L. Pierce, Conor F. Quinn, Kate Pierce, Alexandra R.
Pierce, Julia S. Pierce, John P. Pierce, Jr., Dylan Quinn, Hilary L.
Buckley, and Hannah R. Buckley.
"Plan": at a particular time, any employee benefit plan which is
----
covered by ERISA and in respect of which the Company or a Commonly
Controlled Entity is
<PAGE>
22
(or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Pledged Securities": as defined in the U.S. Global Guarantee and
------------------
Security Agreement.
"PPSA": the Personal Property Security Act (Ontario).
----
"Purchase Price": with respect to any Permitted Acquisition, an
--------------
amount equal to the sum of (i) the aggregate consideration, whether cash,
property (at the fair market value thereof determined in good faith by the
Board of Directors) or securities (including, without limitation, any
Indebtedness incurred pursuant to subsection 8.4(f) and the fair market
value of any Capital Stock of the Company issued to the seller in such
Permitted Acquisition), paid or delivered by the Company and its
Subsidiaries in connection with such Permitted Acquisition plus (ii) the
aggregate amount of liabilities of the acquired business (net of current
assets of the acquired business) that would be reflected on a balance sheet
(if such were to be prepared) of the Company and its Subsidiaries after
giving effect to such Permitted Acquisition.
"RCRA": shall mean the Resource Conservation and Recovery Act, as the
----
same may be amended from time to time, 42 U.S.C. (S) 6901 et seq.
-- ---
"Refunding Bankers' Acceptance": as defined in subsection 3.3(d).
-----------------------------
"Registers": as defined in subsection 11.6(d).
---------
"Regulation D, G, T, U or X": Regulation D, G, T, U or X of the Board
--------------------------
of Governors of the Federal Reserve System as in effect from time to time.
"Reinvestable Proceeds": as defined in subsection 4.1(b).
---------------------
"Release": disposing, discharging, injecting, spilling, pumping,
-------
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing,
pouring and the like, into or upon any land or water or air, or otherwise
entering into the environment.
"Reorganization": with respect to any Multiemployer Plan, the
--------------
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
----------------
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. (S)
2615.
"Required C$ Lenders": at any date, C$ Lenders the C$ Commitment
-------------------
Percentages of which aggregate at least 66-2/3% at such date.
<PAGE>
23
"Required Lenders": at any date, Lenders the Commitment Percentages
----------------
of which aggregate at least 66-2/3% at such date.
"Required US$ Lenders": at any date, US$ Lenders the US Commitment
--------------------
Percentages of which aggregate at least 66-2/3% at such date.
"Requirement of Law": as to any Person, the Certificate of
------------------
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Responsible Officer": with respect to either Borrower, the chief
-------------------
executive officer, the president, the chief financial officer or the
treasurer of such Borrower.
"Restricted Payment": as defined in the Senior Subordinated Notes
------------------
Indenture, as in effect on the date hereof.
"Securities Act": the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder.
"Security Documents": the collective reference to the US Security
------------------
Documents and the Canadian Security Documents.
"Senior Subordinated Notes": the Senior Subordinated Notes due 2006
-------------------------
of the Company in an aggregate principal amount of US$200,000,000 issued
pursuant to the Senior Subordinated Notes Indenture, as the same may be
amended, sup-plemented or otherwise modified from time to time in
accordance with subsection 8.11.
"Senior Subordinated Notes Indenture": the Senior Subordinated Notes
-----------------------------------
Indenture, dated as of July 15, 1996, between the Company and United States
Trust Company of New York, as trustee, as amended, supplemented or
otherwise modified from time to time in accordance with subsection 8.11.
"Shareholders": as defined in subsection 5.17.
------------
"Shareholders' Agreements": collectively, all agreements entered into
------------------------
by the Company or its Subsidiaries, on the one hand, and any Affiliate of
the Company, on the other hand, governing the terms and relative rights of
its Capital Stock and any agreements entered into by Affiliates of the
Company with respect to the capital stock or other equity interest of the
Company or any of its Subsidiaries.
"Single Employer Plan": any Plan which is covered by Title IV of
--------------------
ERISA, but which is not a Multiemployer Plan.
<PAGE>
24
"Subsidiary": as to any Person, a corporation, partnership or other
----------
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Company.
"Tax Distributions": for so long as the Company is taxed as an S
-----------------
corporation or other pass-through entity for federal income tax purposes,
distributions to the holders of Capital Stock of the Company based on
estimates of the highest amount of federal, state and local income tax per
share of Capital Stock that any holder of Capital Stock of the Company
would be required to pay as a result of the Company's being treated as a
pass-through entity for income tax purposes.
"Tax Refund": with respect to either Borrower, any cash payment
----------
received by such Borrower as a rebate or refund of any federal, state,
provincial or local income taxes paid by such Borrower or of any taxes with
respect to the assets or properties of such Borrower.
"Tax Sharing Agreements": collectively, all tax sharing, tax
----------------------
allocation and other similar agreements entered into by the Company or any
of its Subsidiaries.
"Termination Date": June 30, 2002.
----------------
"Texas Avenue Property": that certain real property leased by the
---------------------
Company pursuant to a Ground Lease, dated as of August 1, 1922, between the
Company and S. Bernard Naman, as Trustee, located at 1120 Texas Avenue,
Houston, Texas.
"Total Net Debt": at any date of determination, without duplication,
--------------
the excess, if any, of all Indebtedness of the Company and its Subsidiaries
(excluding (a) all Indebtedness of the type described in clause (e) of the
definition thereof, except to the extent amounts are owing with respect
thereto upon the termination of the respective agreement constituting such
Indebtedness) and all Guarantee Obligations of the Company and its
Subsidiaries in respect of Indebtedness of third Persons over (b) any cash
balances in excess of US$500,000 then standing to the credit of the Company
and its Subsidiaries in their respective operating accounts and the
aggregate amount of Cash Equivalents then owned by the Company and its
Subsidiaries.
"Transferee": as defined in subsection 11.6(f).
----------
"Travelers Corporation Building Archives": the real property located
---------------------------------------
at 1100 Kennedy Boulevard, Windsor, Connecticut.
<PAGE>
25
"Type": (a) as to any US$ Loan, its nature as an Base Rate Loan or a
----
Eurodollar Loan and (b) as to any C$ Loan, its nature as a C$ Prime Loan or
a Bankers' Acceptance.
"US Administrative Agent": Canadian Imperial Bank of Commerce, New
-----------------------
York Agency, together with its affiliates, as the arranger of the
Commitments and as the agent for the Lenders under this Agreement and the
other Loan Documents.
"US Administrative Office": the US Administrative Agent's office
------------------------
located at 425 Lexington Avenue, New York, New York 10017, or such other
office in the United States as may be designated by the US Administrative
Agent by written notice to the Company and the Lenders.
"US Commitment": as to any US$ Lender, its obligation to make US$
-------------
Loans to the Company hereunder in an aggregate principal amount at any one
time outstanding not to exceed the amount set forth opposite such Lender's
name on Schedule 1.1 as such Lender's "US Commitment", as such amount may
be changed from time to time as provided herein. The original aggregate
principal amount of the US Commitments is US$100,000,000.
"US Commitment Percentage": as to any US$ Lender at any time, the
------------------------
percentage of the aggregate US Commitments then constituted by such
Lender's US Commitment.
"US$ Equivalent": on any date of determination, with respect to any
--------------
amount in C$, the equivalent in US Dollars of such amount, determined by
the US Administrative Agent using the Canadian Exchange Rate then in
effect.
"US$ Exchange Rate": on a particular date, the rate at which US$
-----------------
may be exchanged into C$, determined by reference to the Bank of Canada
noon rate as published on the Reuters Screen page BOFC on the immediately
preceding Business Day. In the event that such rate does not appear on such
Reuters page, the "US$ Exchange Rate" shall be determined by reference to
-----------------
any other means (as selected by the relevant Administrative Agent) by which
such rate is quoted or published from time to time by the Bank of Canada
(in each case as in effect at or about 12:00 Noon, Toronto time, on the
Business Day immediately preceding the relevant date of determination);
provided, that if at the time of any such determination, for any reason,
--------
no such exchange rate is being quoted or published, the relevant
Administrative Agent may use any reasonable method as it deems applicable
to determine such rate, and such determination shall be conclusive absent
manifest error.
"US$ Lender": each Lender designated as a "US$ Lender" on Schedule
----------
1.1, as such Schedule may be modified from time to time as provided herein.
"US$ Loans": as defined in subsection 2.1(a).
---------
<PAGE>
26
"US Dollars" and "US$": dollars in lawful currency of the United
---------- ---
States of America.
"US Global Guarantee and Security Agreement": the US Global Guarantee
------------------------------------------
and Security Agreement, substantially in the form of Exhibit D.
"US Lending Office": as to each US$ Lender, the office in the United
-----------------
States specified as the "US Lending Office" of such Lender on Schedule 1.1
or in an Assignment and Acceptance, as the case may be, or such other
office in the United States as may be designated by such Lender by written
notice to Company and the US Administrative Agent.
"US Mortgage": a mortgage to be executed and delivered by a domestic
-----------
Loan Party, with respect to a US Mortgaged Property, substantially in the
form of Exhibit F-2, as the same may be amended, supplemented or otherwise
modified from time to time.
"US Mortgaged Properties": all real property listed and identified as
-----------------------
such in Part B of Schedule 5.8 and designated as such.
"US$ Notes": as defined in subsection 4.1(f).
---------
"US Register": as defined in subsection 11.6(d).
-----------
"US Security Documents": the collective reference to the US Global
---------------------
Guarantee and Security Agreement, the US Mortgages and all other security
documents hereafter delivered to the US Administrative Agent granting a
Lien on any asset or assets of the Company or any Domestic Subsidiary to
secure the obligations and liabilities of the Company hereunder and under
any of the other Loan Documents or to secure any guarantee by any
subsidiary of any such obligations and liabilities.
"Wholly Owned Subsidiary": any Subsidiary, 99% or more of the
-----------------------
outstanding Capital Stock (other than directors' qualifying shares or
shares held pursuant to similar requirements of law in respect of Foreign
Subsidiaries) of which are owned, directly or indirectly, by the Company.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
-----------------------------
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in any Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Company and its Subsidiaries not defined in subsection 1.1 and accounting terms
partly defined in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
<PAGE>
27
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. THE US COMMITMENTS
2.1 The US Commitments. (a) Subject to the terms and conditions
------------------
hereof, each US$ Lender severally agrees to make revolving credit loans ("US$
---
Loans") to the Company from time to time during the Commitment Period in an
- -----
aggregate principal amount at any one time outstanding not to exceed the amount
of such Lender's US Commitment. During the Commitment Period the Company may
use the US Commitments by borrowing, prepaying or repaying the US$ Loans of such
Lender in whole or in part, and reborrowing, all in accordance with the terms
and conditions hereof.
(b) The US$ Loans may from time to time be (i) Eurodollar Loans, (ii)
Base Rate Loans or (iii) a combination thereof, as determined by the Company and
notified to the US Administrative Agent in accordance with subsections 2.2 and
2.3, provided that no US$ Loan shall be made as a Eurodollar Loan after the day
--------
that is one month prior to the Termination Date.
2.2 Procedure for US$ Loan Borrowing. The Company may borrow under
--------------------------------
the US Commitments during the Commitment Period on any Business Day, provided
--------
that the Company shall give the US Administrative Agent irrevocable written or
telephonic notice (in the case of telephonic notice, to be promptly confirmed in
writing) (which notice must be received by the US Administrative Agent prior to
10:00 A.M., New York City time, (a) three Business Days prior to the requested
Borrowing Date, if all or any part of the requested US$ Loans are to be
initially Eurodollar Loans, or (b) one Business Day prior to the requested
Borrowing Date, in the case of Base Rate Loans), specifying (i) the amount to be
borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to
be of Eurodollar Loans, Base Rate Loans or a combination thereof and (iv) if the
borrowing is to be entirely or partly of Eurodollar Loans, the amount of such
Type of Loan and the length of the initial Interest Period or Interest Periods
therefor. Each borrowing under the US Commitments shall be in an amount equal to
(x) in the case of Base Rate Loans, US$300,000 or a whole multiple of $100,000
in excess thereof (or, if the then Available Commitments are less than
US$300,000, such lesser amount) and (y) in the case of Eurodollar Loans,
US$1,000,000 or a whole multiple of US$100,000 in excess thereof (or, if the
then Available Commitments are less then US$1,000,000, such lesser amount). Upon
receipt of any such notice from the Company, the US Administrative Agent shall
promptly notify each US$ Lender thereof. Each US$ Lender will make the amount of
its pro rata share of each borrowing available to the US Administrative Agent
for the account of the Company at the US Administrative Office prior to 11:00
A.M., New York City time, on the
<PAGE>
28
Borrowing Date requested by the Company in funds immediately available to the US
Administrative Agent. Such borrowing will then be made available to the Company
by the US Administrative Agent crediting the account of the Company on the books
of such office with the aggregate of the amounts made available to the US
Administrative Agent by the US$ Lenders and in like funds as received by the US
Administrative Agent.
2.3 Conversion and Continuation Options. (a) The Company may elect
-----------------------------------
from time to time to convert Eurodollar Loans to Base Rate Loans by giving the
US Administrative Agent at least one Business Day's prior irrevocable written or
telephonic notice (in the case of telephonic notice, to be promptly confirmed in
writing) of such election, provided that if any such conversion of Eurodollar
--------
Loans occurs on a day other than the last day of an Interest Period with respect
thereto the Company shall pay any breakage costs in connection with such
conversion. The Company may elect from time to time to convert Base Rate Loans
to Eurodollar Loans by giving the US Administrative Agent at least three
Business Days' prior irrevocable written or telephonic notice (in the case of
telephonic notice, to be promptly confirmed in writing) of such election. Any
such notice of conversion to Eurodollar Loans shall specify the length of the
initial Interest Period or Interest Periods therefor. Upon receipt of any such
notice the US Administrative Agent shall promptly notify each US$ Lender
thereof. All or any part of outstanding Eurodollar Loans and Base Rate Loans
may be converted as provided herein, provided that (i) no Base Rate Loan may be
--------
converted into a Eurodollar Loan when any Event of Default has occurred and is
continuing and the US Administrative Agent has or the Required US$ Lenders have
determined that such a conversion is not appropriate and (ii) no Base Rate Loan
may be converted into a Eurodollar Loan after the date that is one month prior
to the Termination Date.
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Company giving,
at least three Business Days prior, irrevocable written or telephonic notice (in
the case of telephonic notice, to be promptly confirmed in writing) to the US
Administrative Agent, in accordance with the applicable provisions of the term
"Interest Period" set forth in subsection 1.1, of the length of the next
Interest Period to be applicable to such Loans, provided that no Eurodollar Loan
--------
may be continued as such (i) when any Event of Default has occurred and is
continuing and the US Administrative Agent has or the Required US$ Lenders have
determined that such a continuation is not appropriate or (ii) after the date
that is one month prior to the Termination Date in accordance with the terms
described above and provided, further, that if the Company shall fail to give
-------- -------
such notice or if such continuation is not permitted such Loans shall be
automatically converted to Base Rate Loans on the last day of such then expiring
Interest Period. Upon receipt of any notice given by the Company pursuant to
this subsection 2.3(b), the US Administrative Agent shall promptly notify each
US$ Lender thereof.
2.4 Minimum Amounts and Maximum Number of Eurodollar Tranches.
---------------------------------------------------------
Notwithstanding anything to the contrary in this Agreement, all borrowings,
payments, prepayments, conversions and continuations of US$ Loans hereunder and
all selections of Interest Periods hereunder shall be in such amounts and be
made pursuant to such elections
<PAGE>
29
so that, after giving effect thereto, the aggregate principal amount of the
Loans comprising each Eurodollar Tranche shall be equal to US$1,000,000 or a
whole multiple of US$100,000 in excess thereof. More than one borrowing may
occur on the same date, but in no event shall there be more than five Eurodollar
Tranches outstanding at any time.
SECTION 3. THE CANADIAN COMMITMENTS
3.1 The Canadian Commitments. Subject to the terms and conditions
------------------------
hereof, each C$ Lender severally agrees to make revolving credit loans (which
shall be C$ Prime Loans) to, and to accept and, at the option of the Canadian
Borrower, purchase Bankers' Acceptances from, the Canadian Borrower from time to
time during the Commitment Period in an aggregate principal amount at any one
time outstanding not to exceed such Lender's Canadian Commitment. During the
Commitment Period, the Canadian Borrower may use the Canadian Commitments by
borrowing, prepaying or repaying the C$ Prime Loans or Bankers' Acceptances, in
whole or in part, and reborrowing, all in accordance with the terms and
conditions hereof.
3.2 Procedure for C$ Loan Borrowing. The Canadian Borrower may
-------------------------------
borrow C$ Prime Loans during the Commitment Period on any Business Day, provided
--------
that the Canadian Borrower shall give the Canadian Administrative Agent
irrevocable written or telephonic notice (in the case of telephonic notice, to
be promptly confirmed in writing) (which notice must be received by the Canadian
Administrative Agent prior to 10:00 A.M., Toronto time, one Business Day prior
to the requested Borrowing Date), specifying (a) the amount to be borrowed and
(b) the requested Borrowing Date. Each borrowing of C$ Prime Loans shall be in
an amount equal to C$300,000 or a whole multiple of C$100,000 in excess thereof.
Upon receipt of any such irrevocable notice from the Canadian Borrower, the
Canadian Administrative Agent shall promptly notify each C$ Lender thereof.
Each C$ Lender will make the amount of its pro rata share of each such borrowing
available to the Canadian Administrative Agent for the account of the Canadian
Borrower at the Canadian Administrative Office prior to 11:00 A.M., Toronto
time, on the Borrowing Date requested by the Canadian Borrower in funds
immediately available to the Canadian Administrative Agent. Such borrowing will
then be made available, on such Borrowing Date to the Canadian Borrower by the
Canadian Administrative Agent crediting the account of the Canadian Borrower on
the books of the Canadian Administrative Office with the aggregate of the
amounts made available to the Canadian Administrative Agent by the C$ Lenders
and in like funds as received by the Canadian Administrative Agent.
3.3 Bankers' Acceptances. (a) The Canadian Borrower may issue
--------------------
Bankers' Acceptances denominated in C$, for acceptance and, at the Canadian
Borrower's option, purchase by the C$ Lenders, each in accordance with the
provisions of this subsection 3.3.
<PAGE>
30
(b) Procedures.
----------
(1) Notice. The Canadian Borrower shall notify the Canadian
------
Administrative Agent by irrevocable written or telephonic notice (in the
case of telephonic notice, to be promptly confirmed in writing) by 10:00
A.M., Toronto time, one Business Day prior to the Borrowing Date in respect
of any borrowing by way of Bankers' Acceptances.
(2) Minimum Borrowing Amount. Each borrowing by way of Bankers'
------------------------
Acceptances shall be in a minimum aggregate face amount of C$1,000,000 or a
whole multiple of C$100,000 in excess thereof.
(3) Face Amounts. The face amount of each Bankers' Acceptance shall
------------
be C$100,000 or any whole multiple thereof.
(4) Term. Bankers' Acceptances shall be issued and shall mature on a
----
Business Day. Each Bankers' Acceptance shall have a term of 30, 60, 90 or
180 days (or such shorter or longer term as shall be agreed to by all of
the C$ Lenders), shall mature on or before the Termination Date and shall
be in form and substance reasonably satisfactory to each C$ Lender.
(5) Bankers' Acceptances in Blank. To facilitate the acceptance of
-----------------------------
Bankers' Acceptances under this Agreement, the Canadian Borrower shall,
from time to time as required, provide to the Canadian Administrative Agent
Drafts duly executed and endorsed in blank by the Canadian Borrower in
quantities sufficient for each C$ Lender to fulfill its obligations
hereunder. Each C$ Lender is hereby authorized to accept such Drafts
endorsed in blank in such face amounts as may be determined by such C$
Lender in accordance with the terms of this Agreement, provided that the
--------
aggregate amount thereof is less than or equal to the aggregate amount of
Bankers' Acceptances required to be accepted by such C$ Lender. No C$
Lender shall be responsible or liable for its failure to accept a Bankers'
Acceptance if the cause of such failure is, in whole or in part, due to the
failure of the Canadian Borrower to provide duly executed and endorsed
Drafts to the Canadian Administrative Agent on a timely basis, nor shall
any C$ Lender be liable for any damage, loss or other claim arising by
reason of any loss or improper use of any such instrument except loss or
improper use arising by reason of the gross negligence or willful
misconduct of such C$ Lender, its officers, employees, agents or
representatives. The Canadian Administrative Agent and each C$ Lender
shall exercise such care in the custody and safekeeping of Drafts as it
would exercise in the custody and safekeeping of similar property owned by
it. Each C$ Lender will, upon the request of the Canadian Borrower,
promptly advise the Canadian Borrower of the number and designation, if
any, of Drafts then held by it for the Canadian Borrower. Each C$ Lender
shall maintain a record with respect to Drafts and Bankers' Acceptances (i)
received by it from the Canadian Administrative Agent in blank hereunder,
(ii) voided by it for any reason, (iii) accepted by it hereunder, (iv)
purchased by it hereunder and (v) cancelled at their respective maturities.
Each C$ Lender further
<PAGE>
31
agrees to retain such records in the manner and for the statutory periods
provided in the various Canadian provincial or federal statutes and
regulations which apply to such C$ Lender.
(6) Execution of Bankers' Acceptances. Drafts of the Canadian
---------------------------------
Borrower to be accepted as Bankers' Acceptances hereunder shall be duly
executed on behalf of the Canadian Borrower. Notwithstanding that any
person whose signature appears on any Bankers' Acceptance as a signatory
for the Canadian Borrower may no longer be an authorized signatory for the
Canadian Borrower at the date of issuance of a Bankers' Acceptance, such
signature shall nevertheless be valid and sufficient for all purposes as if
such authority had remained in force at the time of such issuance, and any
such Bankers' Acceptance so signed shall be binding on the Canadian
Borrower.
(7) Issuance of Bankers' Acceptances. Promptly following receipt of
--------------------------------
a notice of borrowing by way of Bankers' Acceptances, the Canadian
Administrative Agent shall so advise the C$ Lenders and shall advise each
C$ Lender of the face amount of each Draft to be accepted by it and the
term thereof. The aggregate face amount of Drafts to be accepted by a C$
Lender shall be determined by the Canadian Administrative Agent on a pro
rata basis by reference to the respective Canadian Commitments of the C$
Lenders, except that, if the face amount of a Draft which would otherwise
be accepted by a C$ Lender, would not be C$100,000 or a whole multiple
thereof, such face amount shall be increased or reduced by the Canadian
Administrative Agent in its sole and unfettered discretion to the nearest
whole multiple of C$100,000.
(8) Acceptance of Bankers' Acceptances. Each Draft to be accepted by
----------------------------------
a C$ Lender shall be accepted at such C$ Lender's Canadian Lending Office.
(9) Purchase of Bankers' Acceptances. Each C$ Lender shall be
--------------------------------
required to purchase (subject to the commercial availability of a resale
market in the case of Bankers' Acceptances with a term of approximately 30,
60, 90 or 180 days, as the case may be) from the Canadian Borrower on such
Borrowing Date, at the Applicable BA Discount Rate, the Bankers'
Acceptances accepted by it on such Borrowing Date and to provide to the
Canadian Administrative Agent the BA Discount Proceeds thereof not later
than 12:00 Noon, Toronto time, on such Borrowing Date for the account of
the Canadian Borrower. The Acceptance Fee payable by the Canadian Borrower
to such C$ Lender under subsection 3.3(e) in respect of each Bankers'
Acceptance accepted and purchased by such C$ Lender from the Canadian
Borrower shall be set off against the BA Discount Proceeds payable by such
C$ Lender under this subsection 3.3(b)(9). Not later than 2:00 P.M.,
Toronto time, on such Borrowing Date the Canadian Administrative Agent
shall make such BA Discount Proceeds available to the Canadian Borrower by
crediting the account of the Canadian Borrower on the books of the Canadian
Administrative Office with the aggregate of the amounts made available to
the
<PAGE>
32
Canadian Administrative Agent by the C$ Lenders and in like funds as
received by the Canadian Administrative Agent.
(10) Sale of Bankers' Acceptances. Each C$ Lender may at any time
----------------------------
and from time to time hold, sell, rediscount or otherwise dispose of any or
all Bankers' Acceptances accepted and purchased by it.
(11) Waiver of Presentment and Other Conditions. To the extent
------------------------------------------
permitted by applicable law, the Canadian Borrower waives presentment for
payment and any other defense to payment of any amounts due to a C$ Lender
in respect of a Bankers' Acceptance accepted by it pursuant to this
Agreement which might exist solely by reason of such Bankers' Acceptance
being held, at the maturity thereof, by such C$ Lender in its own right,
and the Canadian Borrower agrees not to claim any days of grace if such C$
Lender as holder sues the Canadian Borrower on the Bankers' Acceptances for
payment of the amount payable by the Canadian Borrower thereunder.
(c) The Canadian Borrower shall reimburse the C$ Lender for, and
there shall become due and payable at 10:00 a.m., Toronto time, on the contract
maturity date for each Bankers' Acceptance, an amount in Canadian Dollars in
same day funds equal to the face amount of such Bankers' Acceptance. The
Canadian Borrower shall make each such reimbursement payment (i) by causing any
proceeds of a Refunding Bankers' Acceptance issued in accordance with subsection
3.3(d) or conversion of such Bankers' Acceptance in accordance with subsection
3.4 to be applied in reduction of such reimbursement payment; and (ii) by
depositing the amount of such reimbursement payment (or any portion thereof
remaining unpaid after application of any proceeds referred to in clause (i))
with the Canadian Administrative Office in accordance with subsection 4.8. The
Canadian Borrower's payment in accordance with this Section shall satisfy its
obligations under any Bankers' Acceptance to which it relates, and the C$ Lender
which has accepted such Bankers' Acceptance shall thereafter be solely
responsible for the payment of such Bankers' Acceptance.
(d) The Canadian Borrower shall give irrevocable written or telephonic
notice (in the case of telephonic notice, to be promptly confirmed in writing)
(or such other method of notification as may be agreed upon between the Canadian
Administrative Agent and the Canadian Borrower) to the Canadian Administrative
Agent at or before 10:00 A.M., Toronto time, one Business Day prior to the
maturity date of each Bankers' Acceptance of the Canadian Borrower's intention
to issue a Bankers' Acceptance on such maturity date (a "Refunding Bankers'
-----------------
Acceptance") to provide for the payment of such maturing Bankers' Acceptance (it
- ----------
being understood that payments by the Canadian Borrower and fundings by the C$
Lenders in respect of each maturing Bankers' Acceptance and the related
Refunding Bankers' Acceptance shall be made on a net basis reflecting the
difference between the face amount of such maturing Bankers' Acceptance and the
BA Discount Proceeds (net of the applicable Acceptance Fee) of such Refunding
Bankers' Acceptance). If the Canadian Borrower fails to give such notice or does
not have sufficient funds on deposit in the amount of reimbursement payment in
accordance with subsection 3.3(c)(ii), the Canadian
<PAGE>
33
Borrower shall be deemed to have requested that such maturing Bankers'
Acceptances be repaid with the proceeds of C$ Prime Loans (without any
requirement to give notice with respect thereto), commencing on the maturity
date of such maturing Bankers' Acceptances.
(e) An Acceptance Fee shall be payable by the Canadian Borrower to
each C$ Lender in advance (in the manner specified in subsection 3.3(b)(9)) upon
the issuance of a Bankers' Acceptance to be accepted by such C$ Lender
calculated at the rate per annum equal to the Applicable Margin, such Acceptance
Fee to be calculated on the face amount of such Bankers' Acceptance and to be
computed on the basis of the number of days in the term of such Bankers'
Acceptance.
(f) Upon the occurrence of any Event of Default which is continuing,
and in addition to any other rights or remedies of any C$ Lender and the
Canadian Administrative Agent hereunder, any C$ Lender or the Canadian
Administrative Agent (or such alternate arrangement as may be agreed upon by the
Canadian Borrower and such C$ Lender or the Canadian Administrative Agent, as
applicable) shall be entitled to deposit and retain in an account to be
maintained by the Canadian Administrative Agent (bearing interest at the
Canadian Administrative Agent's rates as may be applicable in respect of other
deposits of similar amounts for similar terms), for the ratable benefit of the
C$ Lenders, amounts which are received by such C$ Lender or the Canadian
Administrative Agent from the Canadian Borrower hereunder or as proceeds of the
exercise of any rights or remedies of any C$ Lender or the Canadian
Administrative Agent hereunder against the Canadian Borrower, to the extent such
amounts may be required to satisfy any contingent or unmatured obligations or
liabilities of the Canadian Borrower to the C$ Lenders or the Canadian
Administrative Agent, or any of them hereunder.
3.4 Conversion Option. Subject to the provisions of this Agreement,
-----------------
the Canadian Borrower may, prior to the Termination Date, effective on any
Business Day, convert, in whole or in part, C$ Prime Loans into Bankers'
Acceptances or vice versa upon giving to the Canadian Administrative Agent prior
irrevocable written or telephonic notice (in the case of telephonic notice, to
be promptly confirmed in writing) within the notice period and in the form which
would be required to be given to the Canadian Administrative Agent in respect of
the category of C$ Loan into which the outstanding C$ Loan is to be converted in
accordance with the provisions of subsection 3.2 or 3.3, as applicable, provided
--------
that:
(a) no C$ Prime Loan may be converted into a Bankers'
Acceptance when any Event of Default has occurred and is continuing;
(b) each conversion to Bankers' Acceptances shall be for an aggregate
amount of C$1,000,000 (and whole multiples of C$100,000 in excess
thereof), and each conversion to C$ Prime Loans shall be in a minimum
aggregate amount of C$100,000; and
<PAGE>
34
(c) Bankers' Acceptances may be converted only on the maturity date of
such Bankers' Acceptances and, provided that, if less than all
--------
Bankers' Acceptances are converted, then after such conversion not
less than C$1,000,000 (and whole multiples of C$100,000 in excess
thereof) shall remain as Bankers' Acceptances.
3.5 Circumstances Making Bankers' Acceptances Unavailable. (a) If
-----------------------------------------------------
the Canadian Administrative Agent determines in good faith, which determination
shall be final, conclusive and binding upon the Canadian Borrower, and notifies
the Canadian Borrower that, by reason of circumstances affecting the money
market, there is no market for Bankers' Acceptances, then:
(i) the right of the Canadian Borrower to request a borrowing by way
of Bankers' Acceptance shall be suspended until the Canadian Administrative
Agent determines that the circumstances causing such suspension no longer
exist and the Canadian Administrative Agent so notifies the Canadian
Borrower; and
(ii) any notice relating to a borrowing by way of Bankers' Acceptance
which is outstanding at such time shall be deemed to be a notice requesting
a borrowing by way of C$ Prime Loan (all as if it were a notice given
pursuant to subsection 3.2).
(b) The Canadian Administrative Agent shall promptly notify the
Canadian Borrower and the C$ Lenders of the suspension of the Canadian
Borrower's right to request a borrowing by way of Bankers' Acceptance and of the
termination of such suspension.
SECTION 4. GENERAL PROVISIONS
4.1 Repayment of Loans; Evidence of Debt. (a) The Company hereby
------------------------------------
unconditionally promises to pay to the US Administrative Agent for the account
of each US$ Lender the then unpaid principal amount of each US$ Loan of such US$
Lender on the Termination Date (or such earlier date on which the US$ Loans
become due and payable pursuant to Section 9). The Company hereby further
agrees to pay interest on the unpaid principal amount of the US$ Loans from time
to time outstanding from the date hereof until payment in full thereof at the
rates per annum, and on the dates, set forth in subsection 4.5.
(b) The Canadian Borrower hereby unconditionally promises to pay to
the Canadian Administrative Agent for the account of each C$ Lender the then
unpaid principal amount of each C$ Loan of such C$ Lender on the Termination
Date (or such earlier date on which the C$ Loans become due and payable pursuant
to Section 9). The Canadian Borrower hereby further agrees to pay interest on
the unpaid principal amount of the C$ Loans from time to time outstanding from
the date hereof until payment in full thereof at the rates per annum, and on the
dates, set forth in subsection 4.5.
<PAGE>
35
(c) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the relevant Borrower to such
Lender resulting from each Loan of such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.
(d) Each Administrative Agent shall maintain the Register pursuant to
subsection 11.6(d), and a subaccount therein for each relevant Lender, in which
shall be recorded (i) the amount of each relevant Loan made hereunder, whether
such Loan is, as applicable, a US$ Loan, a C$ Prime Loan or a Bankers'
Acceptance, the Type of each US$ Loan made and each Interest Period applicable
to any Eurodollar Loan, (ii) the amount of any principal or interest due and
payable or to become due and payable from the relevant Borrower to each relevant
Lender hereunder and (iii) both the amount of any sum received by such
Administrative Agent hereunder from the relevant Borrower and each relevant
Lender's share thereof.
(e) The entries made in the Registers and the accounts of each Lender
maintained pursuant to subsection 4.1(c) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
----- -----
obligations of the relevant Borrower therein recorded; provided, however, that
-------- -------
the failure of any Lender or either Administrative Agent to maintain such
Register or any such account, or any error therein, shall not in any manner
affect the obligation of each Borrower to repay (with applicable interest and
all other amounts owing with respect thereto) the Loans made to such Borrower by
such Lender in accordance with the terms of this Agreement.
(f) The Company agrees that, upon the request to the US
Administrative Agent by any US$ Lender, the Company will execute and deliver to
such Lender a promissory note of the Company evidencing the US$ Loans of such
Lender, substantially in the form of Exhibit A-1 with appropriate insertions as
to date and principal amount (a "US$ Note").
--------
(g) The Canadian Borrower agrees that, upon the request to the
Canadian Administrative Agent by any C$ Lender, the Canadian Borrower will
execute and deliver to such Lender a promissory note of the Canadian Borrower
evidencing the C$ Prime Loans of such Lender, substantially in the form of
Exhibit A-2 with appropriate insertions as to date and principal amount (a "C$
--
Note").
- ----
4.2 Commitment Fee. (a) The Company agrees to pay to the US
--------------
Administrative Agent for the account of each US$ Lender a commitment fee for the
period from and including the first day of the Commitment Period to the
Termination Date, computed at the rate of 3/8ths of 1% per annum on the average
daily amount of the Available US Commitment of such US$ Lender during the period
for which payment is made, payable quarterly in arrears on the last day of each
March, June, September and December and on the Termination Date or such earlier
date as the US Commitments shall terminate as provided herein, commencing on the
first of such dates to occur after the date hereof.
<PAGE>
36
(b) The Canadian Borrower agrees to pay to the Canadian
Administrative Agent for the account of each C$ Lender a commitment fee for the
period from and including the first day of the Commitment Period to the
Termination Date, computed at the rate of 3/8ths of 1% per annum on the average
daily amount of the Available Canadian Commitment of such C$ Lender during the
period for which payment is made, payable quarterly in arrears on the last day
of each March, June, September and December and on the Termination Date or such
earlier date as the Canadian Commitments shall terminate as provided herein,
commencing on the first of such dates to occur after the date hereof.
(c) The Borrowers agree to pay to the US Administrative Agent and the
Canadian Administrative Agent, for their own accounts, the fees in the amounts
and on the dates previously agreed to in the Fee Letter dated August, 1996 among
the Borrowers, the US Administrative Agent and the Canadian Administrative
Agent.
4.3 Termination or Reduction of Commitments. (a) The aggregate
---------------------------------------
amount of the US Commitments shall be automatically reduced to zero on the
Termination Date. The aggregate amount of the US Commitments shall also reduce
on the last day of March, June, September and December of each year, commencing
September 30, 1999, each of which reductions on any such date shall be in an
amount equal to the amount set forth below opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
September 30, 1999 $ 6,250,000
December 31, 1999 6,250,000
March 31, 2000 6,250,000
June 30, 2000 6,250,000
September 30, 2000 8,750,000
December 31, 2000 8,750,000
March 31, 2001 8,750,000
June 30, 2001 8,750,000
September 30, 2001 10,000,000
December 31, 2001 10,000,000
March 31, 2002 10,000,000
June 30, 2002 10,000,000
</TABLE>
(b) The aggregate amount of the Canadian Commitments shall be
automatically reduced to zero on the Termination Date. The aggregate amount of
the Canadian Commitments shall also reduce on the last day of March, June,
September and December of each year, commencing September 30, 1999, each of
which reductions on any such date shall be in an amount equal to the amount set
forth below opposite such date:
<PAGE>
37
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
September 30, 1999 C$2,187,500
December 31, 1999 2,187,500
March 31, 2000 2,187,500
June 30, 2000 2,187,500
September 30, 2000 3,062,500
December 31, 2000 3,062,500
March 31, 2001 3,062,500
June 30, 2001 3,062,500
September 30, 2001 3,500,000
December 31, 2001 3,500,000
March 31, 2002 3,500,000
June 30, 2002 3,500,000
</TABLE>
(c) The Company shall have the right, upon not less than two Business
Days' notice to the applicable Administrative Agent, without premium or penalty,
to terminate the Commitments or, from time to time, to reduce the amount of the
US Commitments (so long as, after giving effect thereto and to any
contemporaneous prepayment of the Loans, the then outstanding US$ Loans of each
US$ Lender shall be no greater than such Lender's US Commitment) or reduce the
amount of the Canadian Commitments (so long as, after giving effect thereto and
to any contemporaneous prepayment of the C$ Loans, the then outstanding C$ Loans
of each C$ Lender shall be no greater than such Lender's Canadian Commitment).
Upon receipt of such notice the applicable Administrative Agent shall promptly
notify each relevant Lender thereof. Any such reduction shall be in an amount
of at least US$500,000 and, if greater, in integral multiples of US$100,000 (in
the case of the US Commitments) or C$500,000 and, if greater, in integral
multiples of C$100,000 (in the case of the Canadian Commitments) and shall
reduce permanently the amount of the affected Commitments then in effect. Any
termination of the Commitments shall be accompanied by prepayment in full of the
Loans, together with accrued interest thereon to the date of such prepayment.
4.4 Optional and Mandatory Prepayments. (a) Each Borrower may at
----------------------------------
any time and from time to time prepay the relevant Loans, in whole or in part,
without premium or penalty, upon at least three Business Days' irrevocable
notice to the relevant Administrative Agent (in the case of Eurodollar Loans),
or one Business Day's irrevocable notice to the relevant Administrative Agent
(otherwise), specifying the date and amount of prepayment, and the Type of Loan
to be prepaid, and, if of a combination thereof, the amount allocable to each.
Upon receipt of any such notice the relevant Administrative Agent shall promptly
notify each relevant Lender thereof. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified therein,
together with, in the case of Eurodollar Loans, any interest accrued thereon,
and in the case of all loans, any amounts payable pursuant to subsection 4.12.
Partial prepayments shall be in an aggregate principal amount of US$1,000,000 or
C$1,000,000, as the case may be, or a whole multiple of US$100,000 or C$100,000,
as the case may be, in excess thereof.
<PAGE>
38
Notwithstanding anything to the contrary above, C$ Loans consisting of Bankers'
Acceptances may not be prepaid pursuant to this subsection.
(b) Without limiting the obligation of the Company to obtain the
consent of the Required Lenders pursuant to subsection 8.2 to any Disposition
not otherwise permitted hereunder, in the event that the Net Proceeds of any
Disposition by either Borrower or any of its Subsidiaries (the "Current
-------
Disposition"), and of all prior Dispositions of the Borrowers and their
- -----------
Subsidiaries as to which a prepayment has not yet been made under this
subsection 4.4(b), but excluding any Reinvestable Proceeds (as defined below),
shall exceed US$2,500,000 then, no later than five Business Days after the
occurrence of the Current Disposition, the relevant Borrower will deliver to the
US Administrative Agent a statement, certified by a Responsible Officer of such
Borrower, in form and detail reasonably satisfactory to the US Administrative
Agent, of the amount of the Net Proceeds of the Current Disposition and of all
such prior Dispositions and shall prepay its Loans, and its Commitments shall be
subject to automatic reduction (and, if required, such Borrower shall provide
cash collateral in connection with such reduction, which cash collateral shall
be invested in Cash Equivalents), in an aggregate amount equal to the excess of
100% of the Net Proceeds of the Current Disposition and such prior Dispositions
(but excluding the amount of any Reinvestable Proceeds) over US$2,500,000 (or
the C$ Equivalent thereof, as the case may be), such prepayment and reduction to
be effected in each case in the manner and order specified in subsection 4.4(g);
provided that, at the option of such Borrower and so long as no Default or Event
- --------
of Default shall have occurred and be continuing or would be caused thereby and
subject to the consent of the Required Lenders in connection with any
Disposition not otherwise permitted hereunder, such Net Proceeds shall not be
required to be applied on such date so long a such Borrower delivers a
certificate of a Responsible Officer to the US Administrative Agent prior to
such date stating that such Borrower intends to use all or a portion of the Net
Proceeds of any Disposition (the "Reinvestable Proceeds" of such Disposition) to
---------------------
purchase assets to be used by such Borrower or such Subsidiary in its business
(the "Qualified Assets") within 270 days after receipt of such proceeds and
----------------
setting forth an estimate of the Reinvestable Proceeds to be so expended. After
such election to use the Reinvestable Proceeds, on the date which is 270 days
after the relevant Disposition, such Borrower shall (I) deliver a certificate of
a Responsible Officer to the US Administrative Agent certifying as to the amount
and use of such Reinvestable Proceeds actually used to purchase Qualified Assets
and (II) deliver to the US Administrative Agent, for application in accordance
with this subsection 4.4(b), an amount equal to the remaining unused
Reinvestable Proceeds.
(c) On the date of the receipt thereof by either Borrower or any of
its Subsidiaries, such Borrower shall prepay its Loans (but the Commitments
shall not be subject to any reduction) in an aggregate amount equal to (i) 100%
of the proceeds (net of underwriting discounts and commissions and other costs
associated therewith) from any sale or issuance of equity of such Borrower or
any of its Subsidiaries other than to either Borrower or any of its Subsidiaries
and (ii) 100% of the proceeds (net of underwriting discounts and commissions and
other costs associated therewith) from any incurrence of any Indebtedness for
borrowed money by such Borrower or any of its Subsidiaries (other than
Indebtedness permitted by subsection 8.4), such prepayment to be effected in
each case
<PAGE>
39
in the manner and order specified in subsection 4.4(g). The provisions of this
paragraph shall not limit the obligation of the Company to obtain the consent of
the Required Lenders to any action referred to in this paragraph that is not
otherwise permitted hereunder.
(d) In the event that the Net Proceeds of any Casualty Event of
either Borrower or any of its Subsidiaries (the "Current Casualty Event"), and
----------------------
of all prior Casualty Events of the Borrowers and their Subsidiaries as to which
a prepayment has not yet been made under this subsection 4.4(d), but excluding
any Casualty Reinvestable Proceeds (as defined below), shall exceed
US$2,500,000, then, no later than five Business Days after the occurrence of the
Current Casualty Event, the relevant Borrower will deliver to the US
Administrative Agent a statement, certified by a Responsible Officer of such
Borrower, in form and detail reasonably satisfactory to the relevant
Administrative Agent, of the amount of the Net Proceeds of the Current Casualty
Event and of all such prior Casualty Events and shall prepay its Loans, and its
Commitments shall be subject to automatic reduction (and, if required, such
Borrower shall provide cash collateral in connection with such reduction, which
cash collateral shall be invested in Cash Equivalents), in an aggregate amount
equal to the excess of 100% of the Net Proceeds of the Current Casualty Event
and such prior Casualty Events (but excluding the amount of any Casualty
Reinvestable Proceeds) over US$2,500,000 (or the C$ Equivalent thereof, as the
case may be), such prepayment and reduction to be effected in each case in the
manner and order specified in subsection 4.4(g); provided, that such Net
--------
Proceeds shall not be required to be applied on such date (other than if such
Net Proceeds are required to be applied pursuant to the terms of any Mortgage or
lease) so long as (i) such Borrower delivers a certificate of a Responsible
Officer to the US Administrative Agent prior to such date stating that such
Borrower intends to use or cause the appropriate Subsidiary to use such Net
Proceeds (the "Casualty Reinvestable Proceeds" of such Casualty Event) to repair
------------------------------
or replace the property affected by such Casualty Event (the "Affected
--------
Property") within 270 days after receipt of such Net Proceeds and setting forth
- --------
an estimate of the Casualty Reinvestable Proceeds to be so expended and (ii) no
Event of Default shall have occurred and be continuing or would be caused
thereby. After such election to reinvest, on the date which is 270 days after
the relevant Casualty Event, such Borrower shall (I) deliver a certificate of a
Responsible Officer to the relevant Administrative Agent certifying as to the
amount and use of such Casualty Reinvestable Proceeds actually used to purchase
or replace the Affected Property and (II) deliver to the relevant Administrative
Agent, for application in accordance with this subsection 4.4(d), an amount
equal to the remaining unused Casualty Reinvestable Proceeds.
(e) On the date of the receipt thereof by either Borrower or any of
its Subsidiaries, such Borrower shall prepay its Loans (but its Commitments
shall not be subject to any reduction) in an aggregate amount equal to 100% of
the proceeds of any Tax Refund (net of any marginal increase in income taxes
payable as a result of the receipt by such Borrower and/or any of its
Subsidiaries of such Tax Refund or so long as at the time of such receipt of
proceeds such Borrower is a Subchapter S corporation, the Shareholders), such
prepayment to be effected in each case in the manner and order specified in
subsection 4.4(g).
<PAGE>
40
(f) On the date of the receipt thereof by either Borrower or any of
its Subsidiaries, such Borrower shall prepay its Loans (but its Commitments
shall not be subject to any reduction) in an aggregate amount equal to 100% of
the Net Proceeds of any Disposition of property acquired as part of a Permitted
Acquisition but not used or useful to the business of such Borrower or such
Subsidiary so long as such Disposition is made within 270 days of the date of
the consummation of such Permitted Acquisition, such prepayment to be effected
in each case in the manner and order specified in subsection 4.4(g).
(g) Prepayments of the Loans pursuant to subsections 4.4(b), (c),
(d), (e) and (f) and permanent reductions of Commitments pursuant to subsections
4.4(b) and (d) shall be applied in the following manner:
(i) to the extent such prepayment is required to be made by the
Company, such prepayment shall be applied to reduce (ratably among the US
Lenders) such of the then outstanding US$ Loans as the Company shall
determine in its sole discretion, and any reduction of the Commitments
required pursuant thereto shall be applied ratably to reduce the US
Commitments (which reduction of US Commitments shall reduce the remaining
scheduled commitment reductions thereof in inverse order of maturity); and
(ii) to the extent that such prepayment is required to be made by the
Canadian Borrower, such prepayment shall be applied to reduce (ratably
among the Canadian Lenders) such of the then outstanding C$ Loans (or, in
the case of Bankers' Acceptances, cash collateralization of such Bankers'
Acceptances on terms satisfactory to the Canadian Administrative Agent,
which cash collateral shall be invested in Cash Equivalents) as the
Canadian Borrower shall determine in its sole discretion, and any reduction
of the Canadian Commitments required pursuant thereto shall be applied
ratably to reduce the Canadian Commitments (which reduction of Canadian
Commitments shall reduce the remaining scheduled commitment reductions
thereof in inverse order of maturity).
(h) Notwithstanding anything to the contrary contained above, all
prepayments of each Loan shall be made in the currency in which such Loans were
made, and all cash collateralization of Bankers Acceptances shall be made in
Canadian Dollars. For purposes of determining the amounts required to be
applied, conversions of one currency to another are assumed to be made by using
the C$ Equivalent or US$ Equivalent, as the case may be, of amounts received in
the other currency. However, it shall remain the responsibility of the
respective Borrower to convert amounts received in one currency into the other
to the extent needed to repay, or cash collateralize, Loans or Bankers
Acceptances maintained in the other such currency.
4.5 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
--------------------------------
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such
Interest Period plus the Applicable Margin.
<PAGE>
41
(b) Each Base Rate Loan shall bear interest for each day on the unpaid
principal amount thereof, at a rate per annum equal to the Base Rate determined
for such day plus the Applicable Margin.
(c) Each C$ Prime Loan shall bear interest for each day on the unpaid
principal amount thereof, at a rate per annum equal to the C$ Prime Rate
determined for such day plus the Applicable Margin.
(d) If all or a portion of (i) any principal of any Loan, (ii) any
interest payable thereon, (iii) any acceptance fee or any commitment fee or (iv)
any other amount payable hereunder shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum which is (x) in the case of principal, the rate
that would otherwise be applicable thereto pursuant to the foregoing provisions
of this subsection plus 2% or (y) in the case of any such overdue interest,
acceptance fee or commitment fee or other amount, the rate described in
paragraph (b) of this subsection (in the case of amounts payable in US Dollars)
or paragraph (c) of this subsection (in the case of amounts payable in Canadian
Dollars) plus 2%, in each case from the date of such non-payment until such
overdue principal, interest, acceptance fee or commitment fee or other amount is
paid in full (after as well as before judgment).
(e) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (d) of this
--------
subsection shall be payable from time to time on demand. Interest in respect of
US$ Loans (and all other amounts denominated in US$) shall be payable in US$,
and interest in respect of C$ Loans (and all other amounts denominated in C$)
shall be payable in C$.
(f) (i) If any provision of this Agreement would obligate any Loan
Party to make any payment of interest or other amount payable to any C$ Lender
in an amount or calculated at a rate which would be prohibited by law or would
result in a receipt by such C$ Lender of interest at a criminal rate (as such
terms are construed under the Criminal Code (Canada)), then notwithstanding such
-------------
provision, such amount or rate shall be deemed to have been adjusted with
retroactive effect to the maximum amount or rate of interest, as the case may
be, as would not be so prohibited by law or so result in a receipt by such C$
Lender of interest at a criminal rate, such adjustment to be effected, to the
extent necessary, as follows:
(x) first, by reducing the amount or rates of interest required to
be paid under this subsection 4.5; and
(y) thereafter, by reducing any fees, commissions, premiums and
other amounts which would constitute interest for purposes of
Section 347 of the Criminal Code (Canada).
-------------
(ii) If, notwithstanding the provisions of clause (i) of this
subsection 4.5.(f), and after giving effect to all adjustments contemplated
thereby, any C$ Lender shall have
<PAGE>
42
received an amount in excess of the maximum permitted by such clause, then the
applicable Loan Party shall be entitled, by notice in writing to such C$ Lender,
to obtain reimbursement from such C$ Lender of an amount equal to such excess,
and, pending such reimbursement, such amount shall be deemed to be an amount
payable by such C$ Lender to such Loan Party.
(iii) Any amount or rate of interest referred to in this subsection
4.5(f) shall be determined in accordance with generally accepted actuarial
practices and principles as an effective annual rate of interest over the term
of any C$ Loan on the assumption that any charges, fees or expenses that fall
within the meaning of "interest" (as defined in the Criminal Code (Canada))
-------------
shall, if they relate to a specific period of time, be prorated over that period
of time and otherwise be prorated over the period from the Closing Date to the
Termination Date and, in the event of dispute, a certificate of a Fellow of the
Canadian Institute of Actuaries appointed by the Canadian Administrative Agent
shall be conclusive for the purposes of such determination absent manifest
error.
4.6 Computation of Interest and Fees. (a) Interest calculated on
--------------------------------
the basis of the Eurodollar Rate and Federal Funds Rate shall be calculated on
the basis of a 360-day year for the actual days elapsed; Acceptance fees and
commitment fees and interest calculated on the basis of the CDOR Rate shall be
calculated on the basis of a 365-day year for the actual days elapsed; and
interest calculated on any other basis shall be calculated on the basis of a
365- or 366- day year, as the case may be, for the actual days elapsed. The
relevant Administrative Agent shall as soon as practicable notify the relevant
Borrower and the relevant Lenders of each determination of Eurodollar Rates or
the Applicable BA Discount Rate. Any change in the interest rate on a Loan
resulting from a change in the Base Rate, the C$ Prime Rate or the Applicable
Margin shall become effective as of the opening of business on the day on which
such change becomes effective. The relevant Administrative Agent shall as soon
as practicable notify the relevant Lenders and the relevant Borrower of the
effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the relevant
Administrative Agent pursuant to any provision of this Agreement shall be prima
facie evidence of the accuracy thereof on the Borrowers and the Lenders in the
absence of manifest error. When applicable, each determination by CIBC of a
rate to be notified to the relevant Administrative Agent pursuant to the
definition of "CDOR Rate" shall be prima facie evidence of the accuracy thereof.
The relevant Administrative Agent shall, at the request of the relevant
Borrower, deliver to such Borrower a statement showing any quotations and the
computations used by the relevant Administrative Agent in determining any CDOR
Rate.
(c) For the purposes of the Interest Act (Canada), in any case in
------------
which an interest rate is stated in this Agreement to be calculated on the basis
of a year of 360 days or 365 days, as the case may be, the yearly rate of
interest to which such interest rate is equivalent is equal to such interest
rate multiplied by the number of days in the year in which the relevant interest
payment accrues and divided by 360 or 365, respectively. In addition, the
principles of deemed investment of interest do not apply to any interest
<PAGE>
43
calculations under this Agreement and the rates of interest stipulated in this
Agreement are intended to be nominal rates and not effective rates or yields.
4.7 Inability to Determine Eurodollar Rate. If prior to the first
--------------------------------------
day of any Interest Period:
(a) the US Administrative Agent shall have determined (which
determination shall be prima facie evidence of the accuracy thereof) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, or
(b) the US Administrative Agent shall have received notice from the
Required US$ Lenders that the Eurodollar Rate determined or to be
determined for such Interest Period will not adequately and fairly reflect
the cost to such US$ Lenders (as conclusively certified by such US$
Lenders) of making or maintaining their affected Loans during such Interest
Period,
the US Administrative Agent shall give telecopy or telephonic notice (to be
confirmed in writing) thereof to the Company and the US$ Lenders as soon as
practicable thereafter. If such notice is given (x) any Eurodollar Loans
requested to be made on the first day of such Interest Period shall be made as
Base Rate Loans, (y) any Base Rate Loans that were to have been converted on the
first day of such Interest Period to Eurodollar Loans shall be converted to or
continued as Base Rate Loans and (z) any outstanding Eurodollar Loans shall be
converted, on the first day of such Interest Period, to Base Rate Loans. Until
such notice has been withdrawn by the US Administrative Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Company have
the right to convert Loans to Eurodollar Loans.
4.8 Pro Rata Treatment and Payments. (a) Each borrowing by each
-------------------------------
Borrower from the Lenders hereunder, each payment by each Borrower on account of
any commitment fee or acceptance fee hereunder and any reduction of the US
Commitments or the Canadian Commitments, of the Lenders shall be made pro rata
according to the respective US Commitment Percentages, in the case of the US$
Lenders, and the respective C$ Commitment Percentages, in the case of the C$
Lenders. Each payment (excluding prepayments pursuant to subsection 4.4(g)) by
each Borrower on account of principal of and interest on the Loans shall be made
pro rata according to the respective outstanding principal amounts of the
relevant Loans then held by the relevant Lenders. All payments (including
prepayments) to be made by each Borrower hereunder, whether on account of
principal, interest, fees or otherwise, shall be made without set off or
counterclaim and shall be made prior to 11:00 A.M., Local Time, on the due date
thereof to the relevant Administrative Agent, for the account of the Lenders, at
the relevant Administrative Office, in US Dollars or C$, as the case may be, and
in immediately available funds. The relevant Administrative Agent shall
distribute such payments to the relevant Lenders promptly upon receipt in like
funds as received, but the relevant Borrower shall have satisfied its payment
obligation hereunder upon payment to the relevant Administrative Agent,
regardless of whether such Administrative Agent distributes such payments as
required hereunder. If any
<PAGE>
44
payment hereunder becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day, and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
(b) Unless the relevant Administrative Agent shall have received
notice from a Lender prior to 11:00 A.M., Local Time, on any Borrowing Date that
such Lender will not make available to such Administrative Agent such Lender's
share of the borrowing requested to be made on such Borrowing Date, such
Administrative Agent may assume that such Lender has made its share of such
borrowing available to such Administrative Agent on such Borrowing Date, and
such Administrative Agent may, in reliance upon such assumption, make available
to the relevant Borrower on such Borrowing Date a corresponding amount. If such
Administrative Agent does, in such circumstances, make available to such
Borrower such amount, such Lender shall within three Business Days following
such Borrowing Date make its share of such borrowing available to such
Administrative Agent, together with interest thereon for each day from and
including such Borrowing Date that its share of such borrowing was not made
available, to but excluding the date such Lender makes its share of such
borrowing available to such Administrative Agent, at the Federal Funds Rate (in
the case of US$ Loans) or at the then effective CDOR Rate (in the case of C$
Loans). If such amount is so made available, such payment to such Administrative
Agent shall constitute such Lender's Loan on such Borrowing Date for all
purposes of this Agreement. A certificate of such Administrative Agent submitted
to any Lender with respect to any amounts owing under this subsection shall be
prima facie evidence of such amounts. If such amount is not so made available to
such Administrative Agent by such Lender within three Business Days of such
Borrowing Date, such Administrative Agent shall also be entitled to recover such
amount with interest thereon at the rate per annum applicable to Base Rate Loans
hereunder, on demand, from the relevant Lender. Nothing contained in this
subsection 4.8(b) shall relieve any Lender which has failed to make available
its share of any borrowing hereunder from its obligation to do so in accordance
with the terms hereof or prejudice any rights which the relevant Borrower may
have against any Lender as a result of any default by such Lender to make loans.
(c) The failure of any Lender to make the Loan to be made by it on
any Borrowing Date shall not relieve any other Lender of its obligation, if any,
hereunder to make its Loan on such Borrowing Date, but no Lender shall be
responsible for the failure of any other Lender to make the Loan to be made by
such other Lender on such Borrowing Date.
4.9 Illegality. Notwithstanding any other provision herein, if the
----------
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert Base Rate Loans to Eurodollar Loans shall forthwith be cancelled and (b)
such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be
converted automatically to Base Rate Loans on the respective last days of the
then current Interest Periods with respect to such Loans or within
<PAGE>
45
such earlier period as required by law. If any such conversion of a Eurodollar
Loan occurs on a day which is not the last day of the then current Interest
Period with respect thereto, the Company shall pay to such Lender such amounts,
if any, as may be required pursuant to subsection 4.12.
4.10 Requirements of Law. (a) If the adoption of or any change in
-------------------
any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to, or cause the withdrawal or
termination of a previously granted exemption with respect to, any tax of
any kind whatsoever, or change the basis of taxation of, or increase any
existing tax on, payments of principal, interest, fees or other amounts
payable by either Borrower to such Lender under this Agreement (except for
taxes on the overall receipts or overall net income or capital of such
Lender, and any related surtaxes, or taxes for which such Lender is being
fully compensated under subsection 4.11);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held
by, deposits or other liabilities in or for the account of, advances, loans
or other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the relevant Borrower
shall promptly pay such Lender, upon written demand therefor, such additional
amount or amounts as will compensate such Lender for such increased cost or
reduced amount receivable; provided, that such Borrower shall not be required to
--------
pay any Lender any such additional amount if such additional amount arises (x)
in the case of US$ Loans made to the Company, as a consequence of such Lender's
failure to meet the requirements of subsection 4.11(b) or (y) in the case of C$
Loans made to the Canadian Borrower, as a result of such Lender's failure to be
a Person resident in Canada for the purposes of the Income Tax Act (Canada).
--------------
(b) If the adoption of or any change in any Requirement of Law
regarding capital adequacy or in the interpretation or application thereof by
any Governmental Authority or compliance by any Lender or any corporation
controlling such Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any Governmental Authority made
subsequent to the date hereof shall have the effect of reducing the rate of
return on such Lender's or such corporation's capital as a consequence of its
obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change or compliance
(taking into
<PAGE>
46
consideration such Lender's or such corporation's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time, the Borrowers shall promptly pay to such Lender, upon written
demand therefor, such additional amount or amounts as will compensate such
Lender for such reduced rate of return. In determining such additional amounts,
each Lender will act reasonably and in good faith and will use averaging and
attribution methods which are reasonable and which will, to the extent the
reduced rate of return relates to such Lender's loans or commitments in general
and are not specifically attributable to Loans or Commitments hereunder, be
calculated with respect to all loans or commitments similar to the Loans or
Commitments made by such Lender hereunder whether or not the loan documentation
for such other loans or commitments permits the Lender to charge the respective
borrower on a basis similar to that provided in this subsection 4.10.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify the relevant Borrower
(with a copy to the relevant Administrative Agent) of the event by reason of
which it has become so entitled. A certificate as to any additional amounts
payable pursuant to this subsection submitted by such Lender to such Borrower
(with a copy to the relevant Administrative Agent) showing in reasonable detail
the basis for the calculation thereof, shall be prima facie evidence of such
additional amounts payable. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
4.11 Taxes. (a) All payments made by any Loan Party under this
-----
Agreement and any Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding gross or net income or gross receipts taxes,
ad valorem taxes, personal property and/or sales taxes and franchise taxes
(imposed in lieu of net income taxes) imposed on either Administrative Agent or
any Lender as a result of a present or former connection between either
Administrative Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from such
Administrative Agent or such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to be withheld
------------------
from any amounts payable to either Administrative Agent or any Lender hereunder
or under any Note, the amounts so payable to such Administrative Agent or such
Lender shall be increased to the extent necessary to yield to such
Administrative Agent or such Lender (after payment of all Non-Excluded Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement, provided, however, that no Loan Party shall
-------- -------
be required to increase any such amounts payable to either Administrative Agent,
any Lender or any holder of Bankers' Acceptance if such increased amount arises
as a result of (i) in the case of amounts payable by the Company with respect to
US$ Loans, such Lender's failure to comply with any applicable
<PAGE>
47
requirements of subsection 4.11(b), including a material failure of any
statement or certification given pursuant to subsection 4.11(b) to be true for
any reason other than a change in United States federal income tax law or an
amendment, modification or revocation of an applicable double tax treaty or (ii)
in the case of amounts payable by any Canadian Borrower with respect to C$
Loans, the failure of such C$ Lender, the Canadian Administrative Agent or any
holder of Bankers' Acceptance to be a Person resident in Canada for the purposes
of the Income Tax Act (Canada). Each Loan Party shall also indemnify each
--------------
Administrative Agent and each Lender on an after-tax basis for any additional
taxes on net income which such Administrative Agent or such Lender, as the case
may be, may be obligated to pay as a result of the receipt of additional amounts
under this subsection 4.11(a). Whenever any Non-Excluded Taxes are payable by
any Loan Party, as promptly as possible thereafter but in any event within 45
days after the date of payment such Loan Party shall send to the relevant
Administrative Agent for its own account or for the account of such Lender, as
the case may be, a certified copy of an original official receipt received by
such Loan Party showing payment thereof. If any Loan Party fails to pay any Non-
Excluded Taxes when due to the appropriate taxing authority or fails to remit to
the relevant Administrative Agent the required receipts or other required
documentary evidence, such Loan Party shall indemnify such Administrative Agent
and the Lenders for any incremental taxes, interest or penalties that may become
payable by such Administrative Agent or any Lender as a result of any such
failure. The agreements in this subsection shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) deliver to the Company and the US Administrative Agent (A)
two original signed copies of United States Internal Revenue Service Form
1001 or 4224, or successor applicable form, as the case may be, and (B) two
accurate and complete original signed copies of Internal Revenue Service
Form W-8 or W-9, or successor applicable form, as the case may be;
(ii) deliver to the Company and the US Administrative Agent two
further copies of any such form or certification on or before the date that
any such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Company; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the Company
or the US Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so
<PAGE>
48
advises the Company and the US Administrative Agent. Such Lender shall certify
(i) in the case of a Form 1001 or 4224, that it is entitled to receive payments
under this Agreement without deduction or withholding of any United States
federal income taxes and (ii) in the case of a Form W-8 or W-9, that it is
entitled to an exemption from United States backup withholding tax. Each Person
that shall become a Lender or a Participant pursuant to subsection 11.6 shall,
upon the effectiveness of the related transfer, be required to provide all of
the forms and statements required pursuant to this subsection, provided that in
the case of a Participant such Participant shall furnish all such required forms
and statements to the Lender from which the related participation shall have
been purchased.
4.12 Indemnity. Each Borrower agrees to indemnify each Lender and to
---------
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by such Borrower in making a borrowing
of, conversion into or continuation of Eurodollar Loans after such Borrower has
given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by such Borrower in making any prepayment of Eurodollar
Loans after such Borrower has given a notice thereof in accordance with the
provisions of this Agreement, (c) the making of a prepayment of Eurodollar Loans
on a day which is not the last day of an Interest Period with respect thereto or
(d) repayment of any Bankers' Acceptance prior to its maturity date. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market. This covenant shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.
4.13 Change of Lending Office. Each Lender agrees that if it makes
------------------------
any demand for payment under subsection 4.10 or 4.11(a), or if any adoption or
change of the type described in subsection 4.9 shall occur with respect to it,
it will use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Company to make payments under subsection 4.10 or
4.11(a), or would eliminate or reduce the effect of any adoption or change
described in subsection 4.9.
<PAGE>
49
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agents and the Lenders to enter into this
Agreement and to make the Loans, the Company hereby represents and warrants to
the Administrative Agents and each Lender that:
5.1 Financial Condition. The consolidated balance sheet of the
-------------------
Company and its consolidated Subsidiaries as at December 31, 1995 and the
related consolidated statements of income and retained earnings and changes in
cash flows for the fiscal year ended on such date, reported on by Arthur
Andersen LLP, copies of which have heretofore been furnished to each Lender, are
complete and correct and present fairly in accordance with GAAP the consolidated
financial position of the Company and its consolidated Subsidiaries as at such
date, and the consolidated results of their operations and their consolidated
cash flows for the fiscal year then ended. The unaudited consolidated balance
sheet of the Company and its consolidated Subsidiaries as at March 31, 1996, and
the related unaudited consolidated statements of income and retained earnings
and changes in cash flows for the three-month period ended on such date,
certified by a Responsible Officer, copies of which have heretofore been
furnished to each Lender, are complete and correct and present fairly in
accordance with GAAP the consolidated financial position of the Company and its
consolidated Subsidiaries as at such date, and the consolidated results of their
operations and their consolidated cash flows for the three-month period then
ended (subject to normal year-end audit adjustments). All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except as approved by such accountants or Responsible Officer, as the
case may be, and as disclosed therein). Neither the Company nor any of its
consolidated Subsidiaries had, at the date of the most recent balance sheet
referred to above, any material Guarantee Obligation, contingent liability or
liability for taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or foreign currency
swap or exchange transaction, which is not reflected in the foregoing statements
or in the notes thereto. Except as set forth on Schedule 5.1, during the period
from December 31, 1995 to and including the date hereof there has been no sale,
transfer or other disposition by the Company or any of its consolidated
Subsidiaries of any material part of its business or property and no purchase or
other acquisition of any business or property (including any Capital Stock of
any other Person) material in relation to the consolidated financial condition
of the Company and its consolidated Subsidiaries at December 31, 1995.
5.2 No Change. Except as set forth on Schedule 5.2, (a) Since
---------
December 31, 1995 there has been no development or event which has had or could
reasonably be expected to have a Material Adverse Effect, and (b) during the
period from December 31, 1995 to and including the date hereof no dividends or
other distributions have been declared, paid or made upon the Capital Stock of
the Company nor has any of the Capital Stock of the Company been redeemed,
retired, purchased or otherwise acquired for value by the Company or any of its
Subsidiaries.
<PAGE>
50
5.3 Corporate Existence; Compliance with Law. Each of the Company
----------------------------------------
and its Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization or formation,
(b) has the power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation or an extraprovincial corporation and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification (each of which
jurisdictions are listed on Schedule 5.3), except where the failure to be so
qualified could not have a Material Adverse Effect and (d) is in compliance with
all Requirements of Law except to the extent that the failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
5.4 Corporate Power; Authorization; Enforceable Obligations. Each of
-------------------------------------------------------
the Company and its Subsidiaries has the corporate or partnership power and
authority, as applicable, and the legal right, to execute, deliver and perform
the Loan Documents to which it is a party and, in the case of each Borrower, to
borrow hereunder, and each of the Company and its Subsidiaries has taken all
necessary corporate or partnership action, as applicable, to authorize the
borrowings on the terms and conditions of this Agreement and any Notes and to
authorize the execution, delivery and performance of the Loan Documents to which
it is a party. No consent or authorization of, filing with, notice to or other
act by or in respect of, any Governmental Authority or any other Person is
required in connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of the Loan Documents to which
the Company or any of its Subsidiaries is a party. This Agreement has been, and
each other Loan Document to which it is a party will be, duly executed and
delivered on behalf of each Loan Party. This Agreement constitutes, and each
other Loan Document when executed and delivered will constitute, a legal, valid
and binding obligation of each Loan Party which is a party thereto enforceable
against such Loan Party in accordance with its terms, except to the extent that
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
5.5 No Legal Bar. The execution, delivery and performance of the
------------
Loan Documents to which each Loan Party is a party, the borrowings hereunder and
the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of such Loan Party or of any of its Subsidiaries and will
not result in, or require, the creation or imposition of any Lien (except
pursuant to the Loan Documents to which it is a party) on any of its or their
respective properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation.
5.6 No Material Litigation. No litigation, investigation or
----------------------
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrowers, threatened by or against either Borrower or
any of its Subsidiaries or against any of its or their respective properties or
revenues (a) with respect to any of the Loan
<PAGE>
51
Documents or any of the transactions contemplated hereby or thereby, or (b)
which could reasonably be expected to have a Material Adverse Effect.
5.7 No Default. Neither Borrower nor any of its Subsidiaries is in
----------
default under or with respect to any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect.
No Default or Event of Default has occurred and is continuing.
5.8 Ownership of Property; Liens. All real property owned or leased
----------------------------
by either Borrower or any of its Subsidiaries and the nature of the interest
therein, is correctly set forth on Schedule 5.8. The Company and its
Subsidiaries have good and valid title to all real property owned by them and
good and merchantable title to all other properties owned by them, in each case,
including all property reflected in the balance sheets referred to in subsection
5.1 (except as sold or otherwise disposed of as permitted by this Agreement),
free and clear of all Liens, other than (i) as referred to in such balance
sheets or in the notes thereto or (ii) as otherwise permitted by subsection 8.1.
5.9 Intellectual Property. The Company and each of its Subsidiaries
---------------------
owns, or is licensed to use, all trademarks, tradenames, copyrights, technology,
know-how and processes necessary for the conduct of its business as currently
conducted except for those the failure to own or license which could not
reasonably be expected to have a Material Adverse Effect (the "Intellectual
------------
Property"). Neither the Company nor any of its Subsidiaries has any knowledge
- --------
that any claim has been asserted and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor does the Company know of
any valid basis for any such claim. The use of such Intellectual Property by
the Company and its Subsidiaries does not infringe on the rights of any Person,
except for such claims and infringements that, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
5.10 No Burdensome Restrictions. No Requirement of Law or
--------------------------
Contractual Obligation of either Borrower or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect.
5.11 Taxes. Each of the Company and its Subsidiaries has filed or
-----
caused to be filed all tax returns which, to the knowledge of the Company, are
required to be filed and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than as set forth on Schedule 5.11 and any the
amount or validity of which are currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the Company or its Subsidiaries, as the
case may be); no tax Lien has been filed, and, to the knowledge of the Company,
no claim is being asserted, with respect to any such tax, fee or other charge.
<PAGE>
52
5.12 Margin Regulations. No part of the proceeds of any Loans will
------------------
be used to purchase or carry any Margin Stock (as defined in Regulation G, T, U
or X) or to extend credit for the purpose of purchasing or carrying any Margin
Stock. Neither the making of any Loan, the creation of any Bankers Acceptance
or the purchase of any Draft nor the use of the proceeds thereof will violate or
be inconsistent with the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
5.13 ERISA. (a) Neither a Reportable Event nor an "accumulated
-----
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA) has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan, and
each Plan has complied in all material respects with the applicable provisions
of ERISA and the Code. No termination of a Single Employer Plan has occurred,
and no Lien in favor of the PBGC or a Plan has arisen, during such five-year
period. The present value of all accrued benefits under each Single Employer
Plan (based on those assumptions used to fund such Plans) did not, as of the
last annual valuation date prior to the date on which this representation is
made or deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits. Neither the Company nor any Commonly Controlled Entity
has had a complete or partial withdrawal from any Multiemployer Plan, and
neither the Company nor any Commonly Controlled Entity would become subject to
any liability under ERISA if the Company or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans in which it
participates as of the valuation date most closely preceding the date on which
this representation is made or deemed made. No such Multiemployer Plan is in
Reorganization or Insolvent.
(b) Each Canadian Pension Plan is in substantial compliance with all
applicable pension benefits and tax laws; no Canadian Pension Plan has any
unfunded liabilities (either on a "going concern" or on a "winding up" basis and
determined in accordance with all applicable laws and using assumptions and
methods that are appropriate in the circumstances and in accordance with
generally accepted actuarial principles and practices in Canada), all
contributions (including any special payments to amortize any unfunded
liabilities) required to be made in accordance with all applicable laws and the
terms of each Canadian Pension Plan have been made; no event has occurred and no
condition exists with respect to any Canadian Pension Plan that has resulted or
could result in any Canadian Pension Plan being ordered or required to be wound
up in whole or in part pursuant to any applicable pension benefits laws or
having its registration revoked or refused for the purposes of any applicable
pension benefits or tax laws or being placed under the administration of any
relevant pension benefits regulatory authority or being required to pay any
taxes or penalties under any applicable pension benefits or tax laws, other than
events or conditions that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect; no order has been made
and no notice has been given pursuant to any applicable pension benefits or tax
laws in respect of any Canadian Pension Plan requiring (or proposing to require)
any Person to take or to refrain from taking any action in respect thereof or
that there has (or there are circumstances that indicate that there has) been a
contravention of any such applicable laws, other than in respect of matters
that, individually or in the aggregate, could not reasonably be expected to
<PAGE>
53
have a Material Adverse Effect; no event has occurred and no condition exists
which has resulted or could result in the Company or any Subsidiary of the
Company being required to pay, repay or refund any amount (other than
contributions required to be made or expenses required to be paid in the
ordinary course) to or on account of any Canadian Pension Plan or a current or
former member thereof, other than events or conditions that, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect; and no event has occurred and no condition exists that has resulted or
could result in a payment being made out of a guarantee fund established under
any applicable pension benefits laws in respect of a Canadian Pension Plan.
(c) With respect to any pension, retirement or other deferred
compensation plan maintained by the Canadian Borrower or any of its Subsidiaries
which is not a Canadian Pension Plan, all required contributions have been made,
and there are no unfunded liabilities in respect of such plans (either on a
"going concern" or on a "winding up'" basis and determined in accordance with
all applicable laws and using assumptions and methods that are appropriate in
the circumstances and in accordance with generally accepted actuarial principles
and practices in Canada).
5.14 Investment Company Act; Other Regulations. No Loan Party is an
-----------------------------------------
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No Loan
Party is subject to regulation under any Federal or State statute or regulation
(other than Regulation X of the Board of Governors of the Federal Reserve
System) which limits its ability to incur Indebtedness.
5.15 Environmental Matters. (a) Except as set forth on Schedule
---------------------
5.15: The Company and its Subsidiaries are in compliance in all material
respects with, and on the Closing Date and on the date of each Loan will be in
compliance in all material respects with, all applicable Environmental Laws; to
the best knowledge of the Company, there are no past, pending or threatened
Environmental Claims against the Company or any of its Subsidiaries or any real
property owned or operated by such Persons; there are no facts, circumstances,
conditions or occurrences on any real property owned or operated at any time by
the Company or any of its Subsidiaries that could reasonably be expected (i) to
form the basis of an Environmental Claim against the Company or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect, or (ii) in the case of real property owned or operated by the Company or
any of its Subsidiaries, to cause such real property to be subject to any
material restrictions on the ownership, occupancy, use or transferability of
such real property under any Environmental Law.
(b) The Company and its Subsidiaries have not at any time generated,
used, treated or stored Hazardous Materials on, or transported Hazardous
Materials to or from, any real property owned or operated at any time by the
Company or any of its Subsidiaries, except for (i) Hazardous Materials used in
the ordinary course of such Person's business and (ii) petroleum products
contained in underground storage tanks at the Canadian Borrower's facility in
Saint Lambert, Quebec, in each case, in compliance in all material respects with
all Environmental Laws. The Company and its Subsidiaries have not at any
<PAGE>
54
time Released or disposed of Hazardous Materials on or from any real property
owned or operated at any time by the Company or any of its Subsidiaries, except
in compliance in all material respects with Environmental Laws.
(c) Except as set forth on Schedule 5.15, there are no underground
storage tanks located on any real property owned or operated by the Company or
any of its Subsidiaries.
(d) Except for asbestos and asbestos-containing materials located at
the Texas Avenue Property and also in Murray St., Montreal, Ville Marie,
Montreal, St. Helene, St. Lambert, Summerlea Road, Brampton, Wolfdale Road,
Mississauga, Coronation Drive, Scarborough, 27th St. N.E., Calgary, all of which
are in compliance in all material respects with all Environmental Laws, to the
best of the Company's knowledge there is no friable asbestos in any form present
or suspected to be present at any real property owned or operated by the Company
or any of its Subsidiaries.
5.16 Regulation H. No Mortgage encumbers improved real property
------------
which is located in an area that has been identified by the Secretary of Housing
and Urban Development as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968.
5.17 Capitalization. On the Closing Date, the authorized Capital
--------------
Stock of the Company will consist of (i) 1,000,000 shares of Class A Common
Stock, US$.01 par value per share ("Class A Common Stock"), of which 900 shares
--------------------
will be outstanding and (ii) 1,000,000 shares of Class B Common Stock, US$.01
per value per share ("Class B Common Stock"), of which 9,000 shares will be
--------------------
outstanding. On the Closing Date, the authorized Capital Stock of the Canadian
Borrower will consist of 10,000 common shares, without nominal or par value, of
which 1,000 will be issued and outstanding. All of such outstanding shares will
have been duly and validly issued, will be fully paid and nonassessable and will
be free of preemptive rights. On the Closing Date, Schedule 5.17 will contain a
true and complete list of each shareholder of the Company (each, a
"Shareholder"), together with the number of shares of Class A Common Stock and
-----------
Class B Common Stock held by such Shareholder.
5.18 Subsidiaries. Schedule 5.18 correctly sets forth, as of the
------------
Closing Date, the percentage ownership (direct and indirect) of the Company in
each class of Capital Stock or partnership interest, as the case may be, of each
of its Subsidiaries and also identifies the direct owner thereof.
5.19 Restrictions on or Relating to Subsidiaries. There does not
-------------------------------------------
exist any encumbrance or restriction on the ability of (i) any Subsidiary of the
Company to pay dividends or make any other distributions on its Capital Stock or
any other interest or participation in its profits owned by the Company or any
Subsidiary of the Company, or to pay any Indebtedness owed to the Company or a
Subsidiary of the Company, (ii) any Subsidiary of the Company to make loans or
advances to the Company or any of its Subsidiaries or (iii) the Company or any
Subsidiary of the Company to transfer any of its
<PAGE>
55
properties or assets to the Company or any Subsidiary of the Company, except, in
each case, for such encumbrances or restrictions existing under or by reason of
(w) applicable law, (x) this Agreement or the other Loan Documents, (y)
customary provisions restricting subletting or assignment of any lease governing
a leasehold interest or leases of equipment of the Company or any Subsidiary of
the Company and (z) the Senior Subordinated Notes and Senior Subordinated Notes
Indenture.
5.20 Subchapter S Status. The Company has validly elected to be
-------------------
treated as a Subchapter S corporation within the meaning of Section 1361 of the
Code. The Company has at all times since March 1, 1990 qualified to be treated
as a Subchapter S corporation within the meaning of Section 1361 of the Code.
5.21 Leases. With respect to any lease or rental agreement regarding
------
any real property to which the Company or any of its Subsidiaries is a party,
(i) such lease or rental agreement is in full force and effect, (ii) the Company
and its Subsidiaries have complied in all material respects with all of the
terms of such lease or rental agreement, (iii) there exists no event of default
or to the best of the Company's knowledge, any event, act or condition which
with notice or lapse of time, or both, would constitute an event of default
thereunder by the Company or any of its Subsidiaries, or to the best knowledge
of the Company, the landlord thereunder and (iv) the Company or its Subsidiaries
as the case may be, is in possession of the premises demised under all such
leases and rental agreements and is conducting business on such premises.
5.22 Related Agreements. The Company has delivered to the US
------------------
Administrative Agent true and correct copies of:
(a) any agreement evidencing or relating to material Indebtedness
of the Company or any of its Subsidiaries (excluding the Loans) which shall
remain outstanding on and after the Closing Date, including the Senior
Subordinated Notes Indenture;
(b) any Tax Sharing Agreements;
(c) the Management Services Agreement; and
(d) the Affiliate Contracts.
SECTION 6. CONDITIONS PRECEDENT
6.1 Conditions to Effectiveness. The agreement of each Lender to
---------------------------
make Loans hereunder shall not become effective until the following conditions
precedent shall have been satisfied:
(a) Loan Documents. The US Administrative Agent shall have received
--------------
(i) this Agreement, executed and delivered by a duly authorized officer of
each
<PAGE>
56
Borrower, with a counterpart for each Lender, (ii) any Notes requested by the
Lenders, each executed and delivered by a duly authorized officer of the
relevant Borrower, and each of the other Loan Documents, each executed and
delivered by a duly authorized officer of the party thereto, with a counterpart
or a conformed copy for each Lender, (iii) the US Global Guarantee and Security
Agreement, executed and delivered by a duly authorized officer of each party
thereto, with a counterpart or a conformed copy for each Lender and (iv) the
Canadian Security Agreement, executed and delivered by a duly authorized officer
of each party thereto, with a counterpart or a conformed copy for each Lender.
(b) Proceeds of Issuance of Senior Subordinated Notes. The Company
-------------------------------------------------
shall have received at least US$200,000,000 in gross cash proceeds from the
issuance of the Senior Subordinated Notes.
(c) Termination of the Existing Credit Agreement. (i) All loans and
--------------------------------------------
other amounts outstanding under, and in respect of, the Existing Credit
Agreement shall have been repaid in full, (ii) the commitments under the
Existing Credit Agreement shall have been permanently terminated and all
obligations under the Existing Credit Agreement and the security interests
relating thereto shall have been discharged or transferred to the
Administrative Agents and the Lenders and (iii) the US Administrative Agent
shall have received satisfactory evidence of such repayment, termination
and discharge or transfer.
(d) Existing Indebtedness. Except as set forth below, the US
---------------------
Administrative Agent shall have received, with a copy for each Lender,
evidence, in form and substance reasonably satisfactory to the US
Administrative Agent that the Company and its Subsidiaries shall have
repaid all Indebtedness so that, on the Closing Date, the Company and its
Subsidiaries shall have no Indebtedness or preferred stock outstanding
except for (i) any Loans to be made on the Closing Date, (ii) the Senior
Subordinated Notes and (iii) Indebtedness set forth on Schedule 6.1.
<PAGE>
57
(e) Corporate Proceedings of the Loan Parties. The US Administrative
-----------------------------------------
Agent shall have received, with a counterpart for each Lender, a copy of
the resolutions, in form and substance reasonably satisfactory to the US
Administrative Agent, of the Boards of Directors of each of the Loan
Parties authorizing (i) the execution, delivery and performance of this
Agreement and the other Loan Documents to which it is a party, (ii) the
borrowings contemplated hereunder and (iii) the granting by it of the Liens
created pursuant to its respective Security Documents, certified by its
respective Secretary or an Assistant Secretary as of the Closing Date, each
of which certificates shall be in form and substance reasonably
satisfactory to the US Administrative Agent and shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded.
(f) Incumbency Certificates of the Loan Parties. The US
-------------------------------------------
Administrative Agent shall have received, with a counterpart for each
Lender, a certificate of each of the Loan Parties, dated the Closing Date,
as to the incumbency and signature of the officers of such Loan Party
executing any Loan Document, each of which certificates shall be reasonably
satisfactory in form and substance to the US Administrative Agent, executed
by the President or any Vice President and the Secretary or any Assistant
Secretary of such Loan Party.
(g) Corporate Documents. The US Administrative Agent shall have
-------------------
received, with a counterpart for each Lender, true and complete copies of
(i) the certificate of incorporation and by-laws of each of the Loan
Parties, certified as of the Closing Date as complete and correct copies
thereof by the Secretary or an Assistant Secretary of such Loan Party and
(ii) the limited partnership agreement of each Limited Partnership,
certified as of the Closing Date as complete and correct copies thereof by
a duly authorized officer of the general partner of such Limited
Partnership.
(h) Fees. The US Administrative Agent shall have received the fees
----
to be received on the Closing Date referred to in subsection 4.2(c).
6.2 Conditions to Initial Loans. The agreement of each Lender to
---------------------------
make the initial Loan requested to be made by it is subject to the satisfaction,
immediately prior to or concurrently with the making of such Loan on the initial
Borrowing Date, of the following conditions precedent:
(a) Canadian Security Documents. The US Administrative Agent shall
---------------------------
have received, with a counterpart for each Lender, the Demand Debenture and
Debenture Pledge Agreement for the province of Nova Scotia and the Canadian
Hypothec, each executed and delivered by a duly authorized officer of the
Canadian Borrower.
(b) Leverage Ratio Certificate. The US Administrative Agent shall
--------------------------
have received, with a counterpart for each Lender, a certificate of the
Company, dated the
<PAGE>
58
initial Borrowing Date, stating that after giving effect to all
transactions and borrowings on the initial Borrowing Date, the Leverage
Ratio on the initial Borrowing Date is not greater than 5.75 to 1.00.
(c) Borrowing Certificate. The relevant Administrative Agent shall
---------------------
have received, with a counterpart for each Lender, a certificate of the
relevant Borrower, dated the initial Borrowing Date, substantially in the
form of Exhibit C-1 and Exhibit C-2, respectively, with appropriate
insertions and attachments, satisfactory in form and substance to the
relevant Administrative Agent, executed by the President or any Vice
President and the Secretary or any Assistant Secretary of the relevant
Borrower.
(d) Legal Opinions. The US Administrative Agent shall have received,
--------------
with a counterpart for each Lender, the following executed legal opinions:
(i) the executed legal opinion of Cozen and O'Connor,
counsel to the Borrowers and the Shareholders, substantially in the
form of Exhibit H-1; and
(ii) the executed legal opinion of Davies, Ward & Beck,
Canadian counsel to the Canadian Borrower, substantially in the form
of Exhibit H-2.
(e) Pledged Stock, Stock Powers, Etc. The US Administrative Agent
--------------------------------
shall have received the certificates representing the shares pledged
pursuant to the US Global Guarantee and Security Agreement together with an
undated stock power for each such stock certificate, executed in blank by a
duly authorized officer of the pledgor thereof (which undated stock powers,
in the case of certificates representing shares pledged pursuant to the
Canadian Security Agreement, shall be required only if such Agreement so
requires). In addition, each spouse of any Shareholder executing the US
Global Guarantee and Security Agreement and who resides in a state which
has community property laws, shall have confirmed such spouse's waiver of
all special rights to the Pledged Securities pledged by such Shareholder.
(f) Actions to Perfect Liens. The US Administrative Agent shall have
------------------------
received evidence in form and substance reasonably satisfactory to it that
all filings, recordings, registrations and other actions, including,
without limitation, the filing of duly executed financing statements on
Form UCC-1, PPSA Form 1-C or the appropriate equivalent thereof, necessary
or, in the opinion of the US Administrative Agent, desirable to perfect the
Liens created by the Security Documents shall have been completed or that
all such financing statements and other documents with respect to such
filings, recordings, registrations and other actions shall have been
delivered to the applicable Administrative Agent.
<PAGE>
59
(g) Lien Searches. The US Administrative Agent shall have received
-------------
(i) the results of a recent search by a Person satisfactory to the US
Administrative Agent of the Uniform Commercial Code, judgment and tax lien
filings and (ii) PPSA search results certified by the Ontario Registrar of
Personal Property or equivalent certificate in any other province or
territory with PPSA-type legislation which may have been filed, with
respect to personal property of either Borrower and its Subsidiaries, and
the results of such searches in clauses (i) and (ii) above shall be
reasonably satisfactory to the US Administrative Agent.
(h) Insurance. The US Administrative Agent shall have received
---------
evidence in form and substance reasonably satisfactory to it that all of
the requirements of subsection 5.3 of the US Global Guarantee and Security
Agreement and subsection 6.1 of the Canadian Security Agreement shall have
been satisfied.
6.3 Additional Conditions for Acquisition Loans. The agreement of
-------------------------------------------
each Lender to make any Acquisition Loan requested to be made by it on any
Borrowing Date is subject to the satisfaction of the following conditions
precedent:
(a) Acquisition Documents. The US Administrative Agent shall have
---------------------
received, prior to the proposed borrowing date for such Acquisition Loan,
true and correct copies, certified as to authenticity by the relevant
Borrower, of each Acquisition Document (unless requested by the US
Administrative Agent, without exhibits) (or the most recent form thereof)
pursuant to which the Permitted Acquisition financed with such Acquisition
Loan (the "Relevant Permitted Acquisition") is to be consummated, and such
------------------------------
other documents or instruments as may be reasonably requested by the US
Administrative Agent, including, without limitation, a copy of any debt,
instrument, security agreement or other material contract to which such
Borrower or its Subsidiaries may be a party upon the consummation of such
Relevant Permitted Acquisition. The Relevant Permitted Acquisition shall
have been (or shall concurrently be) consummated in accordance with such
agreements or an agreement substantially similar to the form presented to
the US Administrative Agent.
(b) Pro Forma Compliance. The Company shall be in compliance, on a
--------------------
pro forma basis after giving effect to the Relevant Permitted Acquisition,
--- -----
with the covenants contained in subsection 8.10 recomputed as at the last
day of the most recently ended calendar month of the Company for which
financial statements shall have been delivered to the Lenders pursuant to
subsection 7.1(a), (b) or (c) as if such Relevant Permitted Acquisition had
occurred on the first day of each relevant period for testing such
compliance, and the Borrower shall have delivered to the US Administrative
Agent a certificate of a Responsible Officer to such effect, together with
all relevant financial information for such Subsidiary or assets, and,
after giving effect to such transaction, any acquired or newly formed
Subsidiary shall not be liable for any Indebtedness (except for
Indebtedness permitted by subsection 8.4).
<PAGE>
60
(c) Corporate Documents. The US Administrative Agent shall have
-------------------
received true and complete copies of the certificate of incorporation and
by-laws of any new Subsidiary executing any Loan Document to be delivered
on such Borrowing Date, certified as of such Borrowing Date as complete and
correct copies thereof by the Secretary or an Assistant Secretary of such
new Subsidiary.
(d) Litigation. No litigation, investigation, injunction or
----------
restraining order shall be pending, entered or threatened (including any
proposed statute, rule or regulation) in respect of the Relevant Permitted
Acquisition which could reasonably be expected to have a Material Adverse
Effect.
(e) Filings. All filings and other actions required to create and
-------
perfect a Lien in favor of the relevant Administrative Agent for the
benefit of the relevant Lenders in all property to be acquired pursuant to
the Relevant Permitted Acquisition shall have been duly made or taken or
all necessary financing statements and other documents with respect to such
filing and other actions shall have been delivered to the relevant
Administrative Agent, and all such property shall be free and clear of
other Liens except Liens permitted under the Loan Documents; provided,
however, that no such Liens shall be granted with respect to any real
property acquired in a Permitted Acquisition with respect to which a Lien
permitted by subsection 8.1(l) exists.
(f) Lien Searches. The US Administrative Agent shall have received
-------------
copies of the results of any search conducted in connection with the
Relevant Permitted Acquisition on behalf of or at the request of any Loan
Party for any Uniform Commercial Code, judgment, tax lien or PPSA filings,
which may have been filed with respect to personal property which is to be
acquired (or which is owned by any Person to be acquired) in connection
with such Permitted Acquisition.
(g) Pledged Stock; Stock Powers. The relevant Administrative Agent
---------------------------
shall have received the certificates representing any additional shares of
Capital Stock to be pledged pursuant to the Security Documents in
connection with the Relevant Permitted Acquisition, together with an
undated stock power for each such certificate executed in blank by a duly
authorized officer of the pledgor thereof and each addendum or supplement
as required under subsections 7.15, 7.16 and 7.17.
(h) Legal Opinions. The US Administrative Agent shall have received,
--------------
with a counterpart for each Lender, such executed legal opinions of counsel
to the Loan Parties, covering substantially the same matters as the opinion
delivered pursuant to subsection 6.1(i) or (ii), as the case may be, with
respect to any Person acquired in connection with the Relevant Permitted
Acquisition which shall become a party to a Loan Document.
(i) Environmental Assessment. The US Administrative Agent shall have
------------------------
received to the extent available or prepared on behalf of the Company one
or more environmental assessments with respect to the Relevant Permitted
Acquisition, in
<PAGE>
61
form and substance reasonably satisfactory to it, concerning environmental
compliance and liability issues affecting either Borrower and the other
Loan Parties.
6.4 Conditions to Each Loan. The agreement of each Lender to make
-----------------------
any Loan requested to be made by it on any date (including, without limitation,
its initial Loan) is subject to the satisfaction of the following conditions
precedent:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by either Borrower and any other Loan Party in or pursuant
to the Loan Documents shall be true and correct in all material respects on
and as of such date as if made on and as of such date, except for
representations and warranties stated to relate to a specific earlier date,
in which case such representations and warranties shall be true and correct
in all material respects on and as of such earlier date.
(b) No Default. No Default or Event of Default shall have occurred
----------
and be continuing on such date or after giving effect to the Loans
requested to be made on such date.
(c) Additional Matters. All corporate and other proceedings, and all
------------------
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents
shall be reasonably satisfactory in form and substance to the US
Administrative Agent, and the US Administrative Agent shall have received
such other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as they
shall reasonably request.
Each borrowing by either Borrower hereunder shall constitute a representation
and warranty by the Borrowers as of the date thereof that the conditions
contained in this subsection have been satisfied.
SECTION 7. AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments remain in
effect or any amount is owing to any Lender or any Administrative Agent
hereunder or under any other Loan Document, the Company shall and (except in the
case of delivery of financial information, reports and notices) shall cause each
of its Subsidiaries to:
7.1 Financial Statements, Etc. Furnish to the US Administrative
-------------------------
Agent for distribution to each Lender:
(a) as soon as available, but in any event within 120 days after the
end of each fiscal year of the Company, a copy of the consolidated and
consolidating balance sheets of the Company and its consolidated
Subsidiaries as at the end of such year and the related consolidated and
consolidating statements of income,
<PAGE>
62
retained earnings and cash flows for such fiscal year and setting forth
comparative figures for the preceding fiscal year and, in the case of the
consolidated statements, certified by Arthur Andersen LLP or other
independent certified public accountants of recognized national standing
reasonably acceptable to the Required Lenders, together with comparative
figures for the preceding fiscal year prepared by the Company and an
unaudited schedule prepared by the Company containing comparable budgeted
figures for such period;
(b) as soon as available, but in any event within 45 days after the
end of each of the first three quarterly periods of each fiscal year of the
Company, the unaudited consolidated balance sheets of the Company and its
consolidated Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income, retained earnings and of cash
flows of the Company and its consolidated Subsidiaries for such quarter and
the portion of the fiscal year through the end of such quarter, setting
forth (i) in the case of such consolidated balance sheet, in comparative
form the figures as at the end of the previous fiscal year and (ii) in the
case of such consolidated statements of income and of cash flows, in
comparative form the budgeted figures for such quarter and the figures for
the corresponding quarter of the previous fiscal year, certified by a
Responsible Officer as being fairly stated in accordance with GAAP in all
material respects (subject to normal year-end audit adjustments); and
(c) as soon as available, but in any event within 45 days after the
end of each calendar month, the consolidated statement of income for such
month and the fiscal year to date and the figures for the corresponding
month and year to date of the previous fiscal year;
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or Responsible Officer, as the
case may be, and disclosed therein).
7.2 Certificates; Other Information. Furnish to the US
-------------------------------
Administrative Agent for distribution to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a), a certificate of the independent
certified public accountants reporting on such financial statements stating
that in connection with their audit nothing has come to their attention to
cause them to believe that the Company or any of its Subsidiaries failed to
comply with the covenants contained in Sections 7 and 8; provided, however,
-------- -------
that such audit shall not have been directed primarily toward obtaining
knowledge of such noncompliance, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a certificate of a Responsible
Officer ("Compliance
----------
<PAGE>
63
Certificate") stating that, to the best of such Officer's knowledge, during
-----------
such period (i) no Subsidiary has been formed or acquired (or, if any such
Subsidiary has been formed or acquired, the Company has complied with the
requirements of subsections 7.15, 7.16 and 7.17 with respect thereto), (ii)
neither the Company nor any of its Subsidiaries has changed its name, its
principal place of business, its chief executive office or the location of
any material item of tangible Collateral without complying with the
requirements of this Agreement and the Security Documents with respect
thereto, (iii) the Company in all material respects has observed or
performed all of its covenants and other agreements, and satisfied every
condition, contained in this Agreement and the other Loan Documents to be
observed, performed or satisfied by it, except as specified in such
certificate, and (iv) the Company has set forth in reasonable detail any
and all calculations necessary to show compliance with all of the financial
condition covenants set forth in subsections 8.3 through 8.5 inclusive, and
8.7 through 8.10 inclusive, including, without limitation, calculations and
reconciliations, if any, necessary to show compliance with such financial
condition covenants on the basis of GAAP consistent with those utilized in
preparing the audited financial statements referred to in subsection 5.1,
and such Officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate;
(c) no later than 15 days after the first day of each fiscal year of
the Company, a budget for the Company and its Subsidiaries using a format
reasonably satisfactory to the Administrative Agents and the Required
Lenders (including budgeted statements of income and sources and uses of
cash and balance sheets) prepared by the Company for each fiscal quarter of
such fiscal year, prepared in reasonable detail with appropriate
presentation and discussion of the principal assumptions upon which such
budgets are based, accompanied by the statement of a Responsible Officer of
the Company to the effect that, to the best of his knowledge, the budget is
a reasonable estimate for the period covered thereby.
(d) within five days after the same are filed, copies of all
financial statements and reports which either Borrower may make to, or file
with, the Securities and Exchange Commission or any successor or analogous
Governmental Authority; and
(e) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
7.3 Books, Records and Inspections. The Company and its Subsidiaries
------------------------------
will keep proper books of record and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities. The
Company and its Subsidiaries will permit officers and designated representatives
of either Administrative Agent or any Lender to visit and inspect, under
guidance of officers of the Company or such Subsidiaries, any of the properties
of the Company and its Subsidiaries, and to examine the books of account of
the Company and its Subsidiaries and discuss the affairs, finances and accounts
of the
<PAGE>
64
Company and its Subsidiaries with, and be advised as to the same by, its
and their respective officers, all at such reasonable times and intervals and to
such reasonable extent as either Administrative Agent or such Lender may
request.
7.4 Maintenance of Property, Insurance. (a) Part A of Schedule 7.4
----------------------------------
sets forth a true and complete listing of all insurance maintained by the
Company and its Subsidiaries with respect to its property as of the Closing
Date. The Company and its Subsidiaries will (i) keep all property necessary in
its business in good working order and condition (ordinary wear and tear
excepted), (ii) maintain with financially sound and reputable insurance
companies insurance on all its property in at least such amounts and against at
least such risks as is consistent and in accordance with industry practice for
companies similarly situated and (iii) furnish to each Lender, upon written
request, full information as to the insurance carried. In addition, Part B of
Schedule 7.4 sets forth a true and complete listing of all insurance maintained
by the Company with respect to its Shareholders as of the Closing Date.
(b) The Company will (i) maintain with a financially sound and
reputable insurance company key-man insurance on J. Peter Pierce of at least
US$1,000,000 and (ii) furnish to each Lender, upon written request, full
information as to the insurance carried.
(c) At any time that insurance at levels described in Schedule 7.4 or
at the level described in subsection 7.4(b) is not being maintained by the
Company, the Company will notify the Lenders in writing within two Business Days
thereof. The provisions of this subsection 7.4 shall be deemed to be
supplemental to, but not duplicative of, the provisions of any Security Document
that require the maintenance of insurance.
7.5 Corporate Franchises. The Company and its Subsidiaries will do
--------------------
all things necessary to preserve and keep in full force and effect its existence
and all of its rights, franchises, licenses and patents, except where the
failure to do so could not have been reasonably expected to have a Material
Adverse Effect; provided, however, nothing in this subsection 7.5 shall prevent
-------- -------
the withdrawal by the Company or any of its Subsidiaries of its qualification as
a foreign corporation in a jurisdiction in which such withdrawal could not be
reasonably expected to have a Material Adverse Effect.
7.6 Compliance with Statutes, etc. The Company and its Subsidiaries
------------------------------
will comply with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all Governmental Authorities, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property except such noncompliances as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
7.7 Compliance with Environmental Laws. (a) The Company and its
----------------------------------
Subsidiaries will comply in all material respects with all Environmental Laws
applicable to ownership or use of their real property (including, without
limitation, state laws applicable to underground storage tanks), will promptly
pay or cause to be paid by other responsible parties all costs and expenses
incurred in such compliance, and will keep or cause to be kept all such real
properties free and clear of any Liens or any restrictions on the
<PAGE>
65
ownership, occupancy, use or transferability of such real property imposed
pursuant to such Environmental Laws, except where the failure to do so could not
have been reasonably expected to have a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries will use or store or knowingly permit the
use or storage of Hazardous Materials on any of its respective real property, or
transport or knowingly permit the transportation of Hazardous Materials to or
from any of its respective real property except in material compliance with
Environmental Laws. Neither the Company nor any of its Subsidiaries will
generate, treat, release or dispose of, or permit the generation, treatment,
release or disposal of, Hazardous Materials on any of its respective real
property except in material compliance with Environmental Laws.
(b) At the reasonable request of either Administrative Agent or the
Required Lenders that at any time there exists a condition or set of
circumstances or facts which has given rise to a material Environmental Claim,
material noncompliance with an Environmental Law or an Event of Default exists
with respect to this Section 7.7, the Company will provide, at its sole cost and
expense, an environmental site assessment report concerning such real property
of the Company or its Subsidiaries which is affected by any Environmental Claim,
or noncompliance with an Environmental Law or material Event of Default,
prepared by an environmental consulting firm approved by the US Administrative
Agent or the Required Lenders, indicating the presence or Release or absence of
Hazardous Materials and the potential cost of any required removal or remedial
action in connection with any Hazardous Materials on such real property. If the
Company fails to provide the same within sixty (60) days after such request is
made or within a reasonable time thereafter, the US Administrative Agent or the
Required Lenders may upon ten (10) days' prior notice order the same or
undertake such an assessment all at the expense of the Company, and the Company
or its Subsidiary shall grant and hereby grants to the US Administrative Agent
and the Lenders and their agents access to such real property.
7.8 ERISA; Canadian Pension Plans. (a) As soon as possible and, in
-----------------------------
any event, within 10 days after the Company or any ERISA Affiliate knows or has
reason to know of the occurrence of any of the following, the Company will
deliver to each of the Lenders a certificate of a Responsible Officer of the
Company setting forth details as to such occurrence and the action, if any,
which the Company or such ERISA Affiliate is required or proposes to take,
together with any notices required or proposed to be given to or filed with or
by the Company, the ERISA Affiliate, the PBGC, a Plan participant or the Plan
administrator with respect thereto: that a Reportable Event has occurred; that
an accumulated funding deficiency has been incurred or an application may be or
has been made to the Secretary of the Treasury for a waiver or modification of
the minimum funding standard (including any required installment payments) or an
extension of any amortization period under Section 412 of the Code with respect
to a Plan; that a Plan has been or may be terminated, reorganized, partitioned
or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded
Current Liability giving rise to a lien under ERISA or the Code; that
proceedings may be or have been instituted to terminate a Plan; that a
proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Plan; or that the Company or any ERISA Affiliate
will or may incur any liability (including any contingent or secondary
liability) to or on account of the termination of or withdrawal
<PAGE>
66
from a Plan under Section 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or with
respect to a Plan under Section 4971 or 4975 of the Code or Section 409 or
502(i) or 502(1) of ERISA. The Company will deliver to each of the Lenders a
complete copy of the annual report (Form 5500) of each Plan required to be filed
with the Internal Revenue Service. In addition to any certificates or notices
delivered to the Lenders pursuant to the first sentence hereof, copies of annual
reports and any notices received by the Company or any ERISA Affiliate with
respect to any Plan shall be delivered to the Lenders no later than 10 days
after the later of the date such report or notice has been filed with the
Internal Revenue Service or received by the Company or the ERISA Affiliate.
(b) As soon as possible and, in any event, within 10 days after the
Company or any Subsidiary of the Company knows of any of the following, the
Company will deliver to the US Administrative Agent a certificate setting forth
the details of any such occurrence or condition and such action, if any, which
is required or proposed to be taken, together with any notices required or
proposed to be given to or filed with or by the Company or such Subsidiary, the
relevant pension or tax regulatory authority, a current or former member of a
Canadian Pension Plan, an administrator or member of an advisory committee of a
Canadian Pension Plan or a union representing current or former members of a
Canadian Pension Plan with respect thereto: that a Canadian Pension Plan is not
in substantial compliance with any applicable pension benefits and tax laws;
that a Canadian Pension Plan has an unfunded liability (either on a "going
concern" or on a "winding up" basis and determined in accordance with all
applicable laws and using assumptions and methods that are appropriate in the
circumstances and in accordance with generally accepted actuarial principles and
practices in Canada); that any contribution (including any special payment to
amortize any unfunded liability) required to be made in accordance with any
applicable law or the terms of a Canadian Pension Plan has not been made; that
an event has occurred or a condition exists with respect to a Canadian Pension
Plan that has resulted or could result in the Canadian Pension Plan being
ordered or required to be wound up in whole or in part pursuant to any
applicable pension benefits laws or having its registration revoked or refused
for the purposes of any applicable pension benefits and tax laws or being placed
under the administration of any relevant pension benefits regulatory authority
or being required to pay any taxes or penalties under any applicable pension
benefits and tax laws; that an order has been made or notice has been given
pursuant to any applicable pension benefits and tax laws in respect of any
Canadian Pension Plan requiring (or proposing to require) any person to take or
refrain from taking any action in respect thereof or that there has (or there
are circumstances that indicate that there has) been a contravention of any such
applicable laws; or that an event has occurred or a condition exists that has
resulted or could result in the Company or any Subsidiary of the Company being
required to pay, repay or refund any amount (other than contributions required
to be made or expenses required to be paid in the ordinary course) to or on
account of any Canadian Pension Plan or a current or former member thereof; or
that an event has occurred or a condition exists that has resulted or could
result in a payment being made out of a guarantee fund established under the
applicable pension benefits laws in respect of a Canadian Pension Plan.
<PAGE>
67
(c) The Company will, and will cause each of its Subsidiaries, to
make all contributions (including any special payments to amortize any unfunded
liabilities) required to be made in accordance with all applicable laws and the
terms of each Canadian Pension Plan in a timely manner.
7.9 End of Fiscal Years; Fiscal Quarters. The Company will cause its
------------------------------------
and each of its Subsidiaries' fiscal years to end on December 31, and each of
its and its Subsidiaries' first three fiscal quarters to end on March 31, June
30 and September 30.
7.10 Performance of Obligations. The Company will, and will cause
--------------------------
each of its Subsidiaries to, perform all of its obligations under the terms of
each mortgage, indenture, security agreement and other debt instrument by which
it is bound and each other agreement or contract to which it is a party, except
such non-performances as could not reasonably be expected to individually or in
the aggregate have a Material Adverse Effect.
7.11 Payment of Taxes. Each of the Company and its Subsidiaries will
----------------
pay and discharge all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits, or upon any properties belonging
to it, prior to the date on which penalties attach thereto, and all lawful
claims which, if unpaid, might become a Lien upon any properties of such Person;
provided, that such Person shall not be required to pay any such tax,
- --------
assessment, charge, levy or claim which is being contested in good faith and by
proper proceedings if it has maintained adequate reserves with respect thereto
in accordance with GAAP.
7.12 Use of Proceeds. The proceeds of Loans shall be used by the
---------------
Borrowers (i) to fund Permitted Acquisitions, (ii) to provide funds in an
aggregate amount not to exceed US$10,000,000 for the purchase, repurchase,
redemption or other payment in respect of the Capital Stock of the Company,
(iii) to provide funds in an aggregate amount not to exceed US$20,000,000 for
the purchase, repurchase, redemption or other payment in respect of the Senior
Subordinated Notes and (iv) for general corporate purposes, including to finance
the working capital needs of the Borrowers.
7.13 Notices. Promptly give notice to the US Administrative Agent
-------
and each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Company or any of its Subsidiaries, including, without
limitation, under the Senior Subordinated Notes or (ii) litigation,
investigation or proceeding which may exist at any time between the Company
or any of its Subsidiaries and any Governmental Authority, which in either
case, if not cured or if adversely deter mined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
<PAGE>
68
(c) any litigation or proceeding affecting the Company or any of its
Subsidiaries (i) in which the amount involved is US$1,000,000 or more and
not covered by insurance or (ii) in which injunctive or similar relief is
sought which could reasonably be expected to have a Material Adverse
Effect;
(d) any material adverse change in the business, operations,
property, condition (financial or otherwise) or prospects of the Borrower
and its Subsidiaries taken as a whole; and
(e) as soon as possible after a Responsible Officer of the Company
knows or reasonably should know thereof, (i) any Release by the Company or
any of its Subsidiaries of any Hazardous Materials required to be reported
under applicable Environmental Laws to any Governmental Authority, unless
the Company reasonably determines that the total Environmental Costs
arising out of such release or discharge are unlikely to exceed
US$1,000,000 or to have a Material Adverse Effect; (ii) any condition,
circumstance, occurrence or event not previously disclosed in writing to
the US Administrative Agent that could result in liability under applicable
Environmental Laws unless the Company reasonably determines that the total
Environmental Costs arising out of such condition, circumstance, occurrence
or event are unlikely to exceed US$1,000,000 or to have a Material Adverse
Effect, or could result in the imposition of any Lien or other restriction
on the title, ownership or transferability of any facilities and properties
owned, leased or operated by the Company or any of its Subsidiaries that
could reasonably be expected to have a Material Adverse Effect; and (iii)
any proposed action to be taken by the Company or any of its Subsidiaries
that would reasonably be expected to subject the Company or any of its
Subsidiaries to any material additional or different requirements or
liabilities under Environmental Laws, unless the Company determines that
the total Environmental Costs arising out of such proposed action are
unlikely to exceed US$1,000,000 or to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
7.14 Tax Status. The Company will comply in all respects with the
----------
Code to maintain its status as an S corporation as defined in Section 1361 of
the Code and will take all actions necessary so that the Company continues to
qualify as an S corporation (as defined in Section 1361 of the Code); provided,
however, the Company shall not be required to continue its status as an S
corporation in the event (a) the Company completes a public offering of its
Capital Stock or (b) the Company shall have provided to the US Administrative
Agent financial projections for the then remaining life of this Agreement
demonstrating pro forma compliance (after giving effect to the conversion of the
Company to a "C" corporation) with subsections 8.8, 8.9 and 8.10 for the then
remaining life of this Agreement.
<PAGE>
69
7.15 Additional Mortgages. (a) The Company shall grant, and shall
--------------------
cause its Subsidiaries to grant, to the relevant Administrative Agent, for the
benefit of the relevant Lenders a lien and security interest in any real
property of such Person not covered by a Mortgage (including, without
limitation, any real property acquired by such Loan Party pursuant to a
Permitted Acquisition, but excluding any property that has a Lien thereon
permitted by subsection 8.1(l)) so long as the fair market value of such
property exceeds US$2,500,000 (or the C$ Equivalent thereof) an "Additional
----------
Mortgaged Property"), and shall take all actions reasonably requested by the US
- ------------------
Administrative Agent (including, without limitation, the obtaining of title
insurance policies and title surveys) in connection with the granting of such
security interest, provided, however, that no such Mortgage shall be required to
-----------------
be created with respect to any real property that is subject to a Lien permitted
by subsection 8.1(l).
(b) The liens and security interests required to be granted pursuant
to clause (a) above shall be granted pursuant to security documentation (which
shall be substantially similar to the Security Documents) reasonably
satisfactory in form and substance to the US Administrative Agent and shall
constitute valid and enforceable perfected security interests prior to the
rights of all third Persons and subject to no other Liens except such Liens as
are permitted by subsection 8.1. The Mortgages and other instruments related
thereto shall be duly recorded or filed in such manner and in such places and at
such times as are required by law to establish, perfect, preserve and protect
the Liens, in favor of the relevant Administrative Agent for the benefit of the
relevant Lenders, required to be granted pursuant to the Mortgages, as the case
may be, and, all taxes, fees and other charges payable in connection therewith
shall be paid in full by the respective Borrower. At the time of the execution
and delivery of the Mortgages, such Borrower shall cause to be delivered to the
relevant Administrative Agent such opinions of counsel, title insurance, title
surveys and other related documents other than real estate appraisals as may be
reasonably requested by such Administrative Agent or the relevant Required
Lenders to assure themselves that this subsection has been complied with.
(c) Each Borrower agrees that each action required by subsections (a)
or (b) with respect to any Mortgages, as the case may be, shall be completed
within 60 days of the later of (i) the date such action is requested to be taken
and (ii) the date of the Relevant Permitted Acquisition.
7.16 Additional Stock Pledges. (a) The Company will, and will cause
------------------------
each of its Subsidiaries to, pledge to the US Administrative Agent 100% of the
issued and outstanding Capital Stock (other than directors' qualifying shares)
which it or such Subsidiary holds of each Domestic Subsidiary of the Company
which has not previously been pledged hereunder. Such pledge shall be granted
pursuant to an addendum to the US Guarantee and Security Agreement substantially
in the form of Exhibit A thereto.
(b) The Company will, and will cause each of its US Subsidiaries to,
pledge (or grant analogous security interests) to the US Administrative Agent in
accordance with the laws of the jurisdiction of organization of the issuer
thereof 65% (rounded downward to eliminate any fraction of a share) of the
issued and outstanding shares of each class of
<PAGE>
70
Capital Stock entitled to vote (within the meaning of Treasury Regulations
(S)1.956-2(c)(2)) ("Voting Stock") and 100% of the issued and outstanding shares
------------
of each class of Capital Stock not entitled to vote (within the meaning of such
Regulation) ("Non-Voting Stock") of each first-tier Foreign Subsidiary from time
----------------
to time of the Company which (in each case) is owned of record by the Company or
any Domestic Subsidiary of the Company and which has not previously been pledged
hereunder. Each such pledge shall, unless otherwise agreed to by the US
Administrative Agent, be granted pursuant to an addendum to the US Guarantee and
Security Agreement in such form as (x) may be reasonably required in order to
perfect a security interest in the pledged stock delivered thereto as defined
therein under the laws of the jurisdiction in which the issuer of such pledged
stock is organized and (y) is in form and substance reasonably satisfactory to
the US Administrative Agent.
(c) The Company will, and will cause each of the US Subsidiaries to,
execute and deliver each addendum required to be executed and delivered pursuant
to this subsection 7.16 promptly following the organization, acquisition or
identification of any such Subsidiary or first-tier Foreign Subsidiary. Each
such addendum shall be accompanied by (i) share certificates evidencing the
pledged stock thereunder (to the extent that such pledged stock is certificated)
as defined therein, together with an undated stock power for each such share
certificate (duly executed in blank and delivered by a duly authorized officer
of the pledgor of the pledged stock represented by such certificate), (ii) in
the case of the pledge of Capital Stock of any Foreign Subsidiary, evidence of
the taking of all such other actions as may be necessary or appropriate for the
perfection and first priority of such pledge and (iii) in the case of any
Subsidiary, such resolutions, incumbency certificates and legal opinions as are
reasonably requested by the US Administrative Agent and shall otherwise be in
form and substance reasonably satisfactory to the US Administrative Agent.
(d) The Canadian Borrower will, and will cause each of its
Subsidiaries to, pledge to the Canadian Administrative Agent 100% of the issued
and outstanding Capital Stock or other equity interests (other than directors'
qualifying shares) which it or such Subsidiary holds of each of its Subsidiaries
which has not previously been pledged hereunder. Such pledge shall, unless
otherwise agreed to by the Canadian Administrative Agent, be granted pursuant to
an addendum to the Canadian Security Agreement substantially in the form of
Exhibit A thereto.
(e) The Canadian Borrower will, and will cause each of its
Subsidiaries to, execute and deliver each addendum required to be executed and
delivered pursuant to this subsection 7.16 promptly following the organization,
acquisition or identification of any such Subsidiary. Each such addendum shall
be accompanied by (i) share certificates, if any, evidencing the pledged stock
thereunder (to the extent that such pledged stock is certificated) as defined
therein, together with an undated stock power for each such share certificate
(duly executed in blank and delivered by a duly authorized officer of the
pledgor of the pledged stock represented by such certificate), (ii) in the case
of the pledge of Capital Stock of any Foreign Subsidiary, evidence of the taking
of all such other actions as may be necessary or appropriate for the perfection
and first priority of such pledge and (iii) in the case of any Subsidiary, such
resolutions, incumbency certificates and legal opinions
<PAGE>
71
as are reasonably requested by the Canadian Administrative Agent and shall
otherwise be in form and substance reasonably satisfactory to the Canadian
Administrative Agent.
7.17 Additional Guarantee and Security Agreements. Each Borrower
--------------------------------------------
will cause each of its respective Subsidiaries which has not previously done so
to execute and deliver to the relevant Administrative Agent an addendum to, and
thereby become a party to, the respective US Global Guarantee and Security
Agreement or Canadian Security Agreement and to take such other action as
reasonably shall be necessary or as the relevant Administrative Agent reasonably
shall request to grant to such Administrative Agent a perfected (to the extent
required in the US Global Guarantee and Security Agreement or Canadian Security
Agreement) security interest in all Collateral described in the US Global
Guarantee and Security Agreement or Canadian Security Agreement (subject to any
Liens permitted to encumber such Collateral pursuant to subsection 8.1). Each
such addendum to the relevant US Global Guarantee and Security Agreement or
Canadian Security Agreement shall be accompanied by such evidence of the taking
of all actions as may be necessary or appropriate for the perfection (to the
extent required in such US Global Guarantee and Security Agreement or Canadian
Security Agreement) of such security interest (including, without limitation,
the filing of any necessary Uniform Commercial Code or PPSA financing
statements) and such resolutions, incumbency certificates and legal opinions as
are reasonably requested by such Administrative Agent, all of which shall be in
form and substance reasonably satisfactory to such Administrative Agent.
7.18 Mortgaged Properties Documentation. The Company shall, within
----------------------------------
60 days after the Closing Date:
(a) Mortgages. Furnish to the US Administrative Agent each Mortgage,
---------
each executed and delivered by a duly authorized officer of the party
thereto, with a counterpart or a conformed copy for each Lender.
(b) Surveys. Furnish to the US Administrative Agent and the title
-------
insurance company issuing the policy referred to in subsection 7.18(b) (the
"Title Insurance Company") maps or plats of an as-built survey of the sites
-----------------------
of the US Mortgaged Properties and the Canadian Mortgaged Properties
certified to the US Administrative Agent and the Title Insurance Company in
a manner reasonably satisfactory to them, dated a date satisfactory to the
US Administrative Agent and the Title Insurance Company by an independent
professional licensed land surveyor satisfactory to the US Administrative
Agent and the Title Insurance Company, which maps or plats and the surveys
on which they are based shall be made in accordance with the Minimum
Standard Detail Requirements for Land Title Surveys jointly established and
adopted by the American Land Title Association and the American Congress on
Surveying and Mapping in 1962 or such other certification reasonably
acceptable to the US Administrative Agent, and, without limiting the
generality of the foregoing, there shall be or is, as of a recent date,
surveyed and shown on such maps, plats or surveys the following: (i) the
locations on such sites of all the buildings, structures and other
improvements and the established building setback lines; (ii) the lines of
streets abutting the sites and width thereof; (iii) all access and other
easements
<PAGE>
72
appurtenant to the sites or necessary or desirable to use the sites; (iv)
all roadways, paths, driveways, easements, encroachments and overhanging
projections and similar encumbrances affecting the site, whether recorded,
apparent from a physical inspection of the sites or otherwise known to the
surveyor; (v) any encroachments on any adjoining property by the building
structures and improvements on the sites; and (vi) if the site is described
as being on a filed map, a legend relating the survey to said map.
(c) Title Insurance Policy or Opinion. Furnish to the US
---------------------------------
Administrative Agent (i) in respect of each parcel covered by each
Mortgage, a mortgagee's title policy (or policies) or marked up
unconditional binder for such insurance dated the Closing Date and each
such policy shall (A) be in an amount satisfactory to the US Administrative
Agent; (B) be issued at ordinary rates; (C) insure that the Mortgage
insured, thereby creates a valid first Lien on such parcel free and clear
of all defects and encumbrances, except such as may be approved by the US
Administrative Agent; (D) name the US Administrative Agent for the benefit
of the Lenders as the insured thereunder; (E) be in the then current form
of ALTA Loan Policy approved by the state in which the parcel is located or
the comparable form in Canada, as the case may be; (F) contain such
endorsements and affirmative coverage as the US Administrative Agent may
reasonably request and (G) be issued by title companies satisfactory to the
US Administrative Agent (including any such title companies acting as co-
insurers or reinsurers, at the option of the US Administrative Agent), and
evidence satisfactory to the US Administrative Agent that all premiums in
respect of each such policy, and all charges for mortgage recording tax, if
any, have been paid, or (ii) in respect of each parcel covered by the
Canadian Mortgage, a title opinion in form and substance reasonably
satisfactory to the US Administrative Agent.
(d) Copies of Documents. Furnish to the US Administrative Agent a
-------------------
copy of all recorded documents referred to, or listed as exceptions to
title in, the title policy or policies or title opinion or opinion referred
to in subsection 7.18(b) and a copy, certified by such parties as the US
Administrative Agent may deem appropriate, of all other documents affecting
the property covered by each Mortgage.
SECTION 8. NEGATIVE COVENANTS
Each Borrower covenants and agrees with the Lenders and the
Administrative Agents that, so long as any Commitment or Loan is outstanding and
until payment in full of all amounts payable by such Borrower hereunder:
8.1 Liens. Such Borrower will not, and will not permit any of its
-----
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any of its property or assets (real or personal, tangible or
intangible), whether now owned or hereafter acquired, except:
<PAGE>
73
(a) inchoate Liens for taxes not yet due or Liens for taxes being
contested in good faith and by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP;
(b) Liens imposed by law, which were incurred in the ordinary course
of business and do not secure Indebtedness, such as carriers',
warehousemen's, materialmen's, mechanics' and similar Liens arising in the
ordinary course of business, and (x) which do not in the aggregate
materially detract from the value of such Person's property or assets or
materially impair the use thereof in the operation of the business of such
Person or (y) which are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture
or sale of the property or assets subject to any such Lien;
(c) Liens in existence on the Closing Date and listed on Schedule
8.1;
(d) Liens created pursuant to the Security Documents;
(e) easements, rights-of-way, restrictions, encroachments and other
similar charges, encumbrances or defects or irregulations of title not
materially interfering with the conduct of the business of such Borrower or
such Subsidiary;
(f) any attachment or judgment Lien so long as no Event of Default
shall have arisen under subsection 9(h) in connection therewith;
(g) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security
benefits as required by law, or securing leases incurred in the ordinary
course of business;
(h) Liens created by leases or subleases granted to others not
interfering in any material respect with the business of such Borrower or
such Subsidiary;
(i) Liens on property of such Borrower or any of its Subsidiaries
securing Capitalized Lease Obligations permitted by subsection 8.4(f),
provided that such Liens only secure the payment of such Capitalized Lease
--------
Obligation and encumber only the asset giving rise to the Capitalized Lease
Obligation;
(j) Liens placed upon equipment or machinery used in the ordinary
course of business of such Borrower or such Subsidiary at the time of the
acquisition thereof to secure Indebtedness incurred to pay all or a portion
of the purchase price thereof; provided that the Indebtedness secured by
--------
Liens permitted by this clause is permitted to be pursuant to subsection
8.4(f) and that such Liens do not encumber any other asset or property of
such Borrower or any of its Subsidiaries;
(k) Liens on real property acquired in connection with a Permitted
Acquisition, or which is owned by a Person acquired in connection with a
Permitted
<PAGE>
74
Acquisition which becomes a Subsidiary after the date hereof, in
either case, securing Indebtedness permitted by subsection 8.4(f), provided
--------
that (i) such Liens existed at the time of such Permitted Acquisition and
were not created in anticipation thereof, (ii) any such Lien is not spread
to cover any other property or assets after the date of such Permitted
Acquisition and (iii) the amount of Indebtedness secured thereby is not
increased;
(l) Liens arising pursuant to purchase money mortgages securing
Indebtedness representing a portion of the purchase price of real property
acquired by such Borrower or such Subsidiary in accordance with subsection
8.2(d) or (e), provided, that (i) any such Liens attach only to the real
--------
property so purchased, (ii) the Indebtedness secured by any such Lien does
not exceed 100% of the lesser of the fair market value or the purchase
price of such real property at the time of the incurrence of such
Indebtedness and (iii) the Indebtedness secured by Liens permitted by this
clause is permitted pursuant to subsection 8.4(f);
(m) Liens created by applicable by-laws and other governmental
regulations and restrictions provided that the same do not materially
interfere with the conduct of the business of the owner of the property
subject thereto; and
(n) reservations, limitations and conditions expressed in any
original grants from the Crown.
8.2 Consolidation, Merger, Purchase or Sale of Assets, etc. Such
-------------------------------------------------------
Borrower will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger,
amalgamation or consolidation, nor convey, sell, lease or otherwise dispose of
(or agree to do any of the foregoing at any future time) all or any part of its
property or assets (including, without limitation, stock of any Subsidiary), nor
enter into any partnerships, joint ventures or sale-leaseback transactions, nor
purchase or otherwise acquire (in one or a series of related transactions) any
part of the property or assets (other than purchases or other acquisitions by
such Borrower or such Subsidiary of inventory, materials and equipment in the
ordinary course of business) of any Person, except:
(a) Capital Expenditures permitted by subsection 8.7;
(b) sales of inventory and other assets in the ordinary course of
business;
(c) investments permitted by subsection 8.5;
(d) Permitted Acquisitions;
(e) so long as prior to and after giving effect thereto, there shall
not be a Default or Event of Default in existence, (i) the purchase of the
Travelers Corporation Building Archives, provided that the aggregate
--------
consideration paid in connection therewith shall not exceed US$6,000,000,
(ii) the purchase of the
<PAGE>
75
Montreal Property, provided that the aggregate consideration paid in
--------
connection therewith shall not exceed C$5,250,000, (iii) the Real Estate
Transactions (as defined in the offering memorandum for the Senior
Subordinated Notes), provided that the aggregate consideration paid in
--------
connection therewith shall not exceed US$15,000,000 and (iv) other
purchases of real property in the ordinary course of business, provided
--------
that the aggregate consideration paid during any fiscal year of the Company
in connection with all such other purchases (excluding any purchases in
connection with a Permitted Acquisition) shall not exceed US$5,000,000;
(f) other Dispositions of property or assets (i) which do not exceed
US$2,500,000 in the aggregate or (ii) with respect to which (x) the Company
or a Subsidiary, as the case may be, receives consideration at the time of
such Disposition at least equal to the fair market value thereof; (y) not
less than 85% of such consideration is in the form of cash; and (z) the Net
Cash Proceeds thereof are applied in accordance with subsection 4.4;
(g) leases (as lessee) of real or personal property (so long as such
lease does not create Capitalized Lease Obligations);
(h) mergers, consolidations or amalgamations of one or more
Subsidiaries (i) with and into the Company or another Subsidiary or (ii) in
which any Subsidiary is the surviving or resulting company; and
(i) Restricted Payments to the extent permitted by subsection 8.3.
8.3 Limitation on Restricted Payments. The Company will not make any
---------------------------------
"Restricted Payments" (as defined in the Senior Subordinated Notes Indenture)
other than in accordance with the provisions of Section 4.09 of the Senior
Subordinated Notes Indenture (relating to "Limitation on Restricted Payments")
as such provisions are in effect on the date hereof without giving effect to any
amendments, supplements or other modifications thereto or any termination
thereof, which provisions, together with related definitions, are deemed
incorporated herein by reference, as if set forth at length herein.
8.4 Indebtedness. Such Borrower will not, and will not permit any of
------------
its Subsidiaries to, contract, create, incur, assume nor suffer to exist any
Indebtedness, except:
(a) Indebtedness in respect of the Loans, any Notes, the Security
Documents and the other obligations of the Loan Parties under this
Agreement and the other Loan Documents;
(b) Indebtedness outstanding on the Closing Date (including
Indebtedness evidenced by the Senior Subordinated Notes) and listed on
Schedule 6.1(d), and any subsequent extension, renewal or refinancing
thereof which does not increase the amount thereof or result in any
advancement in the maturity date of any portion of the principal thereof;
<PAGE>
76
(c) so long as prior to, and after giving effect thereto, there shall
not be a Default or Event of Default then in existence, Indebtedness of the
Company incurred to finance the purchase by the Company of (i) the
Travelers Corporation Building Archives, in an aggregate principal amount
not to exceed US$4,000,000 and (ii) the Montreal Property, in an aggregate
principal amount not to exceed C$4,000,000;
(d) Permitted Intercompany Indebtedness;
(e) Indebtedness under Interest Rate Protection Agreements entered
into in the ordinary course of business; and
(f) additional Indebtedness (including, without limitation, (i)
Capitalized Lease Obligations and other Indebtedness secured by Liens
permitted under subsection 8.1(j) or 8.1(k), (ii) Indebtedness assumed in
connection with any Permitted Acquisition and (iii) Indebtedness incurred
to finance the acquisition of any real property in accordance with
subsection 8.2(e)(iv)) up to but not exceeding US$20,000,000 at any one
time outstanding.
8.5 Advances, Investments and Loans. Such Borrower will not, and
-------------------------------
will not permit any of its Subsidiaries to, directly or indirectly lend money or
credit or make advances to any Person, nor purchase or acquire any stock,
obligations or securities of, or any other interest in, nor make any capital
contribution to, any other Person, except:
(a) receivables created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary terms;
(b) Permitted Acquisitions;
(c) such Borrower may make and maintain travel, relocation and other
expense advances to employees for business-related activities in the
ordinary course of business and consistent with past practice, in an
aggregate outstanding principal amount not to exceed US$500,000 at any
time;
(d) loans and advances which create Indebtedness permitted by
subsection 8.4(d);
(e) the Company may enter into Interest Rate Protection Agreements to
the extent permitted pursuant to subsection 8.4(e);
(f) Permitted Intercompany Indebtedness; and
(g) reasonable and customary loans made to employees not to exceed
$500,000 in the aggregate at any one time outstanding, plus any loans which
may be required to be made under the Company's Nonqualified Stock Option
Plan in an amount not to exceed US$2,000,000.
<PAGE>
77
8.6 Transactions with Affiliates. Such Borrower will not, and will
----------------------------
not permit any of its Subsidiaries to, enter into any transaction or series of
related transactions, whether or not in the ordinary course of business, with
any Affiliate except that:
(a) the Company may enter into transactions permitted by subsection
8.5(g);
(b) the Company may pay customary and reasonable fees to any directors
of the Company who would not be Affiliates of the Company if they were not
directors;
(c) the Company and the Canadian Borrower shall be permitted to
perform the Management Services Agreement;
(d) the Company may make any Restricted Payment that is not prohibited
by the provisions described under "Limitations on Restricted Payments"
contained in Section 4.09 of the Senior Subordinated Notes Indenture and
incorporated by reference in subsection 8.3, including, without limitation,
the distributions or other payments permitted to be made to the Permitted
Holders in the aggregate amount of up to US$700,000 in any one fiscal year
and payments made to Leo W. Pierce, Sr. or his spouse pursuant to a pension
obligation of the Company in the annual amount of $96,000; or
(e) the Company or any Subsidiary of the Company may pay customary
investment banking, underwriting, placement agent or financial advisor fees
paid in connection with services rendered to the Company or any Subsidiary
of the Company;
(f) the Company may enter into any transaction, approved by the Board
of Directors of the Company in good faith, with an officer, director,
employee or consultant of the Company or of any Subsidiary in his or her
capacity as an officer, director, employee or consultant entered into in
the ordinary course of business, including compensation, indemnity and
employee benefit arrangements with any officer, director, employee or
consultant of the Company or of any Subsidiary;
(g) the Company may enter into transactions creating Permitted
Intercompany Indebtedness; and
(h) the Company may make rental or lease payments and perform its
obligations under existing leases with Affiliates in accordance with the
terms thereof;
provided, however, that the Company and its Subsidiaries may renew any of the
- -------- -------
existing Affiliate Contracts through either a renewal option or upon expiration
of an arrangement on substantially similar terms to those in effect immediately
preceding such expiration.
<PAGE>
78
8.7 Capital Expenditures. Such Borrower will not, and will not
--------------------
permit any of its Subsidiaries to, make any expenditure (collectively, "Capital
-------
Expenditures") for fixed or capital assets (including, without limitation,
- ------------
expenditures for maintenance and repairs which should be capitalized in
accordance with GAAP and including Capitalized Lease Obligations and including
Client Acquisition Costs (whether or not such costs would be classified as
capital expenditures in accordance with GAAP) but excluding (a) Capital
Expenditures related to a Permitted Acquisition, provided that such amounts
--------
expended in 1996 relating to any Permitted Acquisition shall not exceed 10% of
the Purchase Price of such Permitted Acquisition; (b) insurance proceeds
received in connection with any Casualty Event used as and permitted by
subsection 4.4(d) to effect the repair, construction or rebuilding of the asset
which is the subject of to such Casualty Event; (c) amounts expended to purchase
the Travelers Corporation Building Archives and the Montreal Property in
accordance with subsections 8.2(e)(i) and 8.2(e)(ii), respectively; and (d)
amounts expended to purchase real property pursuant to subsection 8.2(e)(iii)
and (iv)) which should be capitalized in accordance with GAAP; provided that the
--------
Company and its Subsidiaries may make Capital Expenditures so long as the
aggregate amount thereof (other than those described in clauses (a) through (d)
above) does not exceed (i) during the 1996 fiscal year of the Company,
US$20,000,000, or (ii) during any fiscal year of the Company thereafter, an
amount equal to the sum of (x) 15% of total consolidated revenues of the Company
and its Subsidiaries during the 12-month period ending on September 30 of such
year plus (y) to the extent not included in clause (x) above, 15% of the total
revenues for such 12-month period of all businesses acquired by the Company and
its Subsidiaries during such 12-month period (including the revenues of each
such business for the period from the beginning of such 12-month period through
the date of the acquisition thereof).
8.8 Fixed Charge Coverage Ratio. Commencing on September 30, 1997,
---------------------------
the Company will not permit its Fixed Charge Coverage Ratio for any period of
four consecutive fiscal quarters ending on and after such date, in each case
taken as one accounting period, to be less than 1.0:1.0.
8.9 Interest Coverage Ratio. The Company will not permit its ratio
-----------------------
of EBITDA to Interest Expense for any period of four consecutive fiscal quarters
ending during any period set forth below, in each case taken as one accounting
period, to be less than the ratio set forth opposite such period below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Period Ratio
------ -----
- ------------------------------------------------------------------------------------------
<S> <C>
From and including the Closing Date through June 30, 1998 1.50 to 1.00
- ------------------------------------------------------------------------------------------
From and including July 1, 1998 through June 30, 1999 1.75 to 1.00
- ------------------------------------------------------------------------------------------
From and including July 1, 1999 and thereafter 2.00 to 1.00
- ------------------------------------------------------------------------------------------
</TABLE>
8.10 Leverage Ratio. (a) The Company will not permit the Leverage
--------------
Ratio at any time during any period set forth below to exceed the ratio set
forth opposite such period below:
<PAGE>
79
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Period Ratio
------ -----
- -----------------------------------------------------------------------------------
<S> <C>
From and including the Closing Date through June 30, 1999 5.75 to 1.00
- -----------------------------------------------------------------------------------
From and including July 1, 1999 and thereafter 5.50 to 1.00
- -----------------------------------------------------------------------------------
</TABLE>
(b) The Company will not at any time during any period set forth below
permit the ratio of (i) the aggregate principal amount of Loans then
outstanding, less any cash balances in excess of US$500,000 then outstanding to
the credit of the Company and its Subsidiaries in their operating accounts to
(ii) Adjusted EBITDA of the Company for the then most recently ended period of
four consecutive fiscal quarters for which financial statements shall have been
delivered to the Lenders pursuant to subsection 7.1(a) or 7.1(b):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Period Ratio
------ -----
- -----------------------------------------------------------------------------------
<S> <C>
From and including the Closing Date through June 30, 1999 2.75 to 1.00
- -----------------------------------------------------------------------------------
From and including July 1, 1999 through June 30, 2000 2.50 to 1.00
- -----------------------------------------------------------------------------------
From and including July 1, 2000 through June 30, 2001 2.25 to 1.00
- -----------------------------------------------------------------------------------
From and including July 1, 2001 through June 30, 2002 2.00 to 1.00
- -----------------------------------------------------------------------------------
From and including July 1, 2002 and thereafter 1.75 to 1.00
- ------------------------------------------------------------------------------------
</TABLE>
8.11 Limitation on Voluntary Payments and Modifications of
-----------------------------------------------------
Indebtedness and Certain Other Agreements; etc. The Company will not, and will
- -----------------------------------------------
not permit any of its Subsidiaries to:
(a) make (or give any notice in respect of) any voluntary or optional
payment or prepayment or redemption or acquisition for value of any
Indebtedness (other than the Loans), other than the redemption of the
Senior Subordinated Notes with the net proceeds or one or more Public
Equity Offering (as defined in the Senior Subordinated Notes Indenture) to
the extent permitted under the Senior Subordinated Notes Indenture;
(b) amend or modify, or permit the amendment or modification of, or
relating to the payment or prepayment of the principal of or interest on
any Indebtedness (other than any such amendment or modification which would
extend the maturity or reduce the amount of any payment of principal
thereof or which would reduce the rate or extend the date for payment of
interest thereon);
(c) amend or modify, or permit the amendment or modification of, any
of the terms and conditions of the Senior Subordinated Note Indenture or
the Senior Subordinated Notes (other than (i) as permitted by clause (b)
above and (ii) those that would relax any restriction on the Company
imposed thereby and would not have an adverse effect upon the Lenders); or
<PAGE>
80
(d) amend, modify or change, or enter into any new Shareholders'
Agreement (including the Corporate Buy Sell Agreement), Affiliate Contract,
Management Services Agreement or Tax Sharing Agreement, except for any such
amendment, modification or change which is beneficial to the Company and
its Subsidiaries.
8.12 Limitation on Issuance of Capital Stock. The Company will not
---------------------------------------
permit any of its Subsidiaries to issue any Capital Stock (including by way of
sales of treasury stock) or any options or warrants to purchase, or securities
convertible into, Capital Stock, except for issuances which do not decrease the
percentage of the ownership of any Subsidiary currently held, directly or
indirectly, by the Company.
8.13 Business. The Company will not, and will not permit any of its
--------
Subsidiaries to, engage (directly or indirectly) in any business other than the
business in which it is engaged on the date hereof and any other reasonably
related businesses. The Limited Partnerships shall engage in no business other
than owning the stock of the Canadian Borrower.
8.14 Designation of "Designated Senior Indebtedness". The Company
-----------------------------------------------
will not, without the prior written consent of the Required Lenders, designate
any Indebtedness as "Designated Senior Indebtedness" within the meaning of such
term as used in the Senior Subordinated Note Indenture.
SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) Either Borrower shall fail to pay any principal of any Loan when
due in accordance with the terms thereof or hereof; or either Borrower
shall fail to pay any interest on any Loan, or any other amount payable
hereunder, within five days after any such interest or other amount becomes
due in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by the Company
or any other Loan Party herein or in any other Loan Document or which is
contained in any certificate, document or financial or other statement
furnished by it at any time under or in connection with this Agreement or
any such other Loan Document shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or
(c) The Company or any other Loan Party shall default in the
observance or due performance of any agreement contained in Section 8,
Sections 6 and 7 of the US Mortgage, and Article 2 of the Canadian Security
Agreement; or
<PAGE>
81
(d) The Company or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in paragraphs
(a) through (c) of this Section), and such default shall continue
unremedied for a period of 30 days after the earlier of (i) the date upon
which written notice thereof is given to the Company by either
Administrative Agent or any Lender or (ii) the date upon which either
Borrower obtains knowledge of such default; or
(e) The Company or any of its Subsidiaries shall (i) default (unless
such default has been waived by the relevant creditor) in any payment of
principal of or interest on any Indebtedness (other than the Loans) or in
the payment of any Guarantee Obligation, beyond the period of grace, if
any, provided in the instrument or agreement under which such Indebtedness
or Guarantee Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation
(or a trustee or agent on behalf of such holder or holders or beneficiary
or beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or such Guarantee
Obligation to become payable; provided, however, that no Default or Event
-------- -------
of Default shall exist under this paragraph unless the aggregate amount of
Indebtedness and/or Guarantee Obligations in respect of which any default
or other event or condition referred to in this paragraph shall have
occurred shall be equal to at least US$1,000,000; or
(f) (i) The Company or any of its material Subsidiaries shall
commence any voluntary case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking appointment
of a receiver, trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or the Company or
any of its Subsidiaries shall make a general assignment for the benefit of
its creditors; or (ii) there shall be commenced against the Company or any
of its material Subsidiaries any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against the Company or any of its Subsidiaries any
case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the
<PAGE>
82
entry thereof; or (iv) the Company or any of its Subsidiaries shall take
any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) the Company or any of its Subsidiaries shall generally not,
or shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
(g) (i) Any Person shall engage in any non-exempt "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist with
respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise
on the assets of the Company or any Commonly Controlled Entity, (iii) a
Reportable Event shall occur with respect to, or proceedings shall commence
to have a trustee appointed, or a trustee shall be appointed, to administer
or to terminate, any Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the
Company or any Commonly Controlled Entity shall, or in the reasonable
opinion of the Required Lenders is likely to, incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of,
a Multiemployer Plan or (vi) any other event or condition shall occur or
exist with respect to a Plan; but only if, in each case in clauses (i)
through (vi) above, such event or condition, together with all other such
events or conditions, if any, involve an aggregate amount in excess of
US$3,000,000; or
(h) One or more judgments or decrees shall be entered against the
Company or any of its Subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance) of US$3,000,000 or more, and all
such judgments or decrees shall not have been vacated, discharged, stayed
or bonded pending appeal within 60 days from the entry thereof; or
(i) (i) Any of the Security Documents shall cease, for any reason, to
be in full force and effect, or the Company or any other Loan Party which
is a party to any of the Security Documents shall so assert; or (ii) the
Lien created by any of the Security Documents shall cease to be enforceable
and of the same effect and priority purported to be created thereby; or
(iii) any guarantee in any of the Security Documents shall cease, for any
reason, to be in full force and effect or any Loan Party which is a
guarantor thereunder shall so assert; or
(j) Any Change of Control shall occur; or
(k) Any "Dissolution Event", as defined in the Articles of
Association of the Canadian Borrower shall occur;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section with respect to either
Borrower, automatically the
<PAGE>
83
Commitments shall immediately terminate and the Loans hereunder (including the
face amount of all Bankers' Acceptances accepted by any C$ Lender), with accrued
interest thereon, and all other amounts owing under this Agreement shall
immediately become due and payable, and (B) if such event is any other Event of
Default, either or both of the following actions may be taken:
(i) (x) with the consent of the Required US$ Lenders, the US
Administrative Agent may, or upon the request of the Required US$ Lenders,
the US Administrative Agent shall, by notice to the Company declare the US
Commitments to be terminated forthwith, whereupon the US Commitments shall
immediately terminate; and (y) with the consent of the Required US$
Lenders, the US Administrative Agent may, or upon the request of the
Required US$ Lenders, the US Administrative Agent shall, by notice to the
Company, declare the US$ Loans hereunder (with accrued interest thereon)
and all other amounts owing under this Agreement to the US$ Lenders to be
due and payable forthwith, whereupon the same shall immediately become due
and payable; and
(ii) (x) with the consent of the Required C$ Lenders, the Canadian
Administrative Agent may, or upon the request of the Required C$ Lenders,
the Canadian Administrative Agent shall, by notice to the Canadian Borrower
declare the Canadian Commitments to be terminated forthwith, whereupon the
Canadian Commitments shall immediately terminate; and (y) with the consent
of the Required C$ Lenders, the Canadian Administrative Agent may, or upon
the request of the Required C$ Lenders, the Canadian Administrative Agent
shall, by notice to the Canadian Borrower declare the C$ Loans hereunder
(including the face amount of all Bankers' Acceptances accepted by any C$
Lender), with accrued interest thereon, and all other amounts owing under
this Agreement to the Canadian Lenders to be due and payable forthwith,
whereupon the same shall immediately become due and payable.
Except as expressly provided above in this Section, presentment, demand, protest
and all other notices of any kind are hereby expressly waived.
SECTION 10. THE ADMINISTRATIVE AGENTS
10.1 Appointment. Each Lender hereby irrevocably designates and
-----------
appoints the Administrative Agents as the agents of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agents, in such capacities, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agents by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agents shall not have any duties or responsibilities, except
those expressly set forth in this Agreement, or any fiduciary relationship with
any Lender, and no implied
<PAGE>
84
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against either Administrative Agent. The Borrowers shall be entitled to
conclusively rely upon any statement made by either Administrative Agent that it
has received the approval of the Required Lenders, the Required US$ Lenders, the
Required C$ Lenders, all of the Lenders, all of the US$ Lenders or all of the C$
Lenders.
10.2 Delegation of Duties. Each Administrative Agent may execute any
--------------------
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Neither Administrative Agent
shall be responsible to any Lender for the negligence or misconduct of any
agents or attorneys in-fact selected by it with reasonable care.
10.3 Exculpatory Provisions. Neither Administrative Agent nor any of
----------------------
its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Loan
Document (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by any Loan Party
or any officer thereof contained in this Agreement or any other Loan Document or
in any certificate, report, statement or other document referred to or provided
for in, or received by such Administrative Agent under or in connection with,
this Agreement or any other Loan Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or for any failure of any Loan Party to perform its
obligations hereunder or thereunder. Neither Administrative Agent shall be
under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Loan Party.
10.4 Reliance by Administrative Agent. Each Administrative Agent
--------------------------------
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation reasonably believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrowers), independent accountants and other experts selected by the
Administrative Agent. Each Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with such
Administrative Agent. Each Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
Each Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Loan
<PAGE>
85
Documents in accordance with a request of the Required Lenders, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Loans.
10.5 Notice of Default. Neither Administrative Agent shall be deemed
-----------------
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless such Administrative Agent has received notice from a Lender or
the Company referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default." In the event
that either Administrative Agent receives such a notice, such Administrative
Agent shall give notice thereof to the Lenders. The Administrative Agents shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; provided that unless and until the
--------
Administrative Agents shall have received such directions, the Administrative
Agents may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as they
shall deem advisable and in the best interests of the Lenders.
10.6 Non-Reliance on Administrative Agents and Other Lenders. Each
-------------------------------------------------------
Lender expressly acknowledges that neither Administrative Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representations or warranties to it and that no act by either Administrative
Agent hereinafter taken, including any review of the affairs of either Borrower,
shall be deemed to constitute any representation or warranty by such
Administrative Agent to any Lender. Each Lender represents to the Administrative
Agents that it has, independently and without reliance upon either
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of either Borrower and made its own decision to
make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon either
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of any Loan Party. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Administrative Agents hereunder, neither Administrative Agent
shall have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of any Loan Party which
may come into the possession of such Administrative Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
10.7 Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agents in their respective capacities as such (to the extent not
reimbursed by the Borrowers and without limiting the obligation of either
Borrower to do so), ratably according to their respective Commitment Percentages
in effect on the date on which indemnification is
<PAGE>
86
sought, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Loans) be imposed on, incurred by or asserted
against the Administrative Agents in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agents under or in connection with any of the foregoing; provided
--------
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from an Administrative Agent's
gross negligence or willful misconduct. The agreements in this subsection shall
survive the payment of the Loans and all other amounts payable hereunder.
10.8 Administrative Agents in Their Individual Capacity. The
--------------------------------------------------
Administrative Agents and their Affiliates may make loans to, accept deposits
from and generally engage in any kind of business with either Borrower as though
the Administrative Agents were not the Administrative Agents hereunder and under
the other Loan Documents. With respect to the Loans made by it, each
Administrative Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any Lender and may exercise the same as though
it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall
include such Administrative Agent in its individual capacity.
10.9 Successor Administrative Agent. Each Administrative Agent may
------------------------------
resign as Administrative Agent upon 15 Business Days' prior written notice to
the Borrowers and the Lenders. If either Administrative Agent shall resign as
Administrative Agent under this Agreement and the other Loan Documents, then the
Required Lenders shall appoint from among the Lenders a successor agent for the
Lenders, which successor agent (provided that it shall have been approved by the
Company), shall succeed to the rights, powers and duties of such Administrative
Agent hereunder. Such resignation shall take effect upon the appointment of a
successor agent. Effective upon such appointment and approval, the term
"Administrative Agent" shall mean such successor agent, and such former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 10 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
<PAGE>
87
SECTION 11. MISCELLANEOUS
11.1 Amendments and Waivers. (a) Neither this Agreement nor any
----------------------
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
subsection. The Required Lenders may, or, with the written consent of the
Required Lenders, the US Administrative Agent may, from time to time, (1) enter
into with the Borrowers written amendments, supplements or modifications hereto
and to the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Borrowers hereunder or thereunder or (2) waive, on such
terms and conditions as the Required Lenders or the Administrative Agents, as
the case may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
-------- -------
supplement or modification shall (i) reduce the amount or extend the scheduled
date of maturity of any Loan or of any installment thereof, or reduce the stated
rate of any interest or fee payable hereunder or extend the scheduled date of
any payment thereof or increase the amount or extend the expiration date of any
Lender's Commitments, in each case without the consent of each Lender affected
thereby, or (ii) amend, modify or waive any provision of this subsection or
reduce the percentage specified in the definition of Required Lenders or consent
to the assignment or transfer by either Borrower of any of its rights and
obligations under this Agreement and the other Loan Documents or release all or
substantially all of the Collateral, in each case without the written consent of
all the Lenders, or (iii) reduce the percentage specified in the definition of
Required US$ Lenders or Required C$ Lenders without the written consent of all
the US$ Lenders or C$ Lenders, respectively, or (iv) amend, modify or waive any
provision of Section 10 without the written consent of the then Administrative
Agents, or (v) amend, modify or waive any provision of this Agreement regarding
the allocation of prepayment amounts among the US$ Loans and the C$ Loans or the
application of such prepayment amounts to the respective installments of
principal under the respective US$ Loans and C$ Loans without the written
consent of the Required US$ Lenders and the Required C$ Lenders; or (vi) subject
to clause (i) of this proviso as it relates to reducing the amount or extending
the scheduled date of maturity of any Loan or any installment thereof, amend,
modify or waive any provision of (x) Section 2 without the written consent of
the Required US$ Lenders or (y) Section 3 without the written consent of the
Required C$ Lenders. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding
upon the Borrowers, the Lenders, the Administrative Agents and all future
holders of the Loans. In the case of any waiver, the Borrowers, the Lenders and
the Administrative Agents shall be restored to their former positions and rights
hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any right consequent thereon.
(b) If in connection with any proposed amendment, supplement, waiver
or other modification of any of the provisions of this Agreement as contemplated
by subsection 11.1(a), the consent of the Required Lenders or of all of the
Lenders, as the case
<PAGE>
88
may be, for the relevant level of consent required, is not obtained, the
Borrowers shall have the rights as follows. In matters requiring the consent of
all Lenders or the consent of the Required Lenders, the Borrowers shall have the
right to require any nonconsenting Lender to transfer or assign, in whole or in
part, without recourse (in accordance with subsection 11.6) all or part of its
interest, rights and obligations under this Agreement to another Person
(provided that the relevant Borrower with the reasonable cooperation of such
Lender identifies a Person which is ready, willing and able to be an Assignee
with respect to thereto which shall assume such assigned obligations (which
Assignee may be another Lender, if such Assignee Lender accepts such
assignment); provided that (A) the Assignee shall have paid to such Lender in
--------
immediately available funds an amount equal to the principal of and interest
accrued to the date of such payment on the Loans made by it hereunder and all
other amounts owed to it hereunder, including, without limitation, any amounts
that would be owing under subsection 4.12 if such Loans were prepaid on the date
of such assignment, and (B) such assignment of the Commitment of such Lender and
prepayment of Loans does not conflict with any law, rule or regulation or order
of any Governmental Authority. In cases where the consent referred to above is
only with respect to the Required C$ Lenders or Required US$ Lenders, the
foregoing provisions shall only apply to the Required C$ Lenders or Required US$
Lenders, as the case may be.
11.2 Notices. Unless otherwise expressly provided herein, all
-------
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by facsimile transmission) and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made (a) in the case of delivery by hand, when delivered, (b) in the case of
delivery by mail, three days after being deposited in the mails, postage
prepaid, or (c) in the case of delivery by facsimile transmission, when sent and
receipt has been confirmed, addressed as follows in the case of the Borrowers
and the Administrative Agents, and as set forth in Schedule 1.1 in the case of
the other parties hereto, or to such other address as may be hereafter notified
by the respective parties hereto:
Company: Pierce Leahy Corp.
631 Park Avenue
King of Prussia, PA 19406
Attention: President
Fax: (610) 992-8394
Canadian
Borrower: Pierce Leahy Command Company
195 Summerlea Road
Brampton, Canada, Ontario, L6T 4P6
Fax: (905) 792-2567
<PAGE>
89
with a copy to:
--------------
Pierce Leahy Corp.
631 Park Avenue
King of Prussia, PA 19406
Attention: President
Fax: (610) 992-8394
US Administrative
Agent: Canadian Imperial Bank of Commerce,
New York Agency, Syndications
425 Lexington Avenue
New York, New York 10017
Attention: Aimee Evans
Fax: (212) 856-3763
with a copy to:
---------------
CIBC Wood Gundy Securities Corp.
425 Lexington Avenue
New York, New York 10017
Attention: Lorain Granberg
Fax: (212) 856-3558
Canadian
Administrative
Agent: Canadian Imperial Bank of Commerce,
Commerce Court West 7
Toronto, Ontario, Canada N5L 1A2
Attention: Cindy Grenough
Fax: 416-980-5855
provided that any notice, request or demand to or upon the Administrative Agents
- --------
or the Lenders pursuant to Section 2, 3 or 4 shall not be effective until
received.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of either Administrative Agent or any Lender,
any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
11.4 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made hereunder, in the other Loan Documents and in any document,
certificate
<PAGE>
90
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement and the making of the Loans
hereunder.
11.5 Payment of Expenses and Taxes. The Company agrees (a) to pay or
-----------------------------
reimburse each Administrative Agent for all its reasonable out-of-pocket costs
and expenses incurred in connection with the preparation and execution of, and
any amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith
including, without limitation, the reasonable fees and disbursements of counsel
to the Administrative Agents, (b) to pay or reimburse each Lender and each
Administrative Agent for all of its costs and expenses incurred in connection
with the enforcement or preservation of any rights under this Agreement, the
other Loan Documents and any such other documents following an Event of Default,
including, without limitation, the fees and disbursements of counsel to each
Lender and of counsel to each Administrative Agent, (c) to pay, indemnify, and
hold each Lender and each Administrative Agent harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay (other than delay caused by any Administrative Agent or
Lender) in paying, stamp, excise and other taxes, if any, which may be payable
or determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Loan Documents and any other documents prepared in
connection herewith, and (d) to pay, indemnify, and hold each Lender and each
Administrative Agent harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, and performance of this Agreement, the other
Loan Documents and any such other documents, including, without limitation, any
of the foregoing relating to the violation of, noncompliance with or liability
under, any Environmental Law applicable to the operations of either Borrower,
any of their Subsidiaries or any of their properties (all the foregoing in this
clause (d), collectively, the "indemnified liabilities"), provided that neither
--------
Borrower shall have any obligation hereunder to either Administrative Agent or
any Lender with respect to indemnified liabilities arising from the gross
negligence or willful misconduct of either Administrative Agent or any such
Lender. The agreements in this subsection shall survive repayment of the Loans
and all other amounts payable hereunder.
11.6 Successors and Assigns; Participations and Assignments. (a)
------------------------------------------------------
This Agreement shall be binding upon and inure to the benefit of the Borrowers,
the Lenders, the Administrative Agents and their respective successors and
assigns, except that neither Borrower may assign or transfer any of its rights
or obligations under this Agreement without the prior written consent of each
Lender.
(b) Any Lender may, with the consent of the relevant Borrower and the
relevant Administrative Agent (which in each case shall not be unreasonably
withheld), in the ordinary course of its commercial banking business and in
accordance with applicable law, at any time sell to one or more banks or other
entities ("Participants") participating interests in any Loan owing to such
------------
Lender, any Commitment of such Lender or any other
<PAGE>
91
interest of such Lender hereunder and under the other Loan Documents. In the
event of any such sale by a Lender of a participating interest to a Participant,
such Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely responsible
for the performance thereof, such Lender shall remain the holder of any such
Loan for all purposes under this Agreement and the other Loan Documents, and the
Borrowers and the Administrative Agents shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. No Lender shall
be entitled to create in favor of any Participant, in the participation
agreement pursuant to which such Participant's participating interest shall be
created or otherwise, any right to vote on, consent to or approve any matter
relating to this Agreement or any other Loan Document except for those specified
in clauses (i) and (ii) of the proviso to subsection 11.1(a). Each Borrower
agrees that if amounts outstanding under this Agreement are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in respect of
its participating interest in amounts owing under this Agreement to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under this Agreement, provided that, in purchasing such
--------
participating interest, such Participant shall be deemed to have agreed to share
with the Lenders the proceeds thereof as provided in subsection 11.7(a) as fully
as if it were a Lender hereunder. The Company also agrees that each Participant
shall be entitled to the benefits of subsections 4.10, 4.11 and 4.12 with
respect to its participation in the Commitments and the Loans outstanding from
time to time as if it was a Lender; provided that, in the case of subsection
--------
4.11, such Participant shall have complied with the requirements of said
subsection and provided, further, that no Participant shall be entitled to
-------- -------
receive any greater amount pursuant to any such subsection than the transferor
Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had no
such transfer occurred.
(c) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time and from time to time assign to any
Lender or any affiliate thereof or, with the consent of the relevant Borrower
and the relevant Administrative Agent (which in each case shall not be
unreasonably withheld), to an additional bank or financial institution (an
"Assignee") all or any part of its rights and obligations under this Agreement
- ---------
and the other Loan Documents pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit I, executed by such Assignee, such
assigning Lender (and, in the case of an Assignee that is not then a Lender or
an affiliate thereof, by the Company and the relevant Administrative Agent) and
delivered to the relevant Administrative Agent for its acceptance and recording
in the relevant Register, provided that, in the case of any such assignment to
--------
an additional bank or financial institution, the sum of the aggregate principal
amount of the Loans and the aggregate amount of the Available US Commitment or
Available Canadian Commitment, as the case may be, being assigned is equal to at
least US$10,000,000 and C$10,000,000, respectively (or such lesser amount as may
be agreed to by the relevant Borrower and the relevant Administrative Agent).
Upon such execution, delivery, acceptance and recording, from and after the
effective date determined pursuant to such Assignment and Acceptance, (x) the
Assignee thereunder shall be a party hereto and,
<PAGE>
92
to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein, and
(y) the assigning Lender thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such assigning Lender shall cease to be a party hereto). Notwithstanding any
provision of this paragraph (c) and paragraph (e) of this subsection, the
consent of either Borrower shall not be required, and, unless requested by the
Assignee and/or the assigning Lender, new Notes shall not be required to be
executed and delivered by the relevant Borrower, for any assignment which occurs
at any time when any of the events described in subsection 9(f) shall have
occurred and be continuing.
(d) Each Administrative Agent, on behalf of the relevant Borrower
shall maintain at the address of such Administrative Agent referred to in
subsection 11.2 a copy of each Assignment and Acceptance delivered to it and a
register (each a "Register") for the recordation of the names and addresses of
--------
the Lenders and the Commitments of, and principal amounts of the Loans owing to,
each Lender from time to time. The entries in the Register shall be conclusive,
in the absence of manifest error, and the Borrowers, the Administrative Agents
and the Lenders may (and, in the case of any Loan or other obligation hereunder
not evidenced by a Note, shall) treat each Person whose name is recorded in the
Registers as the owner of a Loan or other obligation hereunder as the owner
thereof for all purposes of this Agreement and the other Loan Documents,
notwithstanding any notice to the contrary. Any assignment of any Loan or other
obligation hereunder not evidenced by a Note shall be effective only upon
appropriate entries with respect thereto being made in the relevant Register.
The Registers shall be available for inspection by either Borrower or any Lender
at any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the relevant Borrower and the relevant
Administrative Agent) together with payment by the Assignee and/or the assigning
Lender to the US Administrative Agent of a registration and processing fee of
US$3,500, the US Administrative Agent shall (i) promptly accept such Assignment
and Acceptance and (ii) on the effective date determined pursuant thereto record
the information contained therein in the Register and give notice of such
acceptance and recordation to the Lenders and the relevant Borrower.
(f) Each Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee
----------
approved by the Company any and all financial information in such Lender's
possession concerning such Borrower and its Subsidiaries which has been
delivered to such Lender by or on behalf of such Borrower pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of such
Borrower in connection with such Lender's credit evaluation of such Borrower and
its Subsidiaries prior to becoming a party to this Agreement; provided that
--------
<PAGE>
93
such Transferee or prospective Transferee agrees to be bound by the provisions
of subsection 11.16.
(g) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this subsection concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law.
11.7 Adjustments; Set-off. (a) If any Lender (a "benefitted
-------------------- ----------
Lender") shall at any time receive any payment of all or part of its Loans which
- ------
shall have been made under either Commitment, or interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by set-
off, pursuant to events or proceedings of the nature referred to in subsection
9(f), or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender's Loans made under such Commitment, or interest thereon, such benefitted
Lender shall purchase for cash from the other Lenders a participating interest
in such portion of each such other Lender's Loan, or shall provide such other
Lenders with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such benefitted Lender to share the excess payment
or benefits of such collateral or proceeds ratably with each of the Lenders
which hold Loans made under such Commitment; provided, however, that if all or
-------- -------
any portion of such excess payment or benefits is thereafter recovered from such
benefitted Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to either Borrower,
any such notice being expressly waived by such Borrower to the extent permitted
by applicable law, upon any amount becoming due and payable by such Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise) to set-
off and appropriate and apply against such amount any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of such Borrower. Each Lender agrees promptly to notify
the relevant Borrower and the relevant US Administrative Agent after any such
set-off and application made by such Lender, provided that the failure to give
--------
such notice shall not affect the validity of such set-off and application.
11.8 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with each Borrower and each
Administrative Agent.
<PAGE>
94
11.9 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.10 Integration. This Agreement and the other Loan Documents
-----------
represent the agreement of the Borrowers, the Administrative Agents and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by either Administrative Agent,
either Borrower or any Lender relative to subject matter hereof not expressly
set forth or referred to herein or in the other Loan Documents.
11.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
-------------
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.12 Submission To Jurisdiction; Waivers. Each Borrower hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Borrower at its address set forth in subsection 11.2 or at such other
address of which the Administrative Agents shall have been notified
pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any special, exemplary, punitive or consequential
damages.
<PAGE>
95
11.13 Foreign Currency Judgments. (a) If, for the purpose of
--------------------------
obtaining judgment in any court, it is necessary to convert a sum due hereunder
in one currency into another currency, each Loan Party agrees, to the fullest
extent that it may effectively do so, that the rate of exchange used shall be
that at which in accordance with normal banking procedures in the relevant
jurisdiction the relevant Lender (or agent acting on its behalf) or the relevant
Administrative Agent could purchase the first currency with such other currency
for the first currency on the Business Day immediately preceding the day on
which final judgment is given.
(b) The obligations of each Loan Party in respect of any sum due
hereunder shall, notwithstanding any judgment in a currency (the "Judgment
--------
Currency") other than that in which such sum is denominated in accordance with
- --------
this Agreement (the "Agreement Currency"), be discharged only to the extent
------------------
that, on the Business Day following receipt by any Lender (or agent acting on
its behalf) (the "Applicable Creditor") of any sum adjudged to be so due in the
-------------------
Judgment Currency, the Applicable Creditor may in accordance with normal banking
procedures in the relevant jurisdiction purchase the Agreement Currency with the
Judgment Currency; if the amount of the Agreement Currency so purchased is less
than the sum originally due to the Applicable Creditor in the Agreement
Currency, such Loan Party agrees, as a separate obligation and notwithstanding
any such judgment, to indemnify the Applicable Creditor against such loss,
provided that if the amount of the Agreement Currency so purchased exceeds the
- --------
sum originally due to the Applicable Creditor, the Applicable Creditor agrees to
remit such excess to such Loan Party. The obligations of each Loan Party and
Lender contained in this subsection shall survive the termination of this
Agreement and the payment of all amounts owing hereunder.
11.14 Acknowledgements. Each Borrower hereby acknowledges that:
----------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) none of either Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrowers arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and the
Borrowers, on the other hand, in connection herewith or therewith is solely
that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Borrowers and the Lenders.
11.15 WAIVERS OF JURY TRIAL. THE BORROWERS, THE ADMINISTRATIVE
---------------------
AGENTS AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
<PAGE>
96
11.16 Confidentiality. Each Lender agrees to keep confidential all
---------------
non-public information provided to it by the Company or any of its Subsidiaries
pursuant to this Agreement or any other Loan Document and to use such
information solely for the purposes contemplated by this Agreement; provided
--------
that nothing herein shall prevent any Lender from disclosing any such
information (i) to either Administrative Agent or any other Lender, (ii) to any
Transferee which receives such information having been made aware of the
confidential nature thereof and which agrees to comply with the provisions of
this subsection, (iii) to its employees, directors, agents, attorneys,
accountants and other professional advisors who are advised of the confidential
nature of such information, (iv) upon the request or demand of any Governmental
Authority having jurisdiction over such Lender, (v) in response to any order of
any court or other Governmental Authority or as may otherwise be required
pursuant to any Requirement of Law, (vi) which has been publicly disclosed other
than in breach of this Agreement, or (vii) in connection with the exercise of
any remedy hereunder.
11.17 Conflicts. In case of any conflict or inconsistency between
---------
the provisions of this Agreement and the provisions of any other Loan Document,
the provisions of this Agreement shall control.
<PAGE>
97
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
PIERCE LEAHY CORP.
By: /s/ Joseph P. Linaugh
-----------------------------------------------
Title: Vice President
PIERCE LEAHY COMMAND COMPANY
By: /s/ Joseph P. Linaugh
-----------------------------------------------
Title: Vice President
CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK
AGENCY,
as US Administrative Agent and US$ Lender
By: /s/ Lorain Granberg
-----------------------------------------------
Title: Director, CIBC Wood Gundy
Securities Corp. AS AGENT
<PAGE>
BANK OF IRELAND GRAND CAYMAN
as a Lender
By: /s/ Paddy Dowling
---------------------------------------------
Title: Account Manager
CREDIT LYONNAIS NEW YORK BRANCH
as a Lender
By: /s/ Attila Koc
---------------------------------------------
Title: Vice President
FLEET NATIONAL BANK
as a Lender
By: /s/ Kevin P. Cronin
---------------------------------------------
Title: Senior Vice President
THE FIRST NATIONAL BANK OF MARYLAND
as a Lender
By: /s/ John C. Acker
---------------------------------------------
Title: Assistant Vice President
HELLER FINANCIAL
as a Lender
By: /s/ Joann L. Holman
---------------------------------------------
Title: Assistant Vice President
STATE STREET BANK AND TRUST COMPANY
as a Lender
By: /s/ Hamilton H. Wood, Jr.
---------------------------------------------
Title: Vice President
THE BANK OF NEW YORK
as a Lender
By: /s/ Walter C. Parelli
---------------------------------------------
Title: Assistant Vice President
<PAGE>
EXHIBIT A-1
TO CREDIT AGREEMENT
-------------------
[FORM OF US$ NOTE]
$_________ New York, New York
________ ___, 1996
FOR VALUE RECEIVED, the undersigned, PIERCE LEAHY CORP., a New York
corporation (the "Borrower"), hereby unconditionally promises to pay to the
--------
order of ________________ (the "Lender") at the office of Canadian Imperial Bank
------
of Commerce, New York Agency, located at 425 Lexington Avenue, New York, New
York 10017, in lawful money of the United States of America and in immediately
available funds, on the Termination Date the principal amount of (a)
________________ US DOLLARS (US$__________), or, if less, (b) the aggregate
unpaid principal amount of all US$ Loans made by the US$ Lender to the Borrower
pursuant to subsection 2.1 of the Credit Agreement, as hereinafter defined. The
Borrower further agrees to pay interest in like money at such office on the
unpaid principal amount hereof from time to time outstanding at the rates and on
the dates specified in subsections 4.5 of such Credit Agreement.
The holder of this US$ Note is authorized to endorse on the schedule
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of each US$
Loan made pursuant to the Credit Agreement and the date and amount of each
payment or prepayment of principal thereof, each continuation thereof, each
conversion of all or a portion thereof to another Type and, in the case of
Eurodollar Loans, the length of each Interest Period with respect thereto. Each
such endorsement shall constitute prima facie evidence of the accuracy of the
----- -----
information endorsed. The failure to make any such endorsement shall not affect
the obligations of the Borrower in respect of such US$ Loan.
This US$ Note (a) is one of the US$ Notes referred to in the Credit
Agreement dated as of August 13, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among the Borrower, the
----------------
Canadian Borrower, the Lender, the other banks and financial institutions from
time to time parties thereto and Canadian Imperial Bank of Commerce, New York
Agency as US administrative agent and Canadian Imperial Bank of Commerce, as
Canadian administrative agent, (b) is subject to the provisions of the Credit
Agreement and (c) is subject to optional and mandatory prepayment in whole or in
part as provided in the Credit Agreement. This US$ Note is secured and
guaranteed as provided in the Loan Documents. Reference is hereby made to the
Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this US$ Note in
respect thereof.
<PAGE>
2
In case an Event of Default shall occur and be continuing, all amounts
then remaining unpaid on this US$ Note shall become, or may be declared to be,
immediately due and payable, all as provided in the Credit Agreement.
The Borrower hereby waives presentment, demand, protest and all other
notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS US$ NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
PIERCE LEAHY CORP.
By: ________________________________
Name: ______________________________
Title: _____________________________
US$ Note
--------
<PAGE>
Schedule A
to US$ Note
-----------
LOANS, CONVERSIONS AND REPAYMENTS OF Base Rate LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Amount of Base Rate
Amount of Base Rate Converted to Amount of Principal of Loans Converted to Unpaid Principal Balance Notation
Date Loans Base Rate Loans Base Rate Loans Repaid Eurodollar Loans of Base Rate Loans Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
<PAGE>
Schedule B
to US$ Note
-----------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Interest Period and Amount of Principal Amount of Eurodollar
Amount of Amount Converted Eurodollar Rate with of Eurodollar Loans Loans Converted to
Date Eurodollar Loans to Eurodollar Loans Respect Thereto Repaid Base Rate Loans
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------
Unpaid Principal
Balance of Eurodollar Notation
Date Loans Made By
- ---------------------------------------------------------
<S> <C> <C>
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT A-2
TO CREDIT AGREEMENT
-------------------
[FORM OF C$ NOTE]
C$___________ New York, New York
_______________ ___, 1996
FOR VALUE RECEIVED, the undersigned, PIERCE LEAHY COMMAND COMPANY, (the
"Canadian Borrower"), hereby unconditionally promises to pay to the order of
- ------------------
________________ (the "Lender") at the office of Canadian Imperial Bank of
------
Commerce, located at Commerce Court West 7, Toronto, Canada, N5L 1A2, in lawful
money of Canada and in immediately available funds, on the Termination Date the
principal amount of (a) ________________ CANADIAN DOLLARS (C$__________), or, if
less, (b) the aggregate unpaid principal amount of all C$ Loans made by the
Lender to the Canadian Borrower pursuant to subsection 3.1 of the Credit
Agreement, as hereinafter defined. The Canadian Borrower further agrees to pay
interest in like money at such office on the unpaid principal amount hereof from
time to time outstanding at the rates and on the dates specified in subsections
4.5 of such Credit Agreement.
The holder of this C$ Note is authorized to endorse on the schedule annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date and amount of each C$ Prime Loan
made pursuant to the Credit Agreement and the date and amount of each payment or
prepayment of principal thereof, each continuation thereof, each conversion of
all or a portion thereof to a Bankers Acceptance. Each such endorsement shall
constitute prima facie evidence of the accuracy of the information endorsed. The
----- -----
failure to make any such endorsement shall not affect the obligations of the
Borrower in respect of such C$ Prime Loan.
This C$ Note (a) is one of the C$ Notes referred to in the Credit Agreement
dated as of August 13, 1996 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Pierce Leahy Corp., the Canadian
----------------
Borrower, the Lender, the other banks and financial institutions from time to
time parties thereto and Canadian Imperial Bank of Canada, New York Agency, as
US administrative agent and Canadian Imperial Bank of Canada, as Canadian
administrative agent, (b) is subject to the provisions of the Credit Agreement
and (c) is subject to optional and mandatory prepayment in whole or in part as
provided in the Credit Agreement. This C$ Note is secured and guaranteed as
provided in the Loan Documents. Reference is hereby made to the Loan Documents
for a description of the properties and assets in which a security interest has
been granted, the nature and extent of the security and the guarantees, the
terms and conditions upon which the security interests and each guarantee were
granted and the rights of the holder of this C$ Note in respect thereof.
<PAGE>
In case an Event of Default shall occur and be continuing, all amounts then
remianing unpaid on this C$ Note shall become, or may be be declared to be,
immediately due and payable, all as provided in the Credit Agreement.
The Canadian Borrower hereby waives presentment, demand, protest and all
other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS C$ NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
PIERCE LEAHY COMMAND COMPANY
By:________________________________
Name:______________________________
Title:_____________________________
C$ Note
-------
<PAGE>
Schedule A
to C$ Note
----------
LOANS, CONVERSIONS, AND REPAYMENTS OF C$ PRIME LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Amount of C$ Prime
Amount of C$ Prime Converted to Amount of Principal of C$ Loans Converted to Unpaid Principal Balance Notation
Date Loans C$ Prime Loans Prime Loans Repaid Bankers' Acceptance of C$ Prime Loans Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
<PAGE>
Schedule B
to C$ Note
----------
REFUNDINGS, CONVERSIONS AND REIMBURSEMENTS OF BANKERS' ACCEPTANCES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of Amount of Bankers'
Purchased Amount Converted Amount of Bankers' Acceptances Unpaid Principal
Bankers' to Bankers' Acceptances Converted to C$ Balance of Bankers' Notation
Date Acceptances Acceptances Reimbursed Prime Loans Acceptances Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
<PAGE>
EXHIBIT D TO
CREDIT AGREEMENT
----------------
================================================================================
US GLOBAL GUARANTEE AND SECURITY AGREEMENT
made by
PIERCE LEAHY CORP.,
certain of its Affiliates and Subsidiaries
and
its Shareholders
in favor of
CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY,
as US Administrative Agent
Dated as of August 13, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINED TERMS.................................................... 2
1.1 Definitions 2
1.2 Other Definitional Provisions...................................... 5
SECTION 2. GUARANTEE........................................................ 6
2.1 Guarantee 6
2.2 Right of Contribution.............................................. 7
2.3 No Subrogation..................................................... 7
2.4 Amendments, etc. with respect to the Guarantor Obligations......... 7
2.5 Guarantee Absolute and Unconditional............................... 8
2.6 Reinstatement...................................................... 9
2.7 Payments 9
SECTION 3. GRANT OF SECURITY INTEREST....................................... 9
3.1 Security Interests from Guarantors................................. 9
3.2 Security Interests from Shareholders............................... 10
SECTION 4. REPRESENTATIONS AND WARRANTIES OF GUARANTORS..................... 10
4.1 Representations.................................................... 10
4.2 Title; No Other Liens.............................................. 12
4.3 Perfected Liens.................................................... 12
4.4 Chief Executive Office............................................. 12
4.5 Inventory and Equipment............................................ 12
4.6 Farm Products...................................................... 12
4.7 Pledged Securities................................................. 12
4.8 Receivables........................................................ 13
4.9 Intellectual Property.............................................. 13
4.10 Vehicles 13
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS................... 13
5.1 Shareholders' Representations...................................... 13
5.2 Title; No Other Liens.............................................. 14
5.3 Perfected Liens.................................................... 14
5.4 Residence.......................................................... 15
5.5 Pledged Securities................................................. 15
SECTION 6. COVENANTS OF GUARANTORS.......................................... 15
6.1 Covenants in Credit Agreement...................................... 15
6.2 Delivery of Instruments and Chattel Paper.......................... 15
6.3 Maintenance of Insurance........................................... 16
6.4 Maintenance of Perfected Security Interest; Further Documentation.. 16
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.6 Notices............................................................ 17
6.7 Pledged Securities................................................. 17
6.8 Receivables........................................................ 18
6.9 Intellectual Property.............................................. 19
SECTION 7. COVENANTS OF SHAREHOLDERS........................................ 19
7.1 Covenants in Credit Agreement...................................... 20
7.2 Maintenance of Perfected Security Interest; Further Documentation.. 20
7.3 Changes in Locations, Name, etc.................................... 20
7.4 Notices............................................................ 20
7.5 Pledged Securities................................................. 21
SECTION 8. REMEDIAL PROVISIONS.............................................. 22
8.1 Certain Matters Relating to Receivables............................ 22
8.2 Communications with Obligors; Guarantors Remain Liable............. 22
8.3 Pledged Stock...................................................... 23
8.4 Proceeds to be Turned Over To US Administrative Agent.............. 24
8.5 Application of Proceeds............................................ 24
8.6 Code and Other Remedies............................................ 24
8.7 Registration Rights................................................ 25
8.8 Waiver; Deficiency................................................. 27
SECTION 9. THE US ADMINISTRATIVE AGENT...................................... 27
9.1 US Administrative Agent's Appointment as Attorney-in-Fact, etc..... 27
9.2 Duty of Administrative Agent....................................... 29
9.3 Execution of Financing Statements.................................. 29
9.4 Authority of Administrative Agent.................................. 29
SECTION 10. MISCELLANEOUS................................................... 29
10.1 Amendments in Writing............................................. 29
10.2 Notices........................................................... 30
10.3 No Waiver by Course of Conduct; Cumulative Remedies............... 30
10.4 Enforcement Expenses; Indemnification............................. 30
10.5 Successors and Assigns............................................ 31
10.6 Set-Off........................................................... 31
10.7 Counterparts...................................................... 31
10.8 Severability...................................................... 31
10.9 Section Headings.................................................. 31
10.10 Integration...................................................... 31
10.11 GOVERNING LAW.................................................... 32
10.12 Submission To Jurisdiction; Waivers.............................. 32
10.13 Acknowledgements................................................. 32
10.14 WAIVER OF JURY TRIAL............................................. 33
10.15 Additional Grantors; Pledged Stock............................... 33
10.16 Releases......................................................... 33
</TABLE>
ii
<PAGE>
Page
----
SCHEDULES:
Schedule 1 Notice Addresses of Grantors
Schedule 2 Description of Pledged Securities
Schedule 3 Filings and Other Actions Required to Perfect Security Interests
Schedule 4 Location of Jurisdiction of Organization and Chief Executive
Office
Schedule 5 Location of Inventory and Equipment
Schedule 6 Copyrights, Patents and Trademarks
Schedule 7 Vehicles
Schedule 8 Existing Prior Liens
iii
<PAGE>
FORM OF
US GLOBAL GUARANTEE AND SECURITY AGREEMENT
US GLOBAL GUARANTEE AND SECURITY AGREEMENT, dated as of August 13,
1996, made by each of the signatories hereto (together with any other entity
that may become a party hereto as provided herein, the "Grantors"), in favor of
--------
CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as US administrative agent
(in such capacity, the "US Administrative Agent") for the banks and other
-----------------------
financial institutions (the "Lenders") from time to time parties to the Credit
-------
Agreement, dated as of August 13, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among PIERCE LEAHY CORP., a
----------------
New York corporation (the "Company"), PIERCE LEAHY COMMAND COMPANY, a company
-------
organized under the laws of the Province of Nova Scotia (the"Canadian Borrower",
-----------------
and together with the Company, the "Borrowers"), the Lenders, the US
---------
Administrative Agent and the Canadian Administrative Agent named therein
(together with the US Administrative Agent, the "Administrative Agents").
---------------------
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make extensions of credit to the Borrowers upon the terms and subject
to the conditions set forth therein;
WHEREAS, each Borrower is a member of an affiliated group of companies
that includes each other Guarantor or entities owned by such Grantor;
WHEREAS, each Borrower and each such Grantor will derive substantial
direct and indirect benefit from the making of the extensions of credit under
the Credit Agreement; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective extensions of credit to the Borrowers under the Credit
Agreement that the Grantors shall have executed and delivered this Agreement to
the US Administrative Agent for the benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agents and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the
Borrowers thereunder, each Grantor hereby agrees with the US Administrative
Agent, for the benefit of the Lenders, as follows:
<PAGE>
2
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined
-----------
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Documents, Equipment, Farm
Products, Instruments and Inventory.
(b) The following terms shall have the
following meanings:
"Agreement": this US Global Guarantee and Security Agreement, as the
---------
same may be amended, supplemented or otherwise modified from time to time.
"Canadian Borrower Obligations": the collective reference to the
-----------------------------
unpaid principal of and interest on the C$ Loans and all other obligations
and liabilities of the Canadian Borrower (including, without limitation,
interest accruing at the then applicable rate provided in the Credit
Agreement after the maturity of the C$ Loans and interest accruing at the
then applicable rate provided in the Credit Agreement after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Canadian Borrower,
whether or not a claim for post-filing or post-petition interest is allowed
in such proceeding) to either Administrative Agent or any Canadian Lender
(or, in the case of any Interest Rate Protection Agreement referred to
below, any Affiliate of any Lender), whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit Agreement,
this Agreement, the other Loan Documents, or any Interest Rate Protection
Agreement entered into by the Canadian Borrower with any Lender (or any
Affiliate of any Lender) or any other document made, delivered or given in
connection therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise with respect to the foregoing (including, without limitation, all
fees and disbursements of counsel to either Administrative Agent or to the
Lenders that are required to be paid by the Canadian Borrower pursuant to
the terms of any of the foregoing agreements).
"Code": the Uniform Commercial Code as from time to time in effect in
----
the State of New York.
"Collateral": collectively, the Guarantor Collateral and the
----------
Shareholder Collateral.
"Collateral Account": any collateral account established by the US
------------------
Administrative Agent as provided in Section 8.1 or 8.4.
<PAGE>
3
"Company Obligations": the collective reference to the unpaid
-------------------
principal of and interest on the US$ Loans and all other obligations and
liabilities of the Company (including, without limitation, interest
accruing at the then applicable rate provided in the Credit Agreement after
the maturity of the US$ Loans and interest accruing at the then applicable
rate provided in the Credit Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding) to either
Administrative Agent or any US$ Lender (or, in the case of any Interest
Rate Protection Agreement referred to below, any Affiliate of any Lender),
whether direct or indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, which may arise under, out of, or in
connection with, the Credit Agreement, this Agreement (including, without
limitation, pursuant to the guarantee by the Company of the Canadian
Borrower Obligations provided for in Section 2 hereof), the other Loan
Documents, or any Interest Rate Protection Agreement entered into by the
Borrower with any Lender (or any Affiliate of any Lender) or any other
document made, delivered or given in connection therewith, in each case
whether on account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to either Administrative Agent or to
the Lenders that are required to be paid by the Company pursuant to the
terms of any of the foregoing agreements).
"Copyrights": (i) all copyrights owned by a Guarantor (including,
----------
without limitation, those listed in Schedule 6), all registration and
----------
recordings thereof, and all applications in connection therewith,
including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, and (ii) all renewals
thereof.
"General Intangibles": all "general intangibles" as such term is
-------------------
defined in Section 9-106 of the Uniform Commercial Code in effect in the
State of New York on the date hereof.
"General Partners": (i) PLC Command I, Inc., a Pennsylvania
----------------
corporation, in its capacity as the general partner of PLC Command I, L.P.,
and (ii) PLC Command II, Inc., a Pennsylvania corporation, in its capacity
as the general partner of PLC Command II, L.P.
"Guarantor Collateral": as defined in subsection 3.1.
--------------------
"Guarantor Obligations": with respect to any Guarantor, the
---------------------
collective reference to (i) (x) with respect to the Company, the Canadian
Borrower Obligations and (y) with respect to any other Guarantor, the
Company Obligations and (ii) all obligations and liabilities of such
Guarantor which may arise under or in connection with this Agreement or any
other Loan Document to which such Guarantor is a party, in each case
whether on account of guarantee obligations, reimbursement
<PAGE>
4
obligations, fees, indemnities, costs, expenses or otherwise relating
thereto (including, without limitation, all fees and disbursements of
counsel to either Administrative Agent or to the Lenders that are required
to be paid by such Guarantor pursuant to the terms of this Agreement or any
other Loan Document).
"Guarantors": the collective reference to the Company, each General
----------
Partner, the Limited Partnerships and each other Domestic Subsidiary of the
Company.
"Intellectual Property": the collective reference to the Copyrights,
---------------------
the Patents, and the Trademarks.
"Intercompany Note": any promissory note evidencing loans made by any
-----------------
Guarantor to the Company or any of its Domestic Subsidiaries.
"Interest Rate Protection Agreement": any interest rate protection
----------------------------------
agreement, interest rate future, interest rate option, interest rate cap or
collar or other interest rate hedge arrangement, to or under which the
Company or any of its Subsidiaries is a party or a beneficiary.
"Issuers": the collective reference to the Persons identified on
-------
Schedule 2 as the issuers of the Pledged Securities.
----------
"Limited Partnerships": (i) PLC Command I, L.P., a Pennsylvania
--------------------
limited partnership, and (ii) PLC Command II, L.P., a Pennsylvania limited
partnership.
"Obligations": (i) in the case of each Guarantor other than the
-----------
Company, its Guarantor Obligations, (ii) in the case of the Company, its
Guarantor Obligations and the Company Obligations and (iii) in the case of
each Shareholder, the Company Obligations.
"Patents": (i) all letters patent of a Guarantor issued by the United
-------
States or any other country, all reissues and extensions thereof and all
goodwill associated therewith, including, without limitation, any of the
foregoing referred to in Schedule 6, and (ii) all applications for letters
----------
patent of a Guarantor issued by the United States or any other country and
all divisions, continuations and continuations-in-part thereof, including,
without limitation, any of the foregoing referred to in Schedule 6.
----------
"Pledged Notes": all promissory notes listed on Schedule 2, all
------------- ----------
Intercompany Notes at any time issued to any Guarantor and all other
promissory notes issued to or held by any Guarantor (other than promissory
notes issued in connection with extensions of trade credit by any Guarantor
in the ordinary course of business).
"Pledged Securities": the collective reference to (i) the Pledged
------------------
Stock, (ii) the Pledged Notes and (iii) any and all partnership interests
(including any and all general partnership interests) any Grantor may hold
in either Borrower or any of its
<PAGE>
5
Domestic Subsidiaries, as set forth in Schedule 2 attached hereto
----------
including, without limitation, all of such Grantor's rights to properties,
assets, and partnership interests under their respective Partnership
Agreements, including, without limitation, any liquidating distributions,
in respect of such partnership interest.
"Pledged Stock": with respect to each Grantor, the shares of Capital
-------------
Stock of such Grantor listed on Schedule 2, together with any other shares,
----------
stock certificates, options or rights of any nature whatsoever in respect
of the Capital Stock of any Issuer that may be issued or granted to, or
held by, such Grantor while this Agreement is in effect.
"Proceeds": all "proceeds" as such term is defined in Section 9-
--------
306(1) of the Uniform Commercial Code in effect in the State of New York on
the date hereof.
"Receivable": any right to payment for goods sold or leased or for
----------
services rendered, whether or not such right is evidenced by an Instrument
or Chattel Paper and whether or not it has been earned by performance
(including, without limitation, any Account).
"Securities Act": the Securities Act of 1933, as amended.
--------------
"Shareholder Collateral": as defined in Section 3.2.
----------------------
"Shareholders": each shareholder of the Company listed on Schedule
------------ --------
2(c).
----
"Trademarks": (i) all trademarks, trade names, corporate names,
----------
company names, business names, fictitious business names, trade styles,
service marks, logos and other source of business identifiers, and all
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, or
otherwise, including, without limitation, any of the foregoing referred to
in Schedule 6, and (ii) all renewals thereof.
----------
"Vehicles": all cars, trucks, trailers, construction and earth moving
--------
equipment and other vehicles owned by a Guarantor (with purchase price in
excess of US $50,000) and covered by a certificate of title law of any
state and, in any event including, without limitation, the vehicles listed
on Schedule 7 and all tires and other
----------
appurtenances to any of the foregoing.
1.2 Other Definitional Provisions. (a) The words "hereof,"
-----------------------------
"herein," "hereto," and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section and Schedule references are
to this Agreement unless otherwise specified.
<PAGE>
6
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to a Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
2.1 Guarantee. (a)(i) The Company hereby, unconditionally and
---------
irrevocably, guarantees to the US Administrative Agent, for the benefit of the
C$ Lenders and their respective successors, indorsees, transferees and assigns,
the prompt and complete payment and performance by the Canadian Borrower when
due (whether at the stated maturity, by acceleration or otherwise) of the
Canadian Borrower Obligations, and (ii) each of the Guarantors other than the
Company hereby, jointly and severally, unconditionally and irrevocably,
guarantees to the US Administrative Agent, for the benefit of the Lenders and
their respective successors, indorsees, transferees and assigns, the prompt and
complete payment and performance by the Company when due (whether at the stated
maturity, by acceleration or otherwise) of the Company Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor (other than the
Company) hereunder and under the other Loan Documents shall in no event exceed
the amount which can be guaranteed by such Guarantor under applicable federal
and state laws relating to the insolvency of debtors (after giving effect to the
right of contribution established in Section 2.2).
(c) Each Guarantor agrees that the Company Obligations or the
Canadian Borrower Obligations, as the case may be, may at any time and from time
to time exceed the amount of the liability of such Guarantor hereunder without
impairing the guarantee contained in this Section 2 or affecting the rights and
remedies of the US Administrative Agent or any Lender hereunder.
(d) The guarantee contained in this Section 2 shall remain in full
force and effect until all the Company Obligations and the Canadian Borrower
Obligations, and the obligations of each Guarantor under the guarantee contained
in this Section 2 shall have been satisfied by payment in full, no Bankers'
Acceptance shall be outstanding, and the Commitments shall be terminated,
notwithstanding that from time to time during the term of the Credit Agreement
either Borrower may be free from any Company Obligations or Canadian Borrower
Obligations, as the case may be.
(e) No payment made by either Borrower, any of the Guarantors, any
other guarantor or any other Person or received or collected by the US
Administrative Agent or any Lender from either Borrower, any of the Guarantors,
any other guarantor or any other Person by virtue of any action or proceeding or
any set-off or appropriation or application
<PAGE>
7
at any time or from time to time in reduction of or in payment of the Company
Obligations or the Canadian Borrower Obligations, as the case may be, shall be
deemed to modify, reduce, release or otherwise affect the liability of any
Guarantor hereunder which shall, notwithstanding any such payment (other than
any payment made by such Guarantor in respect of the Company Obligations or the
Canadian Borrower Obligations or any payment received or collected from such
Guarantor in respect of the Company Obligations or Canadian Borrower
Obligations, as the case may be), remain liable for the Company Obligations or
the Canadian Borrower Obligations, as the case may be, up to the maximum
liability of such Guarantor hereunder until the Company Obligations and the
Canadian Borrower Obligations are paid in full, no Bankers' Acceptance shall be
outstanding, and the Commitments are terminated.
2.2 Right of Contribution. Each Guarantor (other than the Company)
---------------------
hereby agrees that to the extent that a Guarantor (other than the Company) shall
have paid more than its proportionate share of any payment made hereunder, such
Guarantor shall be entitled to seek and receive contribution from and against
any other Guarantor hereunder which has not paid its proportionate share of such
payment. Each Guarantor's right of contribution shall be subject to the terms
and conditions of Section 2.3. The provisions of this Section 2.2 shall in no
respect limit the obligations and liabilities of any Guarantor to the US
Administrative Agent and the US$ Lenders or C$ Lenders, as the case may be, and
each Guarantor shall remain liable to the US Administrative Agent and the US$
Lenders or C$ Lenders, as the case may be, for the full amount guaranteed by
such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any
--------------
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the US Administrative Agent or any Lender, no Guarantor shall be entitled to be
subrogated to any of the rights of the US Administrative Agent or any US$ Lender
or C$ Lender, as the case may be, against the Company or the Canadian Borrower,
as the case may be, or any other Guarantor or any collateral security or
guarantee or right of offset held by the US Administrative Agent or any US$
Lender or C$ Lenders, as the case may be, for the payment of the Company
Obligations or the Canadian Borrower Obligations, as the case may be, nor shall
any Guarantor seek or be entitled to seek any contribution or reimbursement from
the relevant Borrower or any other Guarantor in respect of payments made by such
Guarantor hereunder, until all amounts owing to the US Administrative Agent and
the US$ Lenders or the C$ Lenders, as the case may be, by the relevant Borrower
on account of the Company Obligations or the Canadian Borrower Obligations, as
the case may be, are paid in full, no Bankers' Acceptance shall be outstanding
and the Commitments are terminated. If any amount shall be paid to any
Guarantor on account of such subrogation rights at any time when all of the
Company Obligations or the Canadian Borrower Obligations, as the case may be,
shall not have been paid in full, such amount shall be held by such Guarantor in
trust for the US Administrative Agent and the US$ Lenders or the C$ Lenders, as
the case may be, segregated from other funds of such Guarantor, and shall,
forthwith upon receipt by such Guarantor, be turned over to the US
Administrative Agent in the exact form received by such Guarantor (duly indorsed
by such Guarantor to the US Administrative Agent, if required), to be applied
against the Company Obligations, or the Canadian
<PAGE>
8
Borrower Obligations, as the case may be, whether matured or unmatured, in such
order as the US Administrative Agent may determine.
2.4 Amendments, etc. with respect to the Guarantor Obligations. Each
----------------------------------------------------------
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Company
Obligations or the Canadian Borrower Obligations, as the case may be, made by
the US Administrative Agent or any Lender may be rescinded by the US
Administrative Agent or such Lender and any of the Company Obligations or the
Canadian Borrower Obligations, as the case may be, may be continued, and the
Company Obligations, the Canadian Borrower Obligations or the liability of any
other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the US Administrative Agent or
any Lender, and the Credit Agreement and the other Loan Documents and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the US
Administrative Agent (or the Required Lenders, as the case may be) may deem
advisable from time to time, and any collateral security, guarantee or right of
offset at any time held by the US Administrative Agent or any Lender for the
payment of the Company Obligations or the Canadian Borrower Obligations, as the
case may be, may be sold, exchanged, waived, surrendered or released. Neither
the US Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Company Obligations, the Canadian Borrower Obligations or for the guarantee
contained in this Section 2 or any property subject thereto, except as provided
in Section 9.2.
2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any
------------------------------------
and all notice of the creation, renewal, extension or accrual of any of the
Company Obligations or the Canadian Borrower Obligations, as the case may be,
and notice of or proof of reliance by the US Administrative Agent or any Lender
upon the guarantee contained in this Section 2 or acceptance of the guarantee
contained in this Section 2; the Company Obligations, the Canadian Borrower
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon the guarantee contained in this Section 2; and all dealings between either
Borrower and any of the Guarantors, on the one hand, and the US Administrative
Agent and the Lenders, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon the guarantee
contained in this Section 2. Each Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon
either Borrower or any of the Guarantors with respect to the Company Obligations
or the Canadian Borrower Obligations, as the case may be. Each Guarantor
understands and agrees that the guarantee contained in this Section 2 shall be
construed as a continuing, absolute and unconditional guarantee of payment
without regard to (a) the validity or enforceability of the Credit Agreement or
any other Loan Document, any of the Company Obligations or the Canadian Borrower
Obligations, as the case may be, or any other collateral security therefor or
guarantee or right of offset with respect thereto
<PAGE>
9
at any time or from time to time held by the US Administrative Agent or any
Lender, (b) any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be asserted by
either Borrower against the US Administrative Agent or any Lender, or (c) any
other circumstance whatsoever (with or without notice to or knowledge of either
Borrower or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of either Borrower for the Company
Obligations or the Canadian Borrower Obligations, as the case may be, or of such
Guarantor under the guarantee contained in this Section 2, in bankruptcy or in
any other instance. When making any demand hereunder or otherwise pursuing its
rights and remedies hereunder against any Guarantor, the US Administrative Agent
or any Lender may, but shall be under no obligation to, make a similar demand on
or otherwise pursue such rights and remedies as it may have against either
Borrower, any other Guarantor or any other Person or against any collateral
security or guarantee for the Company Obligations or the Canadian Borrower
Obligations, as the case may be, or any right of offset with respect thereto,
and any failure by the US Administrative Agent or any Lender to make any such
demand, to pursue such other rights or remedies or to collect any payments from
either Borrower, any other Guarantor or any other Person or to realize upon any
such collateral security or guarantee or to exercise any such right of offset,
or any release of either Borrower, any other Guarantor or any other Person or
any such collateral security, guarantee or right of offset, shall not relieve
any Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the US Administrative Agent or any Lender against any
Guarantor. For the purposes hereof "demand" shall include the commencement and
continuance of any legal proceedings.
2.6 Reinstatement. The guarantee contained in this Section 2 shall
-------------
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Company Obligations or the Canadian
Borrower Obligations is rescinded or must otherwise be restored or returned by
the US Administrative Agent or any Lender upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of either Borrower or any Guarantor,
or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, either Borrower or any
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments
--------
hereunder will be paid to the US Administrative Agent without set-off or
counterclaim in Dollars at the office of the US Administrative Agent located at
425 Lexington Avenue, New York, New York 10017.
SECTION 3. GRANT OF SECURITY INTEREST
3.1 Security Interests from Guarantors. Each Guarantor hereby grants
----------------------------------
to the US Administrative Agent, for the benefit of the Lenders, a security
interest in, all of the following property now owned or at any time hereafter
acquired by such Guarantor or in which such Guarantor now has or at any time in
the future may acquire any right, title or
<PAGE>
10
interest (collectively, the "Guarantor Collateral"), as collateral security for
--------------------
the prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of such Guarantor's Obligations:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Documents;
(d) all Equipment;
(e) all General Intangibles;
(f) all Instruments;
(g) all Intellectual Property;
(h) all Inventory;
(i) all Pledged Securities;
(j) all Vehicles; and
(k) all books and records pertaining to the Guarantor Collateral; and
(l) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing and all collateral security and guarantees
given by any Person with respect to any of the foregoing (except to the
extent the creation of such Lien would cause a breach or termination of
such collateral security or guarantees under the terms thereof and of any
applicable law).
3.2 Security Interests from Shareholders. Each Shareholder
-------------------------------------
hereby assigns and transfers to the US Administrative Agent, for the ratable
benefit of the US$ Lenders, a security interest in, all of the following
property now owned or at any time hereafter acquired by such Shareholder or in
which such Shareholder now has or at any time in the future may acquire any
right, title or interest (collectively, the "Shareholder Collateral"), as
----------------------
collateral security for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of such
Shareholder's Obligations:
(a) all Pledged Securities; and
(b) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing.
<PAGE>
11
SECTION 4. REPRESENTATIONS AND WARRANTIES OF GUARANTORS
To induce the Administrative Agents and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their respective extensions
of credit to the applicable Borrower thereunder, each Guarantor hereby
represents and warrants severally, not jointly, to each Administrative Agent and
each Lender that:
4.1 Representations. (a) General Partners' Representations. (i)
--------------- ---------------------------------
Each General Partner (w) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (x) has the
corporate power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (y) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, except where the failure to qualify could not
reasonably be expected to have a Material Adverse Effect and (z) is in
compliance with all Requirements of Law except to the extent that the failure to
comply therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(ii) Each General Partner has the corporate power and authority, and
the legal right, to make, deliver and perform the Loan Documents to which
it is a party and has taken all necessary corporate action to authorize the
execution, delivery and performance of the Loan Documents to which it is a
party. No consent or authorization of, filing with, notice to or other act
by or in respect of, any Governmental Authority or any other Person is
required in connection with the execution, delivery, performance, validity
or enforceability of the Loan Documents to which the General Partner is a
party, except for any filings required to perfect the Liens created hereby.
This Agreement has been, and each other Loan Document to which it is a
party will be, duly executed and delivered on behalf of such General
Partner. This Agreement constitutes, and each other Loan Document to which
it is a party when executed and delivered will constitute, a legal, valid
and binding obligation of such General Partner enforceable against such
General Partner in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding
in equity or at law) and an implied covenant of good faith and fair
dealing.
(iii) Each General Partner has the right, subject to the terms and
provisions of its Partnership Agreement, the Credit Agreement and the other
Loan Documents (x) to vote its Pledged Securities and (y) to pledge and
grant a security interest in all or any of its Pledged Securities.
(iv) The execution, delivery and performance of the Loan Documents to
which each General Partner is a party will not violate any Requirement of
Law or material Contractual Obligation of such General Partner and will not
result in, or
<PAGE>
12
require, the creation or imposition of any Lien on any of its properties or
revenues pursuant to any such Requirement of Law or Contractual Obligation
(other than pursuant to this Agreement or the Loan Documents).
(v) No litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of
each General Partner, threatened by or against such General Partner or
against any of its properties or revenues (x) with respect to any of the
Loan Documents or any of the transactions contemplated hereby or thereby,
or (y) which could reasonably be expected to have a Material Adverse
Effect.
4.2 Title; No Other Liens. Except for the security interest granted
---------------------
to the US Administrative Agent for the benefit of the Lenders pursuant to this
Agreement and the other Liens permitted to exist on the Collateral by the Credit
Agreement, such Guarantor owns each item of the Guarantor Collateral, free and
clear of any and all Liens or claims of others. No financing statement or other
public notice with respect to all or any part of the Collateral is on file or of
record in any public office, except such as have been filed in favor of the US
Administrative Agent, for the benefit of the Lenders, pursuant to this Agreement
or as are permitted by the Credit Agreement.
4.3 Perfected Liens. The security interests granted pursuant to this
---------------
Agreement (a) (i) upon giving of appropriate notices pursuant to Article 8 of
the Code in the form of Annexes 2 and 3 to this Agreement with respect to each
--------- -
partnership interest and (ii) upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
----------
referred to on said Schedule, have been delivered to the US Administrative Agent
in completed and duly executed form) will constitute valid perfected security
interests in all of the Guarantor Collateral in favor of the US Administrative
Agent, for the benefit of the Lenders, as collateral security for such
Guarantor's Obligations, enforceable in accordance with the terms hereof against
all creditors of such Guarantor and any Persons purporting to purchase any
Collateral from such Guarantor and (b) will be prior to all other Liens on the
Guarantor Collateral in existence on the date hereof except for Liens permitted
by the Credit Agreement which have priority over the Liens on the Collateral by
operation of law.
4.4 Chief Executive Office. On the date hereof, such Guarantor's
----------------------
jurisdiction of organization and the location of such Guarantor's chief
executive office or, if such Guarantor has only one place of business, such
place of business are specified on Schedule 4.
----------
4.5 Inventory and Equipment. On the date hereof, the Inventory and
-----------------------
the Equipment (other than mobile goods) of the Guarantors are kept at the
locations listed on Schedule 5.
----------
4.6 Farm Products. None of the Collateral constitutes, or is the
-------------
Proceeds of, Farm Products.
<PAGE>
13
4.7 Pledged Securities. (a) The Pledged Securities of each Issuer
------------------
pledged by such Guarantor constitutes (i) all the issued and outstanding shares
of all classes of the Capital Stock of each domestic Issuer owned by such
Guarantor and (ii) 65% of the issued and outstanding shares of the voting class
of Capital Stock and all of the non-voting class of Capital Stock of each
foreign Issuer owned by such Guarantor.
(b) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable.
(c) Such Guarantor is the record and beneficial owner of, and has
good and marketable title to, the Pledged Securities pledged by it hereunder,
free of any and all Liens or options in favor of, or claims of, any other
Person, except the security interest created by this Agreement or any of the
Loan Documents.
(d) None of the Pledged Securities are evidenced by any certificates
or other instruments which have not been delivered to the US Administrative
Agent, and none of the Partnership Agreements make any provision for the
issuance of any such certificates or instruments.
(e) None of the Pledged Securities are subject to any options to
purchase or similar rights, except as provided in the Corporate Buy/Sell
Agreement.
(f) There are no restrictions, other than those contained in the
Partnership Agreements, the Credit Agreement, the Corporate Buy/Sell Agreement
and the other Loan Documents, upon any of the voting rights associated with, or
the transfer of, any of the Pledged Securities.
4.8 Receivables. (a) No amount payable to such Guarantor under or
-----------
in connection with any Receivable is evidenced by any Instrument or Chattel
Paper which has not been delivered to the US Administrative Agent.
(b) The amounts represented by such Guarantor to the Lenders from
time to time as owing to such Guarantor in respect of the Receivables will at
such times be accurate in all material respects.
4.9 Intellectual Property. Schedule 6 lists all Intellectual
--------------------- ----------
Property owned by such Guarantor in its own name on the date hereof.
4.10 Vehicles. Schedule 7 is a complete and correct list of all
-------- ----------
Vehicles owned by such Guarantor on the date hereof.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
To induce the US Administrative Agent and the US$ Lenders to
enter into the Credit Agreement and to induce the US$ Lenders to make their
respective extensions of
<PAGE>
14
credit to the Company thereunder, each Shareholder hereby represents and
warrants severally, not jointly, to the US Administrative Agent and each US$
Lender that:
5.1 Shareholders' Representations.
-----------------------------
(a) Each Shareholder signing this Agreement in his or her capacity as
a custodian represents and warrants that he or she has the legal right,
power and authority to pledge such shares as to which he or she is a
custodian (the "Custodial Shares") and that he or she has the power to
----------------
execute and deliver all written instruments, covenants or agreements of any
duration which are necessary to carry out his or her powers to pledge as a
custodian.
(b) Such Shareholder is, or at the time when pledged hereunder will
be, the legal, record and beneficial owner of, except that the beneficial
owners of the Custodial Shares are the beneficiaries of such custodial
arrangements, and has good and marketable title to, all Pledged Securities
pledged by it hereunder.
(c) Such Shareholder has the full personal power, authority and legal
right to pledge all the Pledged Securities pursuant to this Agreement, and
this Agreement has been duly authorized, executed and delivered by such
Shareholder and constitutes a legal, valid and binding obligation of such
Shareholder enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, reorganization,
moratorium or similar laws relating to or affecting creditors' rights
generally (whether considered in a proceeding in law or at equity) and an
implied covenant of good faith and fair dealing.
(d) Except to the extent already obtained, no consent of any other
party (including, without limitation, any creditor of such Shareholder) and
no consent, license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with, any
Governmental Authority is required to be obtained by such Shareholder in
connection with the execution, delivery or performance of this Agreement.
(e) The execution, delivery and performance of this Agreement will not
violate any Requirement of Law or material Contractual Obligation to which
such Shareholder is a party or which purports to be binding upon such
Shareholder or upon any of its assets and will not result in the creation
or imposition of any Lien on any of the assets of such Shareholder except
as contemplated by this Agreement.
5.2 Title; No Other Liens. Except for the security interest granted
---------------------
to the US Administrative Agent for the benefit of the US$ Lenders pursuant to
this Agreement and the other Liens permitted to exist on the Collateral by the
Credit Agreement, such Shareholder owns each item of the Shareholder Collateral
free and clear of any and all Liens or claims of others.
5.3 Perfected Liens. The security interests granted pursuant to this
---------------
Agreement upon completion of the actions specified on Schedule 3 will constitute
----------
valid,
<PAGE>
15
perfected security interests in the Shareholder Collateral of such Shareholder,
in favor of the US Administrative Agent, for the benefit of the Lenders, as
collateral security for such Shareholder's Obligations, enforceable in
accordance with the terms hereof against all creditors of such Shareholder and
any Persons purporting to purchase any Shareholder Collateral from such
Shareholder and are prior to all other Liens on such Shareholder Collateral in
existence on the date hereof except for Liens permitted by the Credit Agreement
which have priority over the Liens on such Shareholder Collateral by operation
of law.
5.4 Pledged Securities. (a) The Pledged Securities of the Company
------------------
pledged by such Shareholder constitutes all the issued and outstanding shares of
all classes of the Capital Stock of the Company owned by such Shareholder.
(b) All the shares of the Pledged Stock of such Shareholder have
been duly and validly issued and are fully paid and nonassessable.
(c) The Pledged Securities pledged by such Shareholder hereunder,
are free of any and all Liens or options in favor of, or claims of, any other
Person, except the security interest created by this Agreement or any of the
Loan Documents.
(d) None of the Pledged Securities of such Shareholder are evidenced
by any certificates or other instruments which have not been delivered to the US
Administrative Agent.
(e) None of the Pledged Securities of such Shareholder are subject
to any options to purchase or similar rights, except as provided in the
Corporate Buy/Sell Agreement.
(f) There are no restrictions, other than those contained in the
Credit Agreement, the Corporate Buy/Sell Agreement and the other Loan Documents,
upon any of the voting rights associated with, or the transfer of, any of the
Pledged Securities.
SECTION 6. COVENANTS OF GUARANTORS
Each Guarantor covenants and agrees with each Administrative Agent and
the Lenders that, from and after the date of this Agreement until the
Obligations shall have been paid in full, no Bankers' Acceptance shall be
outstanding and the Commitments shall have terminated:
6.1 Covenants in Credit Agreement. Such Guarantor shall take, or
-----------------------------
shall refrain from taking, as the case may be, each action that is necessary to
be taken or not taken, as the case may be, so that no Default or Event of
Default is caused by the failure to take such action or to refrain from taking
such action by such Guarantor or any of its Subsidiaries.
<PAGE>
16
6.2 Delivery of Instruments and Chattel Paper. If any amount payable
-----------------------------------------
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument (other than checks acquired in the ordinary course of
business) or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the US Administrative Agent, duly indorsed in a manner
reasonably satisfactory to the US Administrative Agent, to be held as Collateral
pursuant to this Agreement.
6.3 Maintenance of Insurance. (a) Such Guarantor will maintain,
------------------------
with financially sound and reputable companies, insurance policies (i) insuring
the Inventory, Equipment and Vehicles against loss by fire, explosion, theft and
such other casualties as may be reasonably satisfactory to the US Administrative
Agent and (ii) insuring such Guarantor, the US Administrative Agent and the
Lenders against liability for personal injury and insuring against property
damage relating to such Inventory, Equipment and Vehicles, such policies to be
in such form and amounts and having such coverage as may be reasonably
satisfactory to the US Administrative Agent.
(b) All insurance maintained by the Guarantors shall (i) name the US
Administrative Agent as insured party or loss payee, (ii) if reasonably
requested by the US Administrative Agent, include a breach of warranty clause
and (iii) be reasonably satisfactory in all other respects to the US
Administrative Agent.
(c) The Borrowers shall deliver to the US Administrative Agent such
reports of a reputable insurance broker with respect to such insurance as the US
Administrative Agent may from time to time reasonably request.
6.4 Maintenance of Perfected Security Interest; Further
---------------------------------------------------
Documentation. (a) Such Guarantor shall not take any action inconsistent with
maintaining the security interest created by this Agreement as a perfected
security interest and shall defend such security interest against the claims and
demands of all Persons whomsoever.
(b) Such Guarantor will furnish to the US Administrative Agent and
the Lenders from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the US Administrative Agent may reasonably request, all in
reasonable detail.
(c) At any time and from time to time, upon the written request of
the US Administrative Agent, and at the sole expense of such Guarantor, such
Guarantor will promptly and duly execute and deliver such further instruments
and documents and take such further actions as the US Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements under
the Uniform Commercial Code (or other similar laws) in effect in any
jurisdiction with respect to the security interests created hereby.
6.5 Changes in Locations, Name, etc. Such Guarantor will not, except
--------------------------------
upon 15 days' prior written notice to the US Administrative Agent:
<PAGE>
17
(i) permit any material amount of the Inventory or Equipment to be
kept at a location other than those listed on Schedule 5, as the same shall
----------
be supplemented from time to time, and those with respect to which
financing statements and other documents reasonably requested by the US
Administrative Agent to maintain the validity, perfection and priority of
the security interests provided for herein shall have been filed;
(ii) change the location of its chief executive office or, if such
Guarantor has only one place of business, such sole place of business from
that referred to in Section 4.4; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the US Administrative Agent in
connection with this Agreement would become misleading.
Such Guarantor will deliver to the US Administrative Agent (a) all additional
executed financing statements and other documents reasonably requested by the US
Administrative Agent to maintain the validity, perfection and priority of the
security interests provided for herein and (b) together with each set of
financial statements delivered pursuant to subsection 7.1(a) and (b) of the
Credit Agreement, a written supplement to Schedule 5 showing any additional
----------
location at which Inventory or Equipment shall be kept.
6.6 Notices. Such Guarantor will advise the US Administrative Agent
-------
and the Lenders promptly, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Credit Agreement) on any of the Collateral which would
materially adversely affect the ability of the US Administrative Agent to
exercise any of its remedies hereunder; and
(b) the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
6.7 Pledged Securities. (a) If such Guarantor shall become entitled
------------------
to receive or shall receive any certificate, instrument or other document
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights in respect of the Capital Stock of any Issuer, whether in addition to,
in substitution of, as a conversion of, or in exchange for, any shares of the
Pledged Securities, such Guarantor shall accept the same as the agent of the US
Administrative Agent and the Lenders, hold the same in trust for the US
Administrative Agent and deliver the same forthwith to the US Administrative
Agent in the exact form received, duly indorsed by such Guarantor to the US
Administrative Agent, if required, together with an undated stock or bond power
covering such certificate duly executed in blank by such Guarantor and with, if
the US Administrative Agent so requests, signature
<PAGE>
18
guaranteed, to be held by the US Administrative Agent, subject to the terms
hereof, as additional collateral security for the Obligations. Any sums paid
upon or in respect of the Pledged Securities upon the liquidation or dissolution
of any Issuer shall be paid over to the US Administrative Agent to be held by it
hereunder as additional collateral security for the Obligations, and in case any
distribution of capital shall be made on or in respect of the Pledged Securities
or any property shall be distributed upon or with respect to the Pledged
Securities pursuant to the recapitalization or reclassification of the capital
of any Issuer or pursuant to the reorganization thereof, the property so
distributed shall, unless otherwise subject to a perfected security interest in
favor of the US Administrative Agent, be delivered to the US Administrative
Agent to be held by it hereunder as additional collateral security for the
Obligations. If any sums of money or property so paid or distributed in respect
of the Pledged Securities shall be received by such Guarantor, such Guarantor
shall, until such money or property is paid or delivered to the US
Administrative Agent, hold such money or property in trust for the Lenders,
segregated from other funds of such Guarantor, as additional collateral security
for the Obligations.
(b) Without the prior written consent of the US Administrative Agent,
such Guarantor will not (i) vote to enable, or take any other action to permit,
any Issuer to issue any stock or other equity securities of any nature or to
issue any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer
(except the issuance of options pursuant to the Company's Nonqualified Stock
Option Plan and any option exercises thereunder), (ii) sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect to, the
Pledged Securities or Proceeds thereof (except pursuant to a transaction
expressly permitted by the Credit Agreement or the Corporate Buy/Sell
Agreement), (iii) create, incur or permit to exist any Lien or option in favor
of, or any claim of any Person with respect to, any of the Pledged Securities or
Proceeds thereof, or any interest therein, except for the security interests
created by this Agreement, any of the Loan Documents or the Corporate Buy/Sell
Agreement or (iv) enter into any agreement or undertaking restricting the right
or ability of such Guarantor or the US Administrative Agent to sell, assign or
transfer any of the Pledged Securities or Proceeds thereof (except pursuant to
any Loan Document or the Corporate Buy/Sell Agreement).
(c) In the case of each Grantor which is an Issuer, such Issuer
agrees that (i) it will be bound by the terms of this Agreement relating to the
Pledged Securities issued by it and will comply with such terms insofar as such
terms are applicable to it, (ii) it will notify the US Administrative Agent
promptly in writing of the occurrence of any of the events described in Section
6.7(a) with respect to the Pledged Securities issued by it and (iii) the terms
of Sections 8.3(c) and 8.7 shall apply to it, mutatis mutandis, with respect to
------- --------
all actions that may be required of it pursuant to Section 8.3(c) or 8.7 with
respect to the Pledged Securities issued by it.
6.8 Receivables. (a) Other than in the ordinary course of business
-----------
consistent with its past practice, such Guarantor will not (i) grant any
extension of the time of payment of any Receivable, (ii) compromise or settle
any Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of
<PAGE>
19
any Receivable, (iv) allow any credit or discount whatsoever on any Receivable
or (v) amend, supplement or modify any Receivable in any manner that could
adversely affect the value thereof.
(b) Such Guarantor will deliver to the US Administrative Agent a copy
of each material demand, notice or document received by it that questions or
calls into doubt the validity or enforceability of more than 5% of the aggregate
amount of the then outstanding Receivables.
6.9 Intellectual Property. (a) Such Guarantor is the true and
---------------------
lawful owner of all rights to the Patents, Trademarks and Copyrights and such
Patents, Trademarks and Copyrights constitute all of the United States Patents,
Trademarks and Copyrights and applications for United States Patents, Trademarks
and Copyrights that such Guarantor now owns. The Guarantor has no knowledge of
any third party claim that any aspect of such Guarantor's present business
operations or business operations contemplated as of the date hereof infringes
or will infringe any patent, trademark or copyright.
(b) Such Guarantor agrees, promptly upon learning thereof, to furnish
the US Administrative Agent in writing all pertinent information available to
such Guarantor with respect to any infringement, contributing infringement or
active inducement to infringe in any material Patent or Trademark or to any
claim that practice of any material Patent or Trademark violates any property
right of a third party, or with respect to any misappropriation of any material
Patent or Trademark. Such Guarantor agrees, absent direction from the US
Administrative Agent to the contrary, to diligently prosecute any Person
infringing or misappropriating any Patent or Trademark.
(c) At its own expense, such Guarantor shall make timely payment of
all post-issuance fees required to maintain in force rights under each Patent
absent prior written consent of the US Administrative Agent.
(d) At its own expense, such Guarantor shall diligently prosecute all
applications for United States Patents or Trademarks and shall not abandon any
such application prior to exhaustion of all administrative judicial remedies,
absent written consent of the US Administrative Agent.
(e) Prior to the later to occur of (i) 30 days of acquisition of a
United States Patent or Trademark, or of filing of an application for a United
States Patent or Trademark or (ii) five Business Days after the last day of the
fiscal quarter in which such acquisition or filing occurs, such Guarantor shall
report such acquisition or filing to the US Administrative Agent, and upon
request of the US Administrative Agent, such Guarantor shall execute and deliver
any and all agreements, instruments, documents and papers as the US
Administrative Agent may request to evidence the US Administrative Agent's and
the Lender's security interest in any Patent or Trademark.
SECTION 7. COVENANTS OF SHAREHOLDERS
<PAGE>
20
Each Shareholder covenants and agrees with the US Administrative Agent
and the US$ Lenders that, from and after the date of this Agreement until the
Obligations shall have been paid in full and the Commitments shall have
terminated:
7.1 Maintenance of Perfected Security Interest; Further
---------------------------------------------------
Documentation. (a) Such Shareholder shall not take any action inconsistent with
- -------------
maintaining the security interest created by this Agreement as a perfected
security interest and shall defend such security interest against the claims and
demands of all Persons whomsoever.
(b) Such Shareholder shall furnish to the US Administrative Agent and
the US$ Lenders from time to time statements and schedules further identifying
and describing the Shareholder Collateral and such other reports in connection
with the Shareholder Collateral as the US Administrative Agent may reasonably
request, all in reasonable detail.
(c) At any time and from time to time, upon the written request of
the US Administrative Agent, and at the sole expense of such Shareholder, such
Shareholder will promptly and duly execute and deliver such further instruments
and documents and take such further actions as the US Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted.
7.2 Notices. Such Shareholder will advise the US Administrative
-------
Agent and the US$ Lenders promptly, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Credit Agreement) on any of the Shareholder Collateral which
would materially adversely affect the ability of the US Administrative Agent to
exercise any of its remedies hereunder; and
(b) the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Shareholder Collateral or on the security interests created hereby.
7.3 Pledged Securities. (a) If such Shareholder shall become
------------------
entitled to receive or shall receive any certificate, instrument or other
document (including, without limitation, any certificate representing a stock
dividend or a distribution in connection with any reclassification, increase or
reduction of capital or any certificate issued in connection with any
reorganization), option or rights in respect of the Capital Stock of the
Company, whether in addition to, in substitution of, as a conversion of, or in
exchange for, any shares of the Pledged Securities, such Shareholder shall
accept the same as the agent of the US Administrative Agent and the US$ Lenders,
hold the same in trust for the US Administrative Agent and deliver the same
forthwith to the US Administrative Agent in the exact form received, duly
indorsed by such Shareholder to the US Administrative Agent, if required,
together with an undated stock power covering such certificate duly executed in
blank by such Shareholder and with, if the US Administrative Agent so requests,
signature guaranteed, to be held by the US Administrative Agent, subject to the
terms hereof, as
<PAGE>
21
additional collateral security for the Obligations. Any sums paid upon or in
respect of the Pledged Securities upon the liquidation or dissolution of the
Company shall be paid over to the US Administrative Agent to be held by it
hereunder as additional collateral security for the Obligations, and in case any
distribution of capital shall be made on or in respect of the Pledged Securities
or any property shall be distributed upon or with respect to the Pledged
Securities pursuant to the recapitalization or reclassification of the capital
of the Company or pursuant to the reorganization thereof, the property so
distributed shall, unless otherwise subject to a perfected security interest in
favor of the US Administrative Agent, be delivered to the US Administrative
Agent to be held by it hereunder as additional collateral security for the
Obligations. If any sums of money or property so paid or distributed in respect
of the Pledged Securities shall be received by such Shareholder, such
Shareholder shall, until such money or property is paid or delivered to the US
Administrative Agent, hold such money or property in trust for the Lenders,
segregated from other funds of such Shareholder, as additional collateral
security for the Obligations.
(b) Without the prior written consent of the US Administrative Agent,
such Shareholder will not (i) vote to enable, or take any other action to
permit, the Company to issue any stock or other equity securities of any nature
or to issue any other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities of any nature of
the Company (except the issuance of options pursuant to the Company's
Nonqualified Stock Option Plan and any option exercises thereunder), (ii) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any option with
respect to, the Pledged Securities or Proceeds thereof (except pursuant to a
transaction expressly permitted by the Credit Agreement or the Corporate
Buy/Sell Agreement), (iii) create, incur or permit to exist any Lien or option
in favor of, or any claim of any Person with respect to, any of the Pledged
Securities or Proceeds thereof, or any interest therein, except for the security
interests created by this Agreement, any of the Loan Documents or the Corporate
Buy/Sell Agreement or (iv) enter into any agreement or undertaking restricting
the right or ability of such Shareholder or the US Administrative Agent to sell,
assign or transfer any of the Pledged Securities or Proceeds thereof (except
pursuant to any Loan Document or the Corporate Buy/Sell Agreement).
SECTION 8. REMEDIAL PROVISIONS
8.1 Certain Matters Relating to Receivables. (a) The US
---------------------------------------
Administrative Agent shall have the right, at its own cost and expense, to make
test verifications of the Receivables in any manner and through any medium that
it reasonably considers advisable, and each Guarantor shall furnish all such
assistance and information as the US Administrative Agent may reasonably require
in connection with such test verifications. At any time after an Event of
Default which is continuing, upon the US Administrative Agent's request and at
the expense of the relevant Guarantor, such Guarantor shall cause independent
public accountants or others satisfactory to the US Administrative Agent to
furnish to the US Administrative Agent reports showing reconciliations, aging
and test verifications of, and trial balances for, the Receivables.
<PAGE>
22
(b) If required by the US Administrative Agent at any time during the
continuance of an Event of Default, any payments of Receivables, when collected
by any Guarantor, (i) shall be forthwith (and, in any event, within two Business
Days) deposited by such Guarantor in the exact form received, duly indorsed by
such Guarantor to the US Administrative Agent if required, in a Collateral
Account maintained under the sole dominion and control of the US Administrative
Agent, subject to withdrawal by the US Administrative Agent for the account of
the Lenders only as provided in Section 8.5, and (ii) until so turned over,
shall be held by such Guarantor in trust for the US Administrative Agent and the
Lenders, segregated from other funds of such Guarantor. Each such deposit of
Proceeds of Receivables shall be accompanied by a report identifying in
reasonable detail the nature and source of the payments included in the deposit.
(c) At the US Administrative Agent's request, each Guarantor shall
make available to the US Administrative Agent all original and other documents
evidencing, and relating to, the agreements and transactions which gave rise to
the Receivables, including, without limitation, all original invoices.
8.2 Communications with Obligors; Guarantors Remain Liable. (a)
------------------------------------------------------
The US Administrative Agent in its own name or in the name of others may at any
time during the continuance of an Event of Default communicate with obligors
under the Receivables to verify with them to the US Administrative Agent's
satisfaction the existence, amount and terms of any Receivables.
(b) Upon the request of the US Administrative Agent at any time
during the continuance of an Event of Default, each Guarantor shall notify
obligors on the Receivables that the Receivables have been assigned to the US
Administrative Agent for the benefit of the Lenders and that payments in respect
thereof shall be made directly to the US Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each Guarantor
shall remain liable under each agreement relating to a Receivable to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. Neither the US Administrative Agent nor any Lender shall have any
obligation or liability under any agreement relating to a Receivable by reason
of or arising out of this Agreement or the receipt by the US Administrative
Agent or any Lender of any payment relating thereto, nor shall the US
Administrative Agent or any Lender be obligated in any manner to perform any of
the obligations of any Guarantor under or pursuant to any Receivable (or any
agreement giving rise thereto), to make any payment, to make any inquiry as to
the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party thereunder, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to it or to which it may be entitled
at any time or times.
8.3 Pledged Stock. (a) Unless an Event of Default shall have
-------------
occurred and be continuing and the US Administrative Agent shall have given
notice to the relevant
<PAGE>
23
Grantor of the US Administrative Agent's intent to exercise its corresponding
rights pursuant to Section 8.3(b), each Grantor shall be permitted to receive
all cash dividends and other distributions paid in respect of the Pledged Stock
and all payments made in respect of the Pledged Notes, and to exercise all
voting and corporate or partnership rights with respect to the Pledged
Securities; provided, however, that no vote shall be cast or corporate or
-------- -------
partnership right exercised or other action taken which, in the US
Administrative Agent's reasonable judgment, would impair the Collateral or which
would be inconsistent with or result in any violation of any provision of the
Credit Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and the US
Administrative Agent shall give notice of its intent to exercise such rights to
the relevant Grantor or Grantors, (i) the US Administrative Agent shall have the
right to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Pledged Securities and make application thereof to the
Obligations in such order as the US Administrative Agent may determine, and (ii)
any or all of the Pledged Securities shall be registered in the name of the US
Administrative Agent or its nominee, and the US Administrative Agent or its
nominee may thereafter exercise (x) all voting, corporate and other rights
pertaining to such Pledged Securities at any meeting of shareholders of the
relevant Issuer or Issuers or otherwise and (y) any and all rights of
conversion, exchange, subscription and any other rights, privileges or options
pertaining to such Pledged Securities as if it were the absolute owner thereof
(including, without limitation, the right to exchange at its discretion any and
all of the Pledged Securities upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate structure of any
Issuer, or upon the exercise by any Grantor or the US Administrative Agent of
any right, privilege or option pertaining to such Pledged Securities, and in
connection therewith, the right to deposit and deliver any and all of the
Pledged Securities with any committee, depositary, transfer agent, registrar or
other designated agency upon such terms and conditions as the US Administrative
Agent may determine), all without liability except to account for property
actually received by it, but the US Administrative Agent shall have no duty to
any Grantor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of any
Pledged Securities pledged by such Grantor hereunder to (i) comply with any
instruction received by it from the US Administrative Agent in writing that (x)
states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Securities directly to the US Administrative Agent.
8.4 Proceeds to be Turned Over To US Administrative Agent. In
-----------------------------------------------------
addition to the rights of the US Administrative Agent and the Lenders specified
in Section 8.1 with respect to payments of Receivables, if an Event of Default
shall occur and be continuing, all Proceeds received by any Grantor consisting
of cash, checks and other near-cash items
<PAGE>
24
shall be held by such Grantor in trust for the US Administrative Agent and the
Lenders, segregated from other funds of such Grantor, and shall, forthwith upon
receipt by such Grantor, be turned over to the US Administrative Agent in the
exact form received by such Grantor (duly indorsed by such Grantor to the US
Administrative Agent, if required). All Proceeds received by the US
Administrative Agent hereunder shall be held by the US Administrative Agent in a
Collateral Account maintained under its sole dominion and control. All Proceeds
while held by the US Administrative Agent in a Collateral Account (or by such
Grantor in trust for the US Administrative Agent and the Lenders) shall continue
to be held as collateral security for all the Obligations and shall not
constitute payment thereof until applied as provided in Section 8.5
8.5 Application of Proceeds. At such intervals as may be agreed upon
-----------------------
by the Borrowers and the US Administrative Agent, or, if an Event of Default
shall have occurred and be continuing, at any time at the US Administrative
Agent's election, the US Administrative Agent may apply all or any part of
Proceeds held in any Collateral Account in payment of the Obligations in such
order as the US Administrative Agent may elect (provided that all such payments
in respect of principal, interest, fees and other amounts then due and payable
hereunder shall in each case be applied pro rata among those Lenders to which
--------
such types of amounts are payable), and any part of such funds which the US
Administrative Agent elects not so to apply and deems not required as collateral
security for the Obligations shall be paid over from time to time by the US
Administrative Agent to the Borrowers or to whomsoever may be lawfully entitled
to receive the same. Any balance of such Proceeds remaining after the
Obligations shall have been paid in full, no Bankers' Acceptances shall be
outstanding and the Commitments shall have terminated shall be paid over to the
Borrowers or to whomsoever may be lawfully entitled to receive the same.
8.6 Code and Other Remedies. If an Event of Default shall occur and
-----------------------
be continuing, the US Administrative Agent, on behalf of the Lenders, may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code or any other applicable law. Without limiting the generality of the
foregoing, the US Administrative Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon any Grantor or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do any
of the foregoing), in one or more parcels at public or private sale or sales, at
any exchange, broker's board or office of the US Administrative Agent or any
Lender or elsewhere upon such terms and conditions as it may deem commercially
reasonable and at such prices as it may for cash or on credit or for future
delivery without assumption of any credit risk. The US Administrative Agent or
any Lender shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any
<PAGE>
25
right or equity of redemption in any Grantor, which right or equity is hereby
waived or released. Each Grantor further agrees, at the US Administrative
Agent's request, to assemble the Collateral and make it available to the US
Administrative Agent at places which the US Administrative Agent shall
reasonably select, whether at such Grantor's premises or elsewhere. The US
Administrative Agent shall apply the net proceeds of any action taken by it
pursuant to this Section 6.6, after deducting all reasonable costs and expenses
of every kind incurred in connection therewith or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the US Administrative Agent and the Lenders hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the payment
in whole or in part of the Obligations, in such order as the US Administrative
Agent may elect (provided that such application shall in each case be applied
--------
pro rata among those Lenders to which such types of amounts are payable), and
- --------
only after such application and after the payment by the US Administrative Agent
of any other amount required by any provision of law, including, without
limitation, Section 9-504(1)(c) of the Code, need the US Administrative Agent
account for the surplus, if any, to any Grantor. To the extent permitted by
applicable law, each Grantor waives all claims, damages and demands it may
acquire against the US Administrative Agent or any Lender arising out of the
exercise by them of any rights hereunder. If any notice of a proposed sale or
other disposition of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least 10 days before such sale or other
disposition.
8.7 Registration Rights. (a) If the Administrative Agent shall
-------------------
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to Section 8.6, and if in the opinion of the Administrative Agent it is
necessary or advisable to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act, upon written
request, the relevant Grantor will use its best efforts to cause the Issuer
thereof to (i) execute and deliver, and cause the directors and officers of such
Issuer to execute and deliver, all such instruments and documents, and do or
cause to be done all such other acts as may be, in the opinion of the
Administrative Agent, necessary or advisable to register the Pledged Stock, or
that portion thereof to be sold, under the provisions of the Securities Act,
(ii) use its best efforts to cause the registration statement relating thereto
to become effective and to remain effective for a period of one year from the
date of the first public offering of the Pledged Stock, or that portion thereof
to be sold, and (iii) make all amendments thereto and/or to the related
prospectus which, in the opinion of the Administrative Agent, are necessary or
advisable, all in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission applicable
thereto; provided, that the Grantor shall not be required to effect such
--------
registration under the Securities Act or with applicable state securities laws
if the Grantor delivers to the US Administrative Agent an opinion of counsel
(who shall be satisfactory to the US Administrative Agent) satisfactory to the
US Administrative Agent that such sale may be made pursuant to an exemption from
the Securities Act and such state securities laws, and provided further, that
----------------
the US Administrative Agent shall furnish to such Grantor such information
regarding the US Administrative Agent and the Lenders as such Grantor may
request in writing and as shall be required in connection with any such
registration, qualification or compliance. Each Grantor agrees to use its best
efforts to
<PAGE>
26
cause the such Issuer to comply with the provisions of the securities or "Blue
Sky" laws of any and all jurisdictions which the US Administrative Agent shall
designate and, except where the US Administrative Agent does not deem it
necessary or desirable to do so under the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto, to
make available to its security holders, as soon as practicable, an earnings
statement (which need not be audited) which will satisfy the provisions of
Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that the mere fact that any such private sale
may result in prices and other terms less favorable than if such sale were a
public sale and agrees that the mere fact that such sale is a private sale shall
not be deemed to have made such sale one not made in a commercially reasonable
manner, provided that such Pledged Stock is sold at a price that the US
--------
Administrative Agent has determined in good faith, is reasonable under the
circumstances. The US Administrative Agent shall be under no obligation to
delay a sale of any of the Pledged Stock for the period of time necessary to
permit the Issuer thereof to register such securities for public sale under the
Securities Act, or under applicable state securities laws, even if such Issuer
would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Stock pledged by it pursuant to this Section 8.7
valid and binding and in compliance with any and all other applicable
Requirements of Law. Each Grantor further agrees that a breach of any of the
covenants contained in this Section 8.7 will cause irreparable injury to the US
Administrative Agent and the Lenders, that the US Administrative Agent and the
Lenders have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 8.7 shall be
specifically enforceable against such Guarantor, and such Guarantor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no Event of Default has
occurred and is continuing under the Credit Agreement.
8.8 Waiver; Deficiency. Each Guarantor waives and agrees not to
------------------
assert any rights or privileges which it may acquire under Section 9-112 of the
Code. Each Guarantor shall remain liable for any deficiency if the proceeds of
any sale or other disposition of the Collateral are insufficient to pay its
Obligations and the fees and disbursements of any attorneys employed by the US
Administrative Agent or any Lender to collect such deficiency.
<PAGE>
27
SECTION 9. THE US ADMINISTRATIVE AGENT
9.1 US Administrative Agent's Appointment as Attorney-in-Fact, etc.
--------------------------------------------------------------
(a) Each Grantor hereby irrevocably constitutes and appoints the US
Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be reasonably necessary or desirable to
accomplish the purposes of this Agreement, and, without limiting the generality
of the foregoing, each Grantor hereby gives the US Administrative Agent the
power and right, on behalf of such Grantor, without notice to or assent by such
Grantor, to do any or all of the following:
(i) in the name of such Guarantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Receivable or with respect to any other Collateral and file any claim or
take any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the US Administrative Agent for the purpose
of collecting any and all such moneys due under any Receivable or with
respect to any other Collateral whenever payable;
(ii) in the case of any Copyright, Patent or Trademark, execute and
deliver any and all agreements, instruments, documents and papers as the US
Administrative Agent may request to evidence the US Administrative Agent's
and the Lenders' security interest in such Copyright, Patent or Trademark
and the goodwill and general intangibles of such Guarantor relating thereto
or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section 8.6
or 8.7, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(v) (1) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the US Administrative Agent or as the US
Administrative Agent shall direct; (2) ask or demand for, collect, receive
payment of and receipt for, any and all moneys, claims and other amounts
due or to become due at any time in respect of or arising out of any
Collateral; (3) sign and indorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with
any of the Collateral; (4) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any portion thereof
<PAGE>
28
and to enforce any other right in respect of any Collateral; (5) defend any
suit, action or proceeding brought against such Grantor with respect to any
Collateral; (6) settle, compromise or adjust any such suit, action or
proceeding and, in connection therewith, to give such discharges or
releases as the US Administrative Agent may deem appropriate; (7) assign
any Copyright, Patent or Trademark (along with the goodwill of the business
to which any such Copyright, Patent or Trademark pertains), throughout the
world for such term or terms, on such conditions, and in such manner, as
the US Administrative Agent shall in its sole discretion determine; and (8)
generally, sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though
the US Administrative Agent were the absolute owner thereof for all
purposes, and do, at the US Administrative Agent's option and such
Grantor's expense, at any time, or from time to time, all acts and things
which the US Administrative Agent deems necessary to protect, preserve or
realize upon the Collateral and the US Administrative Agent's and the
Lenders' security interests therein and to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.
Anything in this Section 9.1(a) to the contrary notwithstanding, the US
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 9.1(a) unless an Event of Default shall
have occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the US Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(c) The expenses of the US Administrative Agent incurred in
connection with actions undertaken as provided in this Section 9.1, together
with interest thereon at a rate per annum equal to the rate per annum at which
interest would then be payable on past due Base Rate Loans in the case of
expenses paid in US$ or C$ Prime Loans, in the case of expenses paid in C$ under
the Credit Agreement, from the date of payment by the US Administrative Agent to
the date reimbursed by the relevant Grantor, shall be payable by such Grantor to
the US Administrative Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations
and agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
9.2 Duty of Administrative Agent. The US Administrative Agent's sole
----------------------------
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the US Administrative Agent deals
with similar property for its own account. Neither the US Administrative Agent,
any Lender nor any of their respective officers, directors, employees or agents
shall be liable for failure to demand, collect or
<PAGE>
29
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the US Administrative Agent and the Lenders hereunder are solely to
protect the US Administrative Agent's and the Lenders' interests in the
Collateral and shall not impose any duty upon the US Administrative Agent or any
Lender to exercise any such powers. The US Administrative Agent and the Lenders
shall be accountable only for amounts that they actually receive as a result of
the exercise of such powers, and neither they nor any of their officers,
directors, employees or agents shall be responsible to any Grantor for any act
or failure to act hereunder, except for their own gross negligence or willful
misconduct.
9.3 Execution of Financing Statements. Pursuant to Section 9-402 of
---------------------------------
the Code and any other applicable law, each Grantor authorizes the US
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the US
Administrative Agent reasonably determines appropriate to perfect the security
interests of the US Administrative Agent under this Agreement. A photographic
or other reproduction of this Agreement shall be sufficient as a financing
statement or other filing or recording document or instrument for filing or
recording in any jurisdiction.
9.4 Authority of Administrative Agent. Each Grantor acknowledges
---------------------------------
that the rights and responsibilities of the US Administrative Agent under this
Agreement with respect to any action taken by the US Administrative Agent or the
exercise or non-exercise by the US Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the US
Administrative Agent and the Lenders, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the US Administrative Agent and the Grantors, the US
Administrative Agent shall be conclusively presumed to be acting as agent for
the Lenders with full and valid authority so to act or refrain from acting as
provided herein, and no Grantor shall be under any obligation, or entitlement,
to make any inquiry respecting such authority.
SECTION 10. MISCELLANEOUS
10.1 Amendments in Writing. None of the terms or provisions of this
---------------------
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by each affected Grantor and the US Administrative
Agent, provided that any provision of this Agreement imposing obligations on any
--------
Grantor may be waived by the US Administrative Agent in a written instrument
executed by the US Administrative Agent.
<PAGE>
30
10.2 Notices. All notices, requests and demands to or upon the US
-------
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in subsection 11.2 of the Credit Agreement; provided that any such
--------
notice, request or demand to or upon any Grantor shall be addressed to such
Grantor at its notice address set forth on Schedule 1 as such Schedule may be
----------
revised from time to time.
10.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither
---------------------------------------------------
the US Administrative Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 10.1), delay, indulgence, omission or otherwise
be deemed to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the US Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the US Administrative Agent or any Lender of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the US Administrative Agent or such Lender would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
10.4 Enforcement Expenses; Indemnification. (a) Each Guarantor
-------------------------------------
agrees to pay or reimburse each Lender and the US Administrative Agent for all
its costs and expenses incurred in collecting against such Guarantor under the
guarantee contained in Section 2 or otherwise enforcing or preserving any rights
under this Agreement and the other Loan Documents to which such Guarantor is a
party, including, without limitation, the fees and disbursements of counsel to
each Lender and of counsel to the US Administrative Agent.
(b) Each Guarantor agrees to pay, and to save the US Administrative
Agent and the Lenders harmless from, any and all liabilities with respect to, or
resulting from any delay (except for any delay caused by the US Administrative
Agent or any Lender) in paying, any and all stamp, excise, sales or other taxes
which may be payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions contemplated by this
Agreement.
(c) Each Guarantor agrees to pay, and to save the US Administrative
Agent and the Lenders harmless from, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement and performance of this Agreement (collectively, the
"indemnified liabilities") to the extent the Borrower would be required to do so
-----------------------
pursuant to subsection 11.5 of the Credit Agreement.
(d) The agreements in this Section 10.4 shall survive repayment of
the Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.
<PAGE>
31
10.5 Successors and Assigns. This Agreement shall be binding upon
----------------------
the successors and assigns of each Grantor and shall inure to the benefit of the
US Administrative Agent and the Lenders and their successors and assigns;
provided that no Grantor may assign, transfer or delegate any of its rights or
- --------
obligations under this Agreement without the prior written consent of the US
Administrative Agent.
10.6 Set-Off. In addition to any rights and remedies of the Lenders
-------
provided by law, each Lender shall have the right, without prior notice to
either Borrower, any such notice being expressly waived by such Borrower to the
extent permitted by applicable law, upon any amount becoming due and payable by
such Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims in any currency, in each
case whether direct or indirect, absolute or contingent, matured or unmatured,
at any time held or owing by such Lender or any branch or agency thereof to or
for the credit or the account of such Borrower. Each Lender agrees promptly to
notify the relevant Borrower and the relevant Administrative Agent after any
such set-off and application made by such Lender, provided that the failure to
--------
give such notice shall not affect the validity of such set-off and application.
10.7 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
10.8 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.9 Section Headings. The Section headings used in this Agreement
----------------
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
10.10 Integration. This Agreement and the other Loan Documents
-----------
represent the agreement of the Grantors, the US Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the US Administrative Agent or
any Lender relative to subject matter hereof not expressly set forth or referred
to herein or in the other Loan Documents. In the event of any conflict between
the provisions of this Agreement and the Credit Agreement, the provisions of the
Credit Agreement shall be controlling.
10.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE>
32
10.12 Submission To Jurisdiction; Waivers. Each Grantor hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Grantor at its address referred to in Section 10.2 or at such other address
of which the US Administrative Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
10.13 Acknowledgements. Each Grantor hereby acknowledges that:
----------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a
party;
(b) neither the US Administrative Agent nor any Lender has any
fiduciary relationship with or duty to any Grantor arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between the Grantors, on the one hand, and the US
Administrative Agent and Lenders, on the other hand, in connection herewith
or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Grantors and the Lenders.
<PAGE>
33
10.14 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
--------------------
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
10.15 Additional Grantors; Pledged Stock. (a) Each Domestic
----------------------------------
Subsidiary of the Company that is required to become a party to this Agreement
pursuant to subsection 7.17 of the Credit Agreement shall become a Grantor for
all purposes of this Agreement upon execution and delivery by such Domestic
Subsidiary of an Assumption Agreement in the form of Annex 1A hereto.
(b) Subsection 7.16 of the Credit Agreement also require that the
Company or any Domestic Subsidiary of the Company which holds the Capital Stock
of any new Subsidiary (including a foreign Subsidiary) of the Company created or
acquired after the Closing Date, pledge 100% of the issued and outstanding
Capital Stock of such new Subsidiary (provided, that in no event shall Capital
--------
Stock representing more than 65% of the voting power of the Capital Stock of any
such new Subsidiary which is not a Domestic Subsidiary be so pledged) to the US
Administrative Agent for the benefit of the Lenders by executing and delivering
a Supplement to this Agreement in the form of Annex 1B hereto. From and after
the date any Grantor executes and delivers a Supplement to this Agreement, the
pledged stock set forth on Schedule 1 to such Supplement shall be deemed to be
Pledged Stock for all purposes under this Agreement and the issuer of such
pledged stock shall be deemed to be an Issuer for all purposes under this
Agreement.
10.16 Releases. (a) At such time as the Loans and the other
--------
Obligations shall have been paid in full and the Commitments have been
terminated and no Bankers' Acceptances shall be outstanding, the Collateral
shall be released from the Liens created hereby, and this Agreement and all
obligations (other than those expressly stated to survive such termination) of
the US Administrative Agent and each Grantor hereunder shall terminate, all
without delivery of any instrument or performance of any act by any party, and
all rights to the Collateral shall revert to the Grantors. At the request and
sole expense of the Company following any such termination, the US
Administrative Agent shall promptly, assign, transfer and deliver to such
Grantor any Collateral held by the US Administrative Agent hereunder, and
execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Credit Agreement,
then the US Administrative Agent, at the request of such Grantor and sole
expense of the Company, shall execute and deliver to such Grantor all releases
or other documents reasonably necessary or desirable for the release of the
Liens created hereby on such Collateral. At the request and sole expense of the
Company, a Grantor shall be released from its obligations hereunder in the event
that all the Capital Stock of such Grantor shall be sold, transferred or
otherwise disposed of in a transaction permitted by the Credit Agreement;
provided that the Company shall have delivered to the US Administrative Agent,
- --------
at least ten Business Days prior to the date of the proposed release, a written
request for release identifying the
<PAGE>
34
relevant Grantor and the terms of the sale or other disposition in reasonable
detail, including the price thereof and any expenses in connection therewith,
together with a certification by the Company stating that such transaction is in
compliance with the Credit Agreement and the other Loan Documents.
Notwithstanding anything contained herein to the contrary, the
recourse of each Shareholder hereunder shall be limited solely to the Pledged
Securities of such Shareholder. No Shareholder shall have any monetary
liability hereunder (other than any monetary liability which arises as a result
of any realization of the securities by the US Administrative Agent) of any kind
or nature whatsoever nor shall any assets of any Shareholder (except for the
Pledged Securities) be subject to any claim by the US Administrative Agent.
<PAGE>
35
IN WITNESS WHEREOF, each of the undersigned has caused this US Global
Guarantee and Security Agreement to be duly executed and delivered as of the
date first above written.
PIERCE LEAHY CORP.
By:_____________________________________________
Title:
PLC COMMAND I, INC.
By:_____________________________________________
Title:
PLC COMMAND II, INC.
By:_____________________________________________
Title:
PLC COMMAND I, L.P.
By PLC Command I, Inc., as its general partner
By:_____________________________________________
Title:
PLC COMMAND II, L.P.
By PLC Command II, Inc., as its general partner
By:_______________________________________________
Title:
<PAGE>
__________________________________________________
Leo W. Pierce, Sr.
__________________________________________________
Kathryn Cox
Individually and as Custodian for Deirdre Cox,
Adrian Cox, Brendan Cox, Timothy Cox, Christopher
Cox and Conor Cox
__________________________________________________
Maurice Cox, Jr.
__________________________________________________
Leo W. Pierce, Jr.
Individually and as Custodian for Kate Pierce,
Alexander Pierce and Julia Pierce
__________________________________________________
J. Peter Pierce
Individually and as Custodian for Matthew Pierce
and John Peter Pierce, Jr.
__________________________________________________
Michael J. Pierce
Individually and as Custodian for Michael A.
Pierce
__________________________________________________
Mary E. Pierce
__________________________________________________
Marjorie L. Pierce
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the US Global
Guarantee and Security Agreement dated as of August ___, 1996 (the "Agreement"),
---------
made by the Grantors parties thereto for the benefit of Canadian Imperial Bank
of Commerce, New York Agency as US Administrative Agent. The undersigned agrees
for the benefit of the US Administrative Agent and the Lenders as follows:
1. The undersigned will be bound by the terms of the Agreement and will
comply with such terms insofar as such terms are applicable to the undersigned.
2. The undersigned will notify the US Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 6.7(a) of
the Agreement.
3. The terms of Sections 8.3(a) and 8.7 of the Agreement shall apply to
it, mutatis mutandis, with respect to all actions that may be required of it
------- --------
pursuant to Section 6.3(a) or 6.7 of the Agreement.
By:_________________________________
Title:____________________________
Address for Notices:
____________________________________
____________________________________
Fax:________________________________
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the US Global
Guarantee and Security Agreement dated as of August , 1996 (the
------
"Agreement"), made by the Grantors parties thereto for the benefit of Canadian
- -----------
Imperial Bank of Commerce, New York Agency as US Administrative Agent. The
undersigned agrees for the benefit of the US Administrative Agent and the
Lenders as follows:
1. The undersigned will be bound by the terms of the Agreement and will
comply with such terms insofar as such terms are applicable to the undersigned.
2. The undersigned will notify the US Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 6.7 (a) of
the Agreement.
3. The terms of Sections 8.3(a) and 8.7 of the Agreement shall apply to it,
mutatis mutandis, with respect to all actions that may be required of it
- ----------------
pursuant to Section 6.3(a) or 6.7 of the Agreement.
By:
-----------------------------
Title:
------------------------
Address for Notices:
--------------------------------
--------------------------------
--------------------------------
Fax:
----------------------------
<PAGE>
Annex 1 to
US Global Guarantee
and Security Agreement
----------------------
ASSUMPTION AGREEMENT, dated as of __________________, 199_, made by
________________________, a ____________________ corporation (the "Additional
----------
Grantor"), in favor of CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as
- -------
US administrative agent (in such capacity, the "US Administrative Agent") for
-----------------------
the banks and other financial institutions (the "Lenders") parties to the Credit
-------
Agreement referred to below. All capitalized terms not defined herein shall
have the meaning ascribed to them in such Credit Agreement.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, PIERCE LEAHY CORP. (the "Borrower"), the Lenders and the US
--------
Administrative Agent have entered into a Credit Agreement, dated as of August
__, 1996 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement");
WHEREAS, in connection with the Credit Agreement, the Borrowers and
certain of Company's Affiliates (other than the Additional Grantor) have entered
into the US Global Guarantee and Security Agreement, dated as of August __, 1996
(as amended, supplemented or otherwise modified from time to time, the
"Guarantee and Security Agreement") in favor of the US Administrative Agent for
- ---------------------------------
benefit of the Lenders;
WHEREAS, the Credit Agreement requires the Additional Grantor to become
a party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Guarantee and Security
Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Security Agreement. By executing and delivering this
--------------------------------
Assumption Agreement, the Additional Grantor, as provided in Section 8.15 of the
Guarantee and Security Agreement, hereby becomes a party to the Guarantee and
Security Agreement as a Grantor thereunder with the same force and effect as if
originally named therein as a Grantor and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Grantor thereunder. The information set forth in
<PAGE>
2
Annex 1-A hereto is hereby added to the information set forth in Schedules
__________________to the Guarantee and Security Agreement. The Additional
Grantor hereby represents and warrants that each of the representations and
warranties contained in Section 4 of the Guarantee and Security Agreement is
true and correct on and as the date hereof (after giving effect to this
Assumption Agreement) as if made on and as of such date.
<PAGE>
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:________________________________
Name:
Title:
<PAGE>
Annex 2 to US
Global Guarantee
and Security
Agreement
[Form of Instruction to Register Pledge]
TO: [Name of Partnership]
You are hereby instructed to register the pledge of the following
uncertificated security as follows:
____% of the [limited partnership] [general partnership] interest of
the undersigned in [name of partnership].
Pledgor Pledgee
- ------------------- -----------------------------------
Canadian Imperial Bank of Commerce,
New York Agency
425 Lexington Avenue
New York, New York 10017
Very truly yours,
By:_____________________
Title
<PAGE>
Annex 3 to US
Global Guarantee
and Security
Agreement
[Form of Initial Transaction Statement]
August __, 1996
To: Canadian Imperial Bank of Commerce,
New York Agency
as US Administrative Agent
425 Lexington Avenue
New York, New York 10017
This statement is to advise you that a pledge of the following
uncertificated security has been registered in the name of Canadian Imperial
Bank of Commerce, New York Agency as follows:
1. Uncertificated Security:
2. Registered Owner:
Taxpayer Identification Number:
3. Registered Pledgee:
Canadian Imperial Bank of Commerce
Taxpayer Identification Number:
4. There are no liens or restrictions of the undersigned partnership
and no adverse claims to which such uncertificated security is or may
be subject known to the undersigned partnership.
5. The pledge was registered on August __, 1996.
THIS STATEMENT IS MERELY A RECORD OF THE RIGHTS OF THE ADDRESSEE AS OF
THE TIME OF ITS ISSUANCE. DELIVERY OF THIS
<PAGE>
2
STATEMENT, OF ITSELF, CONFERS NO RIGHTS ON THE RECIPIENT. THIS STATEMENT IS
NEITHER A NEGOTIABLE INSTRUMENT NOR A SECURITY.
Very truly yours,
[NAME OF PARTNERSHIP]
BY:________________________
Title:
<PAGE>
Exhibit E-1 to Credit Agreement
-------------------------------
CANADIAN SECURITY AGREEMENT
between
PIERCE LEAHY COMMAND COMPANY
and
CANADIAN IMPERIAL BANK OF COMMERCE,
as Canadian Administrative Agent
Dated as of August 13, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1
SECURITY INTERESTS
<TABLE>
<CAPTION>
<C> <S> <C>
1.1. Grant of Security Interests............................. 2
1.2. Power of Attorney....................................... 2
1.3. Attachment.............................................. 2
1.4. Exception for Last Day of Real Property Leases.......... 2
1.5. Exception for Contractual Rights........................ 3
1.6. Transfer of Title....................................... 3
</TABLE>
ARTICLE 2
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
<TABLE>
<CAPTION>
<C> <S> <C>
2.1. Representations in the Credit Agreement................. 3
2.2. Covenants in the Credit Agreement....................... 3
2.3. Necessary Filings....................................... 4
2.4. No Liens................................................ 4
2.5. Other Financial Statements.............................. 4
2.6. Chief Executive Office; Records......................... 4
2.7. Location of Inventory and Equipment..................... 5
2.8. Recourse................................................ 5
2.9. Trade Names; Change of Name............................. 5
</TABLE>
ARTICLE 3
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
<TABLE>
<CAPTION>
<C> <S> <C>
3.1. Additional Representations and Warranties................ 6
3.2. Maintenance of Records................................... 6
3.3. Modification of Terms; etc............................... 7
3.4. Collection............................................... 7
3.5. Instruments.............................................. 7
3.6. Further Actions.......................................... 7
</TABLE>
<PAGE>
ARTICLE 4
SPECIAL PROVISIONS CONCERNING TRADEMARKS
<TABLE>
<CAPTION>
<C> <S> <C>
4.1. Additional Representations and Warranties................ 8
4.2. Licenses and Assignments................................. 8
4.3. Infringements............................................ 8
4.4. Preservation of Marks.................................... 8
4.5. Maintenance of Registration.............................. 8
4.6. Future Registered Marks.................................. 9
4.7. Remedies................................................. 9
</TABLE>
ARTICLE 5
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
<TABLE>
<CAPTION>
<C> <S> <C>
5.1. Additional Representations and Warranties............... 10
5.2. Licenses and Assignments................................ 10
5.3. Infringements........................................... 10
5.4. Maintenance of Patents.................................. 10
5.5. Prosecution of Patent Application....................... 10
5.6. Other Patents and Copyrights............................ 11
5.7. Remedies................................................ 11
</TABLE>
ARTICLE 6
PROVISIONS CONCERNING ALL COLLATERAL
<TABLE>
<CAPTION>
<S> <C> <C>
6.1. Protection of Canadian Administrative Agent's Security 11
6.2. Warehouse Receipts Non-Negotiable..................... 12
6.3. Further Actions....................................... 12
6.4. Financing Statements.................................. 12
</TABLE>
<PAGE>
ARTICLE 7
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
<TABLE>
<CAPTION>
<C> <S> <C>
7.1. Remedies: Obtaining the Collateral Upon Default....... 12
7.1.A. Acting in Accordance with Commercial Practice......... 15
7.2. Remedies; Disposition of the Collateral............... 15
7.3. Waiver of Claims...................................... 15
7.4. Application of Proceeds............................... 16
7.5. Remedies Cumulative................................... 18
7.6. Discontinuance of Proceedings......................... 18
</TABLE>
ARTICLE 8
INDEMNITY
8.1. Indemnity............................................. 19
8.2. Indemnity Obligations Secured by Collateral: Survival. 20
ARTICLE 9
DEFINITIONS
ARTICLE 10
MISCELLANEOUS
<TABLE>
<CAPTION>
<C> <S> <C>
10.1. Notices............................................... 24
10.2. Waiver; Amendment..................................... 25
10.3. Obligations Absolute.................................. 25
10.4. Successors and Assigns................................ 26
10.5. Headings Descriptive.................................. 26
10.6. Severability.......................................... 26
10.7. Governing Law......................................... 26
10.8. Assignor's Duties..................................... 26
10.9. Termination: Release.................................. 26
10.10. Counterparts.......................................... 27
10.11. The Canadian Administrative Agent..................... 27
10.12. Acknowledgements...................................... 27
</TABLE>
<PAGE>
CANADIAN SECURITY AGREEMENT
SECURITY AGREEMENT dated as of August 13, 1996 between PIERCE LEAHY
COMMAND COMPANY, a company amalgamated and existing under the laws of the
Province of Nova Scotia (the "Assignor"), and CANADIAN IMPERIAL BANK OF COMMERCE
(the "Canadian Administrative Agent"), in its capacity as Canadian
administrative agent, for the benefit of (x) the C$ Lenders under the Credit
Agreement hereinafter referred to (such C$ Lenders to which the Assignor has
obligations under the Credit Agreement are hereinafter called the "Lender
Creditors") and (y) if one or more Lenders, or an Affiliate thereof, enter into
one or more Interest Rate Protection Agreements with the Assignor, any such
Lender, or Affiliate thereof, (even if any such Lender ceases to be a Lender
under the Credit Agreement for any reason) so long as any such Lender or
Affiliate participates in the extension of such Interest Rate Protection
Agreements, and their subsequent assigns, if any (collectively, the "Other
Creditors" and, together with the Lender Creditors, the "Secured Creditors").
Except as otherwise defined herein, terms used herein and defined in the Credit
Agreement (defined below) shall be used herein as so defined.
W I T N E S S E T H:
--------------------
WHEREAS Pierce Leahy Corp. (the "Company"), the Assignor, the
financial institutions party to the Credit Agreement hereinafter referred to
from time to time (the "Lenders"), Canadian Imperial Bank of Commerce, New York
Branch, and the Canadian Administrative Agent have entered into a credit
agreement dated as of August 13, 1996 providing for the making of Loans to the
Company and the Assignor as contemplated therein (as such agreement may be
amended, supplemented, restated or otherwise modified from time to time, the
"Credit Agreement");
WHEREAS the Assignor may at any time and from time to time enter into
one or more Interest Rate Protection Agreements with one or more Other
Creditors;
WHEREAS it was a condition to each of the above-described extensions
of credit to the Assignor that the Assignor shall execute and deliver this
Agreement;
NOW THEREFORE, in consideration of the extensions of credit to be made
to the Assignor and other benefits accruing to the Assignor, the receipt and
sufficiency of which are hereby acknowledged, the Assignor hereby makes the
following representations and warranties to the Canadian Administrative Agent
and hereby covenants and agrees with the Canadian Administrative Agent, in each
case as agent for and for the benefit of the Secured Creditors as follows:
<PAGE>
-2-
ARTICLE 1
SECURITY INTERESTS
1.1. Grant of Security Interests. (a) As security for the prompt and
---------------------------
complete payment and performance when due of all of the Obligations, the
Assignor does hereby sell, assign and transfer unto the Canadian Administrative
Agent, and does hereby grant to the Canadian Administrative Agent for the
benefit of the Secured Creditors, a continuing security interest of first
priority (subject to Liens not prohibited by the Credit Agreement) in, all of
the right, title and interest of the Assignor in and to all of the personal
property and undertaking of the Assignor, whether now existing or hereafter from
time to time acquired including, without limitation, the following: (i) each and
every Receivable, (ii) all Contracts, together with all Contract Rights arising
thereunder, (iii) all Inventory, (iv) all Money, (v) all Equipment, (vi) all
Marks, together with the registrations and right to all renewals thereof, and
the goodwill of the business of the Assignor symbolized by the Marks, (vii) all
Patents and Copyrights, (viii) all computer programs of the Assignor and all
intellectual property rights therein and all other proprietary information of
the Assignor, including, but not limited to, trade secrets, (ix) all other
Goods, Intangibles, Chattel Paper, Documents and Instruments, and (x) all
Proceeds and products of any and all of the foregoing, but excluding, in each
case, any of the foregoing which constitute Consumer Goods (all of the
unexcluded above, collectively, the "Collateral").
(b) The security interest of the Canadian Administrative Agent under
this Agreement extends to all Collateral of the kind which is the subject of
this Agreement which the Assignor may acquire at any time during the
continuation of this Agreement.
1.2. Power of Attorney. The Assignor hereby constitutes and appoints the
-----------------
Canadian Administrative Agent its true and lawful attorney, irrevocably, with
full power after the occurrence of and during the continuance of an Event of
Default (in the name of the Assignor or otherwise) to act, require, demand,
receive, compound and give acquittance for any and all monies and claims for
monies due or to become due to the Assignor under or arising out of the
Collateral, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
which the Canadian Administrative Agent may deem to be necessary or advisable to
protect the interests of the Secured Creditors, which appointment as attorney is
coupled with an interest.
1.3. Attachment. The Assignor and the Canadian Administrative Agent
----------
acknowledge and agree that value has been given for the granting of the security
interest granted hereby and that they have not agreed to postpone the time for
attachment, except for after-acquired property forming part of the Collateral
the attachment to which will occur forthwith upon the Assignor acquiring rights
thereto.
<PAGE>
-3-
1.4. Exception for Last Day of Real Property Leases. Notwithstanding any
----------------------------------------------
other provision of this Agreement, the security interest granted hereby does not
and shall not extend to, and Collateral shall not include, the last day of the
term of any real property lease or sub-lease, oral or written, or any agreement
therefor, now held or hereafter acquired by the Assignor, but upon the sale of
the leasehold interest or any part thereof the Assignor shall stand possessed of
such last day in trust to assign the same as the Canadian Administrative Agent
shall direct.
1.5. Exception for Contractual Rights. Notwithstanding any other provision
--------------------------------
of this Agreement, the security interest hereby granted does not and shall not
extend to, and Collateral shall not include, any agreement, right, franchise,
license or permit (the "Contractual Rights") to which the Assignor is a party or
of which the Assignor has the benefit, to the extent that the creation of the
security interest therein would constitute a breach of the terms of or permit
any person to terminate the Contractual Rights, but the Assignor shall hold its
interest therein in trust for the Canadian Administrative Agent and shall assign
such Contractual Rights to the Canadian Administrative Agent forthwith upon
obtaining the consent of the other party thereto. The Assignor agrees that it
shall, upon the request of the Canadian Administrative Agent, use all
commercially reasonable efforts to obtain any consent required to permit any
material Contractual Rights to be subjected to the security interest.
1.6. Transfer of Title. As further continuing security for the due and
-----------------
timely payment and performance by the Assignor of the Obligations, the Assignor,
subject to Sections 1.4 and 1.5, hereby grants, bargains, sells, assigns and
transfers to the Canadian Administrative Agent all Collateral such that title
thereto and ownership therein shall belong to and be vested in the Canadian
Administrative Agent, provided that the Canadian Administrative Agent shall not
thereby assume or be liable for any obligations or payments in respect of any of
the Collateral and provided further that, upon the sale of any Collateral by the
Assignor in accordance with Section 7.2 of this Agreement, title thereto and
ownership therein shall be divested automatically from the Canadian
Administrative Agent and provided further that, upon the termination of this
Agreement in accordance with its terms, title to and ownership in the Collateral
shall be revested automatically in the Assignor without any further act of the
Canadian Administrative Agent or the Assignor.
<PAGE>
-4-
ARTICLE 2
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
The Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement, as follows:
2.1. Representations in the Credit Agreement. The representations and
---------------------------------------
warranties set forth in Section 5 of the Credit Agreement as they relate to the
Assignor or to the Loan Documents to which the Assignor is a party, each of
which is hereby incorporated herein by reference, are true and correct, and the
Canadian Administrative Agent and each Lender shall be entitled to rely on each
of them as if they were fully set forth herein, provided that each reference in
each such representation and warranty to the Company's knowledge shall, for the
purposes of this subsection 2.1, be deemed to be a reference to the Assignor's
knowledge.
2.2. Covenants in the Credit Agreement. The Assignor shall take, or shall
---------------------------------
refrain from taking, as the case may be, each action that is necessary to be
taken or not taken, as the case may be, so that no Default or Event of Default
is caused by the failure to take such action or to refrain from taking such
action by the Assignor.
2.3. Necessary Filings. All filings, registrations and recordings necessary
-----------------
or appropriate under the PPSA to create, preserve, protect and perfect the
security interest granted by the Assignor to the Canadian Administrative Agent
hereby in respect of the Collateral have been accomplished and the security
interest granted to the Canadian Administrative Agent pursuant to this Agreement
in and to the Collateral constitutes a perfected security interest therein prior
to the rights of all other Persons therein and subject to no other Liens (except
Liens not prohibited by the Credit Agreement) and is entitled to all the rights,
priorities and benefits afforded by the PPSA as enacted in any relevant
jurisdiction to perfected security interests.
2.4. No Liens. The Assignor is, and as to Collateral acquired by it from
--------
time to time after the date hereof the Assignor will be, the owner of all
Collateral free from any Lien, security interest, encumbrance or other right,
title or interest of any Person (other than Liens created hereby or otherwise
permitted under the Credit Agreement), and the Assignor shall defend the
Collateral against all claims and demands of all Persons at any time claiming
the same or any interest therein adverse to the Canadian Administrative Agent.
2.5. Other Financing Statements. As of the date hereof, there is no
--------------------------
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral except as disclosed in Annex A hereto and so long as each
of the Canadian Commitments has not been terminated, any C$ Note remains unpaid,
any Interest Rate Protection Agreement entered into by the Assignor
<PAGE>
-5-
remains in effect or any other Obligations remain unpaid or are owed with
respect thereto, the Assignor will not execute or authorize to be filed in any
public office any financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) or statements relating to the
Collateral, except financing statements filed or to be filed in respect of and
covering (i) the security interests granted hereby by the Assignor or (ii) Liens
not prohibited by the Credit Agreement.
2.6. Chief Executive Office; Records. The chief executive office of the
-------------------------------
Assignor is located at 195 Summerlea Road, Brampton, Ontario L6T 4P6, Canada.
The Assignor will not move its chief executive office except to such new
location as the Assignor may establish in accordance with the last sentence of
this Section 2.6. The originals of all documents evidencing all Receivables and
Contract Rights of the Assignor and the only original books of account and
records of the Assignor relating thereto are, and will continue to be, kept at
such chief executive office, at such other locations shown on Annex B hereto or
at such new locations as the Assignor may establish in accordance with the last
sentence of this Section 2.6. All Receivables and Contract Rights of the
Assignor are, and will continue to be, maintained at, and controlled and
directed (including, without limitation, for general accounting purposes) from,
the office locations described above or such new location established in
accordance with the last sentence of this Section 2.6. The Assignor shall not
establish new locations for such offices until (i) it shall have given to the
Canadian Administrative Agent not less than 15 days' prior written notice of its
intention to do so, clearly describing such new location and providing such
other information in connection therewith as the Canadian Administrative Agent
may request, (ii) with respect to such new location, it shall have taken all
action, satisfactory to the Canadian Administrative Agent, to maintain the
security interest of the Canadian Administrative Agent in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect, and (iii) at the request of the Canadian Administrative Agent, it shall
have furnished an opinion of counsel acceptable to the Canadian Administrative
Agent to the effect that all financing or continuation statements and amendments
or supplements thereto have been filed in the appropriate filing office or
offices, and all other actions (including, without limitation, the payment of
all filing fees and taxes, if any, payable in connection with such filings) have
been taken, in order to perfect (and maintain the perfection and priority of)
the security interest granted hereby.
2.7. Location of Inventory and Equipment. All Inventory and Equipment held
-----------------------------------
on the date hereof by the Assignor (with the exception of Inventory in transit)
is located at one of the locations shown on Annex C hereto. The Assignor agrees
that all Inventory and Equipment now held or subsequently acquired by it (with
the exception of Inventory in transit) shall be kept at any one of the locations
shown on Annex C hereto, or such new location as the Assignor may establish in
accordance with the last sentence of this Section 2.7. The Assignor may
establish a new location for Inventory and Equipment only if (i) it shall have
given to the Canadian Administrative Agent not less than 15 days' prior written
notice of its intention so to do, clearly describing such new location and
providing such other information in connection therewith as
<PAGE>
-6-
the Canadian Administrative Agent may request, (ii) with respect to such new
location, it shall have taken all action satisfactory to the Canadian
Administrative Agent to maintain the security interest of the Canadian
Administrative Agent in the Collateral intended to be granted hereby at all
times fully perfected and in full force and effect, and (iii) at the request of
the Canadian Administrative Agent, it shall have furnished an opinion of counsel
acceptable to the Canadian Administrative Agent to the effect that all financing
or continuation statements and amendments or supplements thereto have been filed
in the appropriate filing office or offices, and all other actions (including,
without limitation, the payment of all filing fees and taxes, if any, payable in
connection with such filings) have been taken, in order to perfect (and maintain
the perfection and priority of) the security interest granted hereby.
2.8. Recourse. This Agreement is made with full recourse to the Assignor and
--------
pursuant to and upon all the warranties, representations, covenants and
agreements on the part of the Assignor contained herein, in the other Loan
Documents, in the Interest Rate Protection Agreements entered into by the
Assignor and otherwise in writing in connection herewith or therewith.
2.9. Trade Names; Change of Name. The Assignor does not have or operate in
---------------------------
any jurisdiction under, or in the preceding 12 months has not had or has not
operated in any jurisdiction under, any trade names, fictitious names or other
names except its legal name, the names of its predecessors, Pierce Leahy Command
Company and Command Records Services Limited, and such other trade or fictitious
names as are listed on Annex D hereto. The Assignor does not have or use a
French form of name or a combined English and French form of name. The Assignor
shall not change its legal name or assume or operate in any jurisdiction under
any trade, fictitious or other name except those names listed on Annex D hereto
and new names established in accordance with the last sentence of this Section
2.9. The Assignor shall not assume or operate in any jurisdiction under any new
trade, fictitious or other name until (i) it shall have given to the Canadian
Administrative Agent not less than 15 days' prior written notice of its
intention so to do, clearly describing such new name and the jurisdictions in
which such new name shall be used and providing such other information in
connection therewith as the Canadian Administrative Agent may request, (ii) with
respect to such new name, it shall have taken all action, requested by the
Canadian Administrative Agent, to maintain the security interest of the Canadian
Administrative Agent in the Collateral intended to be granted hereby at all
times fully perfected and in full force and effect, and (iii) at the request of
the Canadian Administrative Agent, it shall have furnished an opinion of counsel
acceptable to the Canadian Administrative Agent to the effect that all financing
or continuation statements and amendments or supplements thereto have been filed
in the appropriate filing office or offices, and all other actions (including,
without limitation, the payment of all filing fees and taxes, if any, payable in
connection with such filings) have been taken, in order to perfect (and maintain
the perfection and priority of) the security interest granted hereby.
<PAGE>
-7-
ARTICLE 3
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1. Additional Representations and Warranties. As of the time when each of
-----------------------------------------
its Receivables arises, the Assignor shall be deemed to have represented and
warranted that such Receivable, and all records, papers and documents relating
thereto (if any) are genuine and in all respects what they purport to be, and
that all papers and documents (if any) relating thereto (i) will represent the
genuine obligation of the account debtor evidencing indebtedness unpaid and owed
by the respective account debtor arising out of the performance of labour or
services or the sale or lease and delivery of the merchandise listed therein, or
both, (ii) will be the only original writings evidencing and embodying such
obligation of the account debtor named therein (other than copies created for
general accounting purposes), (iii) to the best of its knowledge, will evidence
true and valid obligations, enforceable in accordance with their respective
terms, except that the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether the issue of enforceability is considered in a proceeding in equity or
at law), and (iv) will be in compliance and will conform in all material
respects with all applicable federal, provincial, state and local laws and
applicable laws of any relevant foreign jurisdiction.
3.2. Maintenance of Records. The Assignor will keep and maintain at its own
----------------------
cost and expense satisfactory and complete records of its Receivables and
Contracts, including, but not limited to, the originals of all documentation
(including each Contract) with respect thereto, records of all payments
received, all credits granted thereon, all merchandise returned and all other
dealings therewith, and the Assignor will make the same available on the
Assignor's premises to the Canadian Administrative Agent for inspection, at the
Assignor's own cost and expense, at reasonable times and intervals upon request
by the Administrative Agent. Upon the occurrence and during the continuance of
an Event of Default and at the request of the Canadian Administrative Agent, the
Assignor shall, at its own cost and expense, deliver all tangible evidence of
its Receivables and Contract Rights (including, without limitation, all
documents evidencing the Receivables and all Contracts) and such books and
records to the Canadian Administrative Agent or to its representatives (copies
of which evidence and books and records may be retained by the Assignor). Upon
the occurrence and during the continuance of an Event of Default, if the
Canadian Administrative Agent so directs, the Assignor shall legend, in form and
manner satisfactory to the Canadian Administrative Agent, the Receivables and
the Contracts, as well as books, records and documents of the Assignor
evidencing or pertaining to such Receivables and Contracts with an appropriate
reference to the fact that such Receivables and Contracts have been assigned to
the Canadian Administrative Agent and that the Canadian Administrative Agent has
a security interest therein.
<PAGE>
-8-
3.3. Modification of Terms; etc. The Assignor shall not rescind or cancel
---------------------------
any indebtedness evidenced by any Receivable or under any Contract, or modify
any term thereof or make any adjustment with respect thereto, or extend or renew
the same, or compromise or settle any material dispute, claim, suit or legal
proceeding relating thereto, or sell any Receivable or Contract, or interest
therein, without the prior written consent of the Canadian Administrative Agent,
except as permitted by Section 3.4. The Assignor will duly fulfil all
obligations on its part to be fulfilled under or in connection with the
Receivables and Contracts and will do nothing to impair the rights of the
Canadian Administrative Agent in the Receivables or Contracts.
3.4. Collection. The Assignor shall endeavour to cause to be collected from
----------
the account debtor named in each of its Receivables or obligor under any
Contract, as and when due (including, without limitation, amounts which are
delinquent, such amounts to be collected in accordance with generally accepted
lawful collection procedures) any and all amounts owing under or on account of
such Receivable or Contract, and apply forthwith upon receipt thereof all such
amounts as are so collected to the outstanding balance of such Receivable or
under such Contract, except that, prior to the occurrence of an Event of
Default, the Assignor may allow in the ordinary course of business as
adjustments to amounts owing under its Receivables and Contracts (i) adjustments
consistent with its past practice or consistent with adjustments being offered
by its competition, (ii) an extension or renewal of the time or times of
payment, or settlement for less than the total unpaid balance, which the
Assignor finds appropriate in accordance with sound business judgment, and (iii)
a refund or credit due as a result of returned or damaged merchandise or
improperly performed services. The reasonable costs and expenses (including,
without limitation, attorneys' fees) of collection, whether incurred by the
Assignor or the Canadian Administrative Agent, shall be borne by the Assignor.
3.5. Instruments. If the Assignor owns or acquires any Instrument (other
-----------
than cheques acquired in the ordinary course of business and deposited in a bank
account of Assignor for collection) constituting Collateral, the Assignor will
within 10 Business Days notify the Canadian Administrative Agent thereof, and,
upon request by the Canadian Administrative Agent, will promptly deliver such
Instrument to the Canadian Administrative Agent appropriately endorsed to the
order of the Canadian Administrative Agent as further security hereunder.
3.6. Further Actions. The Assignor will, at its own expense, make, execute,
---------------
endorse, acknowledge, file and/or deliver to the Canadian Administrative Agent
from time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to its Receivables, Contracts, Instruments and other property or
rights covered by the security interest hereby, granted, as the Canadian
Administrative Agent may reasonably require.
<PAGE>
-9-
ARTICLE 4
SPECIAL PROVISIONS CONCERNING TRADEMARKS
4.1. Additional Representations and Warranties. The Assignor represents and
-----------------------------------------
warrants that it is the true and lawful owner of or otherwise has the right to
use the registered Marks listed in Annex E hereto and that said listed Marks
constitute all Canadian marks and applications for Canadian marks registered in
the Canadian Trademark office that the Assignor presently owns or uses in
connection with its business. The Assignor represents and warrants that it
owns, is licensed to use or otherwise has the right to use all Marks that it
uses. The Assignor further warrants that, except as set forth in Annex F
hereto, it has no knowledge as of the date hereof, of any third party claim that
any aspect of the Assignor's present business operations or business operations
contemplated as of the date hereof infringes or will infringe any trademark,
service mark or trade name. The Assignor represents and warrants that it is the
beneficial and record owner of all Canadian trademark registrations and
applications listed in Annex E hereto and that said registrations are valid,
subsisting, have not been cancelled and that the Assignor is not aware of any
third-party claim that any of said registrations is invalid or unenforceable,
or, except as set forth in Annex F hereto, that there is any reason that any of
said applications will not pass to registration. The Assignor hereby grants to
the Canadian Administrative Agent an absolute power of attorney to sign, upon
the occurrence and during the continuance of an Event of Default, any document
which may be required by the Canadian Trademark office in order to effect an
absolute assignment of all right, title and interest in each Mark, and record
the same.
4.2. Licenses and Assignments. Other than the license agreements listed on
------------------------
Annex G hereto and any extensions or renewals thereof, or as otherwise permitted
by the Credit Agreement, the Assignor hereby agrees not to divest itself of any
right under any Mark absent prior written approval of the Canadian
Administrative Agent.
4.3. Infringements. The Assignor agrees, promptly upon learning thereof, to
-------------
notify the Canadian Administrative Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect to,
any party who the Assignor believes is infringing or diluting or otherwise
violating in any respect any of the Assignor's rights in and to any material
Mark, or with respect to any party claiming that the Assignor's use of any
material Mark violates in any material respect any property right of that party.
The Assignor further agrees, unless otherwise agreed by the Canadian
Administrative Agent, to prosecute diligently any Person infringing any material
Mark.
4.4. Preservation of Marks. The Assignor agrees to use its Marks during the
---------------------
time in which this Agreement is in effect, sufficiently to preserve such Marks
as trademarks or service marks under the laws of Canada (unless the Assignor, in
its sound business judgment, determines that the preservation of such Marks is
no longer necessary or desirable in the conduct
<PAGE>
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of its business).
4.5. Maintenance of Registration. The Assignor shall, at its own expense,
---------------------------
diligently process all documents required by the Trademark Act (Canada) to
maintain trademark registration, including but not limited to affidavits of use
and applications for renewals of registration in the Canadian Trademark office
for all of its registered Canadian Marks, and shall pay all fees and
disbursements in connection therewith and shall not abandon any such filing of
affidavit of use or any such application of renewal prior to the exhaustion of
all administrative and judicial remedies without prior written consent of the
Canadian Administrative Agent (unless the Assignor, in its sound business
judgment, determines that the maintenance of such Marks is no longer necessary
or desirable in the conduct of its business). The Assignor agrees to notify the
Canadian Administrative Agent three (3) months prior to the dates on which the
affidavits of use or the applications for renewal registration are due with
respect to any registered Mark that the affidavits of use or the renewal is
being processed.
4.6. Future Registered Marks. If any Mark registration issues hereafter to
-----------------------
the Assignor as a result of any application now or hereafter pending before the
Canadian Trademark office, within 30 days of receipt of such certificate the
Assignor shall deliver to the Canadian Administrative Agent a copy of such
certificate, and an assignment for security in such Mark, to the Canadian
Administrative Agent and at the expense of the Assignor, confirming the
assignment for security in such Mark to the Canadian Administrative Agent
hereunder, the form of such security to be substantially the same as the form
hereof.
4.7. Remedies. If an Event of Default shall occur and be continuing, the
--------
Canadian Administrative Agent may, by written notice to the Assignor, take any
or all of the following actions: (i) declare the entire right, title and
interest of the Assignor in and to each of the Marks, together with all
trademark rights and rights of protection to the same, vested in the Canadian
Administrative Agent for the benefit of the Secured Creditors, in which event
such rights, title and interest shall immediately vest in the Canadian
Administrative Agent for the benefit of the Secured Creditors, and the Canadian
Administrative Agent shall be entitled to exercise the power of attorney
referred to in Section 4.1 to execute, cause to be acknowledged and notarized
and record said absolute assignment with the applicable agency; (ii) take and
use or sell the Marks and the goodwill of the Assignor's business symbolized by
the Marks and the right to carry on the business and use the assets of the
Assignor in connection with which the Marks have been used; and (iii) direct the
Assignor to refrain, in which event the Assignor shall refrain, from using the
Marks in any manner whatsoever, directly or indirectly, and, if requested by the
Canadian Administrative Agent, change the Assignor's corporate name to eliminate
therefrom any use of any Mark and execute such other and further documents that
the Canadian Administrative Agent may request to further confirm this and to
transfer ownership of the Marks and registrations and any pending trademark
application in the Canadian Trademark office to the Canadian Administrative
Agent. By its execution of this Agreement, the Assignor hereby agrees that if
an Event of Default shall occur and be continuing and at the Canadian
Administrative
<PAGE>
-11-
Agent's written request, that it will refrain from using the Marks in any manner
whatsoever, directly or indirectly, and, if requested by the Canadian
Administrative Agent, it will change its corporate name to eliminate therefrom
any use of any Mark and execute such other and further documents that the
Canadian Administrative Agent may request to further confirm this.
ARTICLE 5
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
5.1. Additional Representations and Warranties. The Assignor represents and
-----------------------------------------
warrants that it is the true and lawful owner of all rights in (x) all Canadian
trade secrets and proprietary information necessary to operate the business of
the Assignor (the "Trade Secret Rights"), (y) in the Patents listed in Annex H
hereto and (z) the Copyrights listed in Annex I hereto, that said Patents
constitute all the Canadian patents and applications for Canadian patents that
the Assignor now owns and that said Copyrights constitute all the Canadian
copyrights and applications for Canadian copyrights that the Assignor now owns.
The Assignor further warrants that, except as set forth in Annex J hereto, as of
the date hereof it has no knowledge of any third party claim that any aspect of
the Assignor's present business operations or business operations contemplated
as of the date hereof infringes or will infringe any patent or any copyright or
that Assignor has misappropriated any trade secret or proprietary information.
The Assignor hereby grants to the Canadian Administrative Agent an absolute
power of attorney to sign, upon the occurrence and during the continuance of any
Event of Default, any document which may be required by the Canadian Patent
office or the Canadian Copyright office in order to effect an absolute
assignment of all right, title and interest in each Patent and Copyright, and to
record the same.
5.2. Licenses and Assignments. Other than the license agreements listed on
------------------------
Annex G hereto and any extensions or renewal thereof or as otherwise permitted
by the Credit Agreement, the Assignor hereby agrees not to divest itself of any
right under any Patent or Copyright absent prior written approval of the
Canadian Administrative Agent.
5.3. Infringements. The Assignor agrees, promptly upon learning thereof, to
-------------
furnish the Canadian Administrative Agent in writing with all pertinent
information available to the Assignor with respect to any infringement,
contributing infringement or active inducement to infringe in any material
Patent or Copyright or to any claim that practice of any material Patent or
Copyright violates any property right of a third party, or with respect to any
misappropriation of any material Trade Secret Right or any claim that practice
of any material Trade Secret Right violates any property right of a third party.
The Assignor further agrees, absent direction of the Canadian Administrative
Agent to the contrary, diligently to prosecute any Person infringing any
material Patent or Copyright or any Person misappropriating any material Trade
Secret Right.
<PAGE>
-12-
5.4. Maintenance of Patents. At its own expense, the Assignor shall make
----------------------
timely payment of all post-issuance fees required pursuant to Canadian patent
law to maintain in force rights under each Patent absent prior written consent
of the Canadian Administrative Agent.
5.5. Prosecution of Patent Application. At its own expense, the Assignor
---------------------------------
shall diligently prosecute all applications for Canadian Patents listed in Annex
H hereto and shall not abandon any such application prior to exhaustion of all
administrative and judicial remedies, absent written consent of the Canadian
Administrative Agent.
5.6. Other Patents and Copyrights. Within 30 days of acquisition of a
----------------------------
Canadian Patent or registered Copyright, or of filing of an application for a
Canadian Patent or Copyright, the Assignor shall deliver to the Canadian
Administrative Agent a copy of said Patent or Copyright, as the case may be,
with an assignment for security as to such Patent or Copyright, as the case may
be, to the Canadian Administrative Agent and at the expense of the Assignor,
confirming the assignment for security, the form of such assignment for security
to be substantially the same as the form hereof.
5.7. Remedies. If an Event of Default shall occur and be continuing, the
--------
Canadian Administrative Agent may by written notice to the Assignor, take any or
all of the following actions: (i) declare the entire right, title, and interest
of the Assignor in each of the Patents and Copyrights vested in the Canadian
Administrative Agent for the benefit of the Secured Creditors, in which event
such right, title, and interest shall immediately vest in the Canadian
Administrative Agent for the benefit of the Secured Creditors, in which case the
Canadian Administrative Agent shall be entitled to exercise the power of
attorney referred to in Section 5.1 to execute, cause to be acknowledged and
notarized and record said absolute assignment with the applicable agency; (ii)
take and practice or sell the Patents and Copyrights; and (iii) direct the
Assignor to refrain, in which event the Assignor shall refrain, from practising
the Patents and using the Copyrights, directly or indirectly, and the Assignor
shall execute such other and further documents as the Canadian Administrative
Agent may request further to confirm this and to transfer ownership of the
Patents and Copyrights to the Canadian Administrative Agent for the benefit of
the Secured Creditors.
ARTICLE 6
PROVISIONS CONCERNING ALL COLLATERAL
6.1. Protection of Canadian Administrative Agent's Security. The Assignor
------------------------------------------------------
will do nothing to impair the rights of the Canadian Administrative Agent in the
Collateral. The Assignor will at all times keep its Inventory and Equipment
insured in favour of the Canadian Administrative Agent, at the Assignor's own
expense to the extent and in the manner provided in the Credit Agreement; all
policies or certificates with respect to such insurance; (i) shall be
<PAGE>
-13-
endorsed to the Canadian Administrative Agent's satisfaction for the benefit of
the Canadian Administrative Agent (including, without limitation, by naming the
Canadian Administrative Agent as loss payee), (ii) shall state that such
insurance policies shall not be cancelled or revised without 30 days' prior
written notice thereof by the insurer to the Canadian Administrative Agent, and
(iii) certified copies of such policies or certificates shall be deposited with
the Canadian Administrative Agent. If the Assignor shall fail to insure its
Inventory and Equipment in accordance with the preceding sentence, or if the
Assignor shall fail to so endorse and deposit all policies or certificates with
respect thereto, the Canadian Administrative Agent shall have the right (but
shall be under no obligation) to procure such insurance and the Assignor agrees
to promptly reimburse the Canadian Administrative Agent for all costs and
expenses of procuring such insurance. The Canadian Administrative Agent may
apply any proceeds of such insurance obtained by the Canadian Administrative
Agent in accordance with Section 7.4. The Assignor assumes all liability and
responsibility in connection with the Collateral acquired by it and the
liability of the Assignor to pay the Obligations shall in no way be affected or
diminished by reason of the fact that such Collateral may be lost, destroyed,
stolen, damaged or for any reason whatsoever unavailable to the Assignor.
6.2. Warehouse Receipts Non-Negotiable. The Assignor agrees that if any
---------------------------------
warehouse receipt or receipt in the nature of a warehouse receipt is issued with
respect to any of its Inventory, such warehouse receipt or receipt in the nature
thereof shall not be "negotiable" (as such term is used under relevant law).
6.3. Further Actions. The Assignor will, at its own expense, make, execute,
---------------
endorse, acknowledge, file and/or deliver to the Canadian Administrative Agent
from time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Canadian
Administrative Agent deems reasonably appropriate or advisable to perfect,
preserve or protect its security interest in the Collateral.
6.4. Financing Statements. The Assignor agrees to execute and deliver to the
--------------------
Canadian Administrative Agent such financing statements and financing change
statements or other similar filings, in form reasonably acceptable to the
Canadian Administrative Agent, as the Canadian Administrative Agent may from
time to time reasonably request or as are necessary or desirable in the opinion
of the Canadian Administrative Agent to establish and maintain a valid,
enforceable, first priority perfected security interest in the Collateral as
provided herein and the other rights and security contemplated hereby all in
accordance with the PPSA as enacted in any and all relevant jurisdictions or any
other relevant law. The Assignor will pay any applicable filing fees,
recordation taxes and related expenses. The Assignor authorizes the Canadian
Administrative Agent to file any such financing statements and financing change
<PAGE>
-14-
statements or other similar filings without the signature of the Assignor where
permitted by law.
ARTICLE 7
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
7.1. Remedies: Obtaining the Collateral Upon Default. Subject to Section 7.2
-----------------------------------------------
and the mandatory provisions of any applicable law, the Assignor agrees that, if
any Event of Default shall have occurred and be continuing, then and in every
such case, subject to any mandatory requirements of applicable law then in
effect, the Canadian Administrative Agent, in addition to any rights now or
hereafter existing under applicable law, shall have all rights as a secured
creditor under the PPSA in all relevant jurisdictions and may:
(a) personally, or by agents or attorneys, immediately take possession
of the Collateral or any part thereof, from the Assignor or any other Person who
then has possession of any part thereof with or without notice or process of
law, and for the purpose may enter upon the Assignor's premises where any of the
Collateral is located and remove the same and use in connection with such
removal any and all services, supplies, aids and other facilities of the
Assignor;
(b) instruct the obligor or obligors on any agreement, instrument or
other obligation (including, without limitation, the Receivables and the
Contracts) constituting the Collateral to make any payment required by the terms
of such agreement, instrument or other obligation directly to the Canadian
Administrative Agent;
(c) sell, assign or otherwise liquidate, or direct the Assignor to
sell, assign or otherwise liquidate, any or all of the Collateral or any part
thereof, and take possession of the proceeds of any such sale or liquidation;
(d) take possession of the Collateral or any part thereof, by
directing the Assignor in writing to deliver the same to the Canadian
Administrative Agent at any place or places designated by the Canadian
Administrative Agent, in which event the Assignor shall at its own expense:
(i) forthwith cause the same to be moved to the place or places so
designated by the Canadian Administrative Agent and there
delivered to the Canadian Administrative Agent;
(ii) store and keep any Collateral so delivered to the Canadian
Administrative Agent at such place or places pending further
action by the Canadian Administrative Agent as provided in
Section 7.2; and
<PAGE>
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(iii) while the Collateral shall be so stored and kept, provide such
guards and maintenance services as shall be necessary to protect the same and to
preserve and maintain them in good condition;
(e) license or sublicense, whether on an exclusive or nonexclusive basis,
any Marks, Patents or Copyrights included in the Collateral for such term and on
such conditions and in such manner as the Canadian Administrative Agent shall in
its sole judgment determine;
(f) repair, process, complete, modify or otherwise deal with the Collateral
and prepare for the disposition of the Collateral, whether on the premises of
the Assignor or otherwise and in connection with any such action utilize any of
the Assignor's property without charge;
(g) carry on all or any part of the business or businesses of the Assignor
and, to the exclusion of all others including the Assignor, enter upon, occupy
and, subject to any requirements of law and subject to any leases or agreements
then in place, use all or any of the premises, buildings, plant, undertaking and
other property of, or used by, the Assignor for such time and in such manner as
the Canadian Administrative Agent sees fit, free of charge, and except to the
extent required by law, the Canadian Administrative Agent shall not be liable to
the Assignor for any act, omission or negligence in so doing or for any rent,
charges, depreciation or damages or other amount incurred in connection
therewith or resulting therefrom;
(h) file such proofs of claim or other documents as may be necessary or
desirable to have its claim lodged in any bankruptcy, winding-up, liquidation,
dissolution or other proceedings (voluntary or otherwise) relating to the
Assignor;
(i) borrow money for the purpose of carrying on the business of the
Assignor or for the maintenance, preservation or protection of the Collateral
and mortgage, charge, pledge or grant a security interest in the Collateral,
whether or not in priority to the security interest hereby created and granted,
to secure repayment of any money so borrowed;
(j) where the Collateral has been disposed of by the Canadian
Administrative Agent as provided in Section 7.1(c), commence legal action
against the Assignor for any deficiency, if any;
(k) appoint, by an instrument in writing delivered to the Assignor, a
receiver, manager or a receiver and manager (a "Receiver") to collect the
Proceeds, and remove any Receiver so appointed and appoint another or others in
its stead, or institute proceedings in any court of competent jurisdiction of
the appointment of a Receiver, it being understood and agreed that:
<PAGE>
-16-
(i) the Canadian Administrative Agent may appoint any person as
Receiver, including an officer or employee of the Canadian
Administrative Agent;
(ii) such appointment may be made at any time after an Event of
Default either before or after the Canadian Administrative
Agent shall have taken possession of the Collateral;
(iii) the Canadian Administrative Agent may from time to time fix the
reasonable remuneration of the Receiver and direct the payment
thereof out of the Collateral or Proceeds; and
(iv) the Receiver shall, except as otherwise provided under
applicable law, be deemed to be the agent of the Assignor for
all purposes and, for greater certainty, the Canadian
Administrative Agent shall not be, in any way, responsible for
any actions, whether wilful, negligent or otherwise, of any
Receiver, and the Assignor hereby agrees to indemnify and save
harmless the Canadian Administrative Agent from and against any
and all claims, demands, actions, costs, damages, expenses or
payments which the Canadian Administrative Agent may hereafter
suffer, incur or be required to pay as a result of, in whole or
in part, any action taken by the Receiver or any failure of the
Receiver to do any act or thing;
(l) pay or discharge any Lien claimed by any person in the Collateral and
ranking in priority to the security interest granted herein (except Liens not
prohibited by the Credit Agreement);
(m) take any other action, suit, remedy or proceeding authorized or
permitted by this Agreement, the PPSA or by law or equity;
it being understood that the Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Canadian Administrative Agent shall be
entitled to a decree requiring specific performance by the Assignor of said
obligation.
7.1.A. Acting in Accordance with Commercial Practice. In enforcing its rights
---------------------------------------------
hereunder, the Canadian Administrative Agent and any Receiver shall be required
to act at least to the standards which are consistent with the commercial
practices of a person carrying on a business in a distress, default or
liquidation situation.
<PAGE>
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7.2. Remedies; Disposition of the Collateral. Any Collateral repossessed
---------------------------------------
by the Canadian Administrative Agent under or pursuant to Section 7.1 and any
other Collateral whether or not so repossessed by the Canadian Administrative
Agent, may be sold, assigned, leased or otherwise disposed of under one or more
contracts or as an entirety, and without the necessity of gathering at the place
of sale the property to be sold, and in general in such manner, at such time or
times, at such place or places and on such terms as the Canadian Administrative
Agent may, in compliance with any mandatory requirements of applicable law,
determine to be commercially reasonable. Any of the Collateral may be sold,
leased or otherwise disposed of, in the condition in which the same existed when
taken by the Canadian Administrative Agent or after any overhaul or repair at
the expense of the Assignor which the Canadian Administrative Agent shall
determine to be commercially reasonable. Any such disposition which shall be a
private sale or other private proceedings permitted by such requirements shall
be made upon not less than 15 days' written notice to the Assignor specifying
the time at which such disposition is to be made and the intended sale price or
other consideration therefor and such other matters as required by applicable
law, and shall be subject, for the 15 days after the giving of such notice, to
the right of the Assignor, any nominee of the Assignor or any other Person
provided under applicable law to acquire the Collateral involved at a price or
for such other consideration at least equal to the intended sale price or other
consideration so specified. Any such disposition which shall be a public sale
permitted by such requirements shall be made upon not less than 15 days' written
notice to the Assignor specifying the time and place of such sale and, in the
absence of applicable requirements of law, shall be by public auction (which
may, at the Canadian Administrative Agent's option, be subject to reserve),
after publication of notice of such auction not less than 15 days prior thereto
in two newspapers in general circulation in the Municipality of Metropolitan
Toronto. To the extent permitted by any such requirement of law, the Canadian
Administrative Agent may bid for and become the purchaser of the Collateral or
any item thereof, offered for sale in accordance with this Section without
accountability to the Assignor. If, under mandatory requirements of applicable
law, the Canadian Administrative Agent shall be required to make disposition of
the Collateral within a period of time which does not permit the giving of
notice to the Assignor as hereinabove specified, the Canadian Administrative
Agent need give the Assignor only such notice of disposition as shall be
reasonably practicable in view of such mandatory requirements of applicable law.
7.3. Waiver of Claims. Except as otherwise provided in this Agreement, THE
----------------
ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND
JUDICIAL HEARING IN CONNECTION WITH THE CANADIAN ADMINISTRATIVE AGENT'S TAKING
POSSESSION OR THE CANADIAN ADMINISTRATIVE AGENT'S DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH ASSIGNOR WOULD
OTHERWISE HAVE UNDER THE LAWS OF CANADA OR OF A PROVINCE THEREOF, and the
Assignor hereby further waives, to the extent permitted by law:
<PAGE>
-18-
(a) all damages occasioned by such taking of possession except any damages
which are the direct result of the Canadian Administrative Agent's gross
negligence or wilful misconduct;
(b) all other requirements as to the time, place and terms of sale or
other requirements with respect to the enforcement of the Canadian
Administrative Agent's rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay, extension or
moratorium now or hereafter in force under any applicable law in order to
prevent or delay the enforcement of this Agreement or the absolute sale of the
Collateral or any portion thereof, and the Assignor, for itself and all who may
claim under it, insofar as it or they now or hereafter lawfully may, hereby
waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the Assignor therein and thereto, and
shall be a perpetual bar both at law and in equity against the Assignor and
against any and all Persons claiming or attempting to claim the Collateral so
sold, optioned or realized upon, or any part thereof, from, through and under
the Assignor.
7.4. Application of Proceeds. (a) All monies collected by the Canadian
-----------------------
Administrative Agent upon any sale or other disposition of the Collateral,
together with all other monies received by the Canadian Administrative Agent
hereunder, shall be applied as follows:
(i) first, to the payment of all Obligations owing the Canadian
Administrative Agent of the type provided in clauses (iii) and
(iv) of the definition of Obligations;
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the
outstanding Primary Obligations shall be paid to the Secured
Creditors as provided in Section 7.4(d), with each Secured
Creditor receiving an amount equal to its outstanding Primary
Obligations or, if the proceeds are insufficient to pay in full
all such Primary Obligations, its Pro Rata Share of the amount
remaining to be distributed;
(iii) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii), an amount equal
to the outstanding Secondary Obligations shall be paid to the
Secured Creditors as provided in Section 7.4(d), with each
Secured Creditor receiving an amount equal to its outstanding
Secondary Obligations or, if the proceeds are insufficient to
pay in full all such Secondary Obligations,
<PAGE>
-19-
its Pro Rata Share of the amount remaining to be distributed;
and
(iv) fourth, to the extent proceeds remain after the application
pursuant to the preceding clauses (i), (ii) and (iii), to the
Assignor or to whomever may be lawfully entitled to receive
such surplus.
(b) For purposes of this Agreement, (x) "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or amount, that
amount (expressed as a percentage) equal to a fraction, the numerator of which
is the then unpaid amount of such Secured Creditor's Primary Obligations or
Secondary Obligations, as the case may be, and the denominator of which is the
then outstanding amount of all Primary Obligations or Secondary Obligations, as
the case may be, (y) "Primary Obligations" shall mean (i) all of the Credit
Agreement Obligations consisting of all principal of, and interest on, all C$
Loans under the Credit Agreement (together with all interest accrued thereon),
and all regularly accruing Fees owing to the C$ Lenders under the Credit
Agreement, and (ii) all of the Other Obligations consisting of all amounts due
under the Interest Rate Protection Agreements entered into by the Assignor
(other than indemnities, attorneys' fees and similar obligations and
liabilities), and (z) "Secondary Obligations" shall mean all Obligations other
than Primary Obligations.
(c) When payments to Secured Creditors are based upon their respective Pro
Rata Shares, the amounts received by such Secured Creditors hereunder shall be
applied (for purposes of making determinations under this Section 7.4 only) (i)
first, to their Primary Obligations and (ii) second, to their Secondary
Obligations. If any payment to any Secured Creditor of its Pro Rata Share of
any distribution would result in overpayment to such Secured Creditor, such
excess amount shall instead be distributed in respect of the unpaid Primary
Obligations or Secondary Obligations, as the case may be, of the other Secured
Creditors, with each Secured Creditor whose Primary Obligations or Secondary
Obligations, as the case may be, have not been paid in full to receive an amount
equal to such excess amount multiplied by a fraction, the numerator of which is
the unpaid Primary Obligations or Secondary Obligations, as the case may be, of
such Secured Creditors and the denominator of which is the unpaid Primary
Obligations or Secondary Obligations, as the case may be, of all Secured
Creditors.
(d) All payments required to be made to the Lender Creditors hereunder
shall be made to the Canadian Administrative Agent for the account of the Lender
Creditors and all payments required to be made to the Other Creditors hereunder
shall be made to the trustee, paying agent or similar representative under the
applicable Interest Rate Protection Agreement, or in the case of Interest Rate
Protection Agreements without a trustee, paying agent or similar representative,
all payments required to be made hereunder shall be made directly to the Other
Creditors.
<PAGE>
-20-
(e) For purposes of applying payments received in accordance with this
Section 7.4, the Canadian Administrative Agent shall be entitled to rely upon
(i) the U.S. Administrative Agent under the Credit Agreement, and (ii) the Other
Creditors for a determination (which the U.S. Administrative Agent, the
Assignor, each Other Creditor and the Secured Creditors agree (or shall agree)
to provide upon request of the Canadian Administrative Agent) of the outstanding
Primary Obligations and Secondary Obligations owing to the Lender Creditors or
the Other Creditors, as the case may be.
(f) It is understood that the Assignor shall remain liable to the extent
of any deficiency between the amount of the proceeds of the Collateral and the
aggregate amount of the sums referred to in clause (a) of this Section with
respect to the Assignor.
7.5. Remedies Cumulative. Each and every right, power and remedy hereby
-------------------
specifically given to the Canadian Administrative Agent shall be in addition to
every other right, power and remedy specifically given under this Agreement, the
Interest Rate Protection Agreements entered into by the Assignor, the other Loan
Documents and now or hereafter existing at law, in equity or by statute and each
and every right, power and remedy whether specifically herein given or otherwise
existing may be exercised from time to time or simultaneously and as often and
in such order as may be deemed expedient by the Canadian Administrative Agent.
All such rights, powers and remedies shall be cumulative and the exercise or the
beginning of the exercise of one shall not be deemed a waiver of the right to
exercise any other or others. No delay or omission of the Canadian
Administrative Agent in the exercise of any such right, power or remedy and no
renewal or extension of any of the Obligations shall impair any such right,
power or remedy or shall be construed to be a waiver of any Default or Event of
Default or an acquiescence therein. No notice to or demand on the Assignor in
any case shall entitle it to any other or further notice or demand in similar or
other circumstances or constitute a waiver of any of the rights of the Canadian
Administrative Agent to any other or further action in any circumstances without
notice or demand. In the event that the Canadian Administrative Agent shall
bring any suit to enforce any of its rights hereunder and shall be entitled to
judgment, then in such suit the Canadian Administrative Agent may recover
reasonable expenses, including attorneys' fees, and the amounts thereof shall be
included in such judgment.
7.6. Discontinuance of Proceedings. In case the Canadian Administrative
-----------------------------
Agent shall have instituted any proceeding to enforce any right, power or remedy
under this Agreement by foreclosure, sale, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Canadian Administrative Agent, then and in
every such case the Assignor, the Canadian Administrative Agent and each holder
of any of the Obligations shall be restored to their former positions and rights
hereunder with respect to the Collateral subject to the security interest
created under this Agreement, and all rights, remedies and powers of the
Canadian Administrative Agent shall continue as if no such proceeding had been
instituted.
<PAGE>
-21-
ARTICLE 8
INDEMNITY
8.1. Indemnity. (a) The Assignor agrees to indemnify, reimburse and hold
---------
the Canadian Administrative Agent, each Secured Creditor and their respective
successors, permitted assigns, employees, agents and servants (hereinafter in
this Section 8.1 referred to individually as "Indemnitee," and collectively as
"Indemnitees") harmless from any and all liabilities, obligations, damages,
injuries, penalties, claims, demands, actions, suits, judgments and any and all
costs, expenses or disbursements (including reasonable attorneys' fees and
expenses) (for the purposes of this Section 8.1 the foregoing are collectively
called "expenses") of whatsoever kind and nature imposed on, asserted against or
incurred by any of the Indemnitees in any way relating to or arising out of this
Agreement, any Interest Rate Protection Agreement entered into by the Assignor,
any other Loan Document or any other document executed in connection herewith or
therewith or in any other way connected with the administration of the
transactions contemplated hereby or thereby or the enforcement of any of the
terms of, or the preservation of any rights under any thereof, or in any way
relating to or arising out of the manufacture, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Collateral
(including, without limitation, latent or other defects, whether or not
discoverable), the violation of the laws of any country, state or other
governmental body or unit, any tort (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on account
of injury to or the death of any Person (including any Indemnitee), or property
damage), or contract claim; provided that no Indemnitee shall be indemnified
pursuant to this Section 8.1(a) for losses, damages or liabilities to the extent
caused by the gross negligence or wilful misconduct of such Indemnitee. The
Assignor agrees that upon written notice by any Indemnitee of the assertion of
such a liability, obligation, damage, injury, penalty, claim, demand, action,
suit or judgment, the Assignor shall assume full responsibility for the defense
thereof. Each Indemnitee agrees to use its best efforts to promptly notify the
Assignor of any such assertion of which such Indemnitee has knowledge.
(b) Without limiting the application of Section 8.1(a), the Assignor
agrees to pay, or reimburse the Canadian Administrative Agent for any and all
fees, costs and expenses of whatever kind or nature incurred in connection with
the creation, preservation or protection of the Canadian Administrative Agent's
Liens on, and security interest in, the Collateral, including, without
limitation, all fees and taxes in connection with the recording or filing of
instruments and documents in public offices, payment or discharge of any taxes
or Liens upon or in respect of the Collateral, premiums for insurance with
respect to the Collateral and all other fees, costs and expenses in connection
with protecting, maintaining or preserving the Collateral and the Canadian
Administrative Agent's interest therein, whether through judicial proceedings or
otherwise, or in defending or prosecuting any actions, suits or proceedings
arising out of or
<PAGE>
-22-
relating to the Collateral.
(c) Without limiting the application of Section 8.1(a) or (b), the
Assignor agrees to pay, indemnify and hold each Indemnitee harmless from and
against any loss, costs, damages and expenses which such Indemnitee may suffer,
expend or incur in consequence of or growing out of any misrepresentation by the
Assignor in this Agreement, any Interest Rate Protection Agreement entered into
by the Assignor, any other Loan Document or in any writing contemplated by or
made or delivered pursuant to or in connection with this Agreement, any such
Interest Rate Protection Agreement or any other Loan Document.
(d) If and to the extent that the obligations of the Assignor under this
Section 8.1 are unenforceable for any reason, the Assignor hereby agrees to make
the maximum contribution to the payment and satisfaction of such obligations
which is permissible under applicable law.
8.2. Indemnity Obligations Secured by Collateral: Survival. Any amounts
-----------------------------------------------------
paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of the Assignor contained in this Article 8 shall continue
in full force and effect notwithstanding the full payment of all the C$ Loans,
the termination of all Interest Rate Protection Agreements entered into by the
Assignor and the payment of all other Obligations and notwithstanding the
discharge thereof.
ARTICLE 9
DEFINITIONS
The following terms shall have the meanings herein specified. Such
definitions shall be equally applicable to the singular and plural forms of the
terms defined.
"Accounts" shall have the meaning provided in the PPSA.
"Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Assignor" shall have the meaning provided in the preamble to this
Agreement.
"Canadian Administrative Agent" shall have the meaning provided in the
recitals to this Agreement.
"Chattel Paper" shall have the meaning provided in the PPSA.
"Collateral" shall have the meaning provided in Section 1.1(a) of this
Agreement.
<PAGE>
-23-
"Consumer Goods" shall have the meaning provided in the PPSA.
"Contracts" shall mean all contracts between the Assignor and one or
more additional parties (including, without limitation any Interest Rate
Protection Agreements).
"Contract Rights" shall mean all rights of the Assignor (including
without limitation all rights to payment) under each Contract.
"Copyrights" shall mean any Canadian or foreign copyright owned by
Assignor, including any registrations of any Copyrights, in the Canadian
Copyright office or the equivalent thereof in any foreign country, as well as
any application for a Canadian copyright registration now or hereafter made with
the Canadian Copyright office by the Assignor.
"Credit Agreement" shall have the meaning provided in the recitals to
this Agreement.
"Credit Agreement Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article 9.
"Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.
"Documents of Title" shall have the meaning provided in the PPSA.
"Equipment" shall mean any "equipment," as such term is defined in the
PPSA, now or hereafter owned by the Assignor and, in any event, shall include,
but shall not be limited to, all machinery, equipment, furnishings, movable
trade fixtures and vehicles now or hereafter owned by the Assignor and any and
all additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
"Event of Default" shall mean any Event of Default under and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"Goods" shall have the meaning provided in the PPSA.
"Indemnitee" shall have the meaning provided in Section 8.1 of this
Agreement.
"Instrument" shall have the meaning provided in the PPSA.
"Intangibles" shall have the meaning provided in the PPSA.
<PAGE>
-24-
"Inventory" shall mean merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in manufacturing, processing, packaging or
shipping same; in all stages of production -- from raw materials through work-
in-process to finished goods -- and all product and proceeds of whatever sort
and wherever located and any portion thereof which will be returned, rejected,
reclaimed or repossessed by the Canadian Administrative Agent from the
Assignor's customers, and shall specifically include all "inventory" as such
term is defined in the PPSA.
"Lender Creditors" shall have the meaning provided in the preamble to
this Agreement.
"Lenders" shall have the meaning provided in the recitals to this
Agreement.
"Marks" shall mean all right, title and interest in and to any
Canadian or foreign trademarks, service marks and trade names now held or
hereafter acquired by the Assignor, including any registration of any trademarks
and service marks, or the equivalent thereof in any foreign country in the
Canadian Trademark office and any trade dress including logos and/or designs
used by Assignor in Canada or any foreign country.
"Money" shall have the meaning provided in the PPSA.
"Obligations" shall mean (i) (x) the principal of and interest on the
C$ Loans made to the Assignor under the Credit Agreement and (y) all other
obligations and indebtedness (including, without limitation, indemnities, Fees
and interest thereon) of the Assignor to the C$ Lenders now existing or
hereafter incurred under, arising out of, or in connection with the Credit
Agreement and the other Loan Documents and the due performance and compliance by
the Assignor with the terms, conditions and agreements contained in the Credit
Agreement and the other Loan Documents (all such principal, interest,
obligations and liabilities being herein collectively called the "Credit
Agreement Obligations"); (ii) all obligations and liabilities owing by the
Assignor under, or with respect to, any Interest Rate Protection Agreement,
whether such Interest Rate Protection Agreement is now in existence or hereafter
arising, and the due performance and compliance by the Assignor with the terms,
conditions and agreements contained therein (all such obligations and
liabilities described in this clause (ii) being herein collectively called the
"Other Obligations"); (iii) any and all sums advanced by the Canadian
Administrative Agent in order to preserve the Collateral or preserve its
security interest in the Collateral; (iv) in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations, or liabilities of
the Assignor referred to in clauses (i) and (ii) after an Event of Default shall
have occurred and be continuing, the reasonable expenses of re-taking, holding,
preparing for sale or lease, selling or otherwise disposing of or realizing on
the Collateral, or of any exercise by the Canadian Administrative Agent of its
right hereunder,
<PAGE>
-25-
together with reasonable attorneys' fees and court costs; and (v) all amounts
paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement under Section 8.1 of this Agreement.
"Other Creditors" shall have the meaning provided in the preamble to
this Agreement.
"Other Obligations" shall have the meaning provided in the definition
of "Obligations" in this Article 9.
"Patents" shall mean any Canadian or foreign patent to which the
Assignor now or hereafter has title and any divisions or continuations thereof,
as well as any application for a Canadian or foreign patent now or hereafter
made by the Assignor.
"PPSA" means the Personal Property Security Act (Ontario) as amended
or replaced from time to time; provided that if the personal property security
laws of any other jurisdiction shall be applicable for the purpose of the
interpretation or enforcement of this Agreement or the rights and duties of the
parties hereto, the term "PPSA" for such limited purpose only shall mean the
personal property security laws of such other jurisdiction.
"Primary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Proceeds" shall have the meaning provided in the PPSA or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Canadian Administrative Agent or the Assignor from time to time with respect
to any of the Collateral, (ii) any and all payments (in any form whatsoever)
made or due and payable to the Assignor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
colour of governmental authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
"Pro Rata Share" shall have the meaning provided in Section 7.4(b) of
this Agreement.
"Receivables" shall mean any "Account" now or hereafter owned by the
Assignor and, in any event, shall include, but shall not be limited to, all of
the Assignor's rights to payment for goods sold or leased or services performed
by the Assignor, whether now in existence or arising from time to time
hereafter, including, without limitation, rights evidenced by an Account, note,
contract, security agreement, Chattel Paper, or other evidence of indebtedness
or security, together with (a) all security pledged, assigned, hypothecated or
<PAGE>
-26-
granted to or held by the Assignor to secure the foregoing, (b) all of the
Assignor's right, title and interest in and to any Goods, the sale of which gave
rise thereto, (c) all guarantees, endorsements and indemnifications on, or of,
any of the foregoing, (d) all powers of attorney for the execution of any
evidence of indebtedness or security or other writing in connection therewith,
(e) all books, records, ledger cards, and invoices relating thereto, (f) all
evidences of the filing of financing statements and other statements and the
registration of other instruments in connection therewith and amendments
thereto, notices to other creditors or secured parties, and certificates from
filing or other registration officers, (g) all credit information, reports and
memoranda relating thereto, and (h) all other writings related in any way to the
foregoing.
"Secondary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Secured Creditors" shall have the meaning provided in the preamble to
this Agreement.
"Security" shall have the meaning provided in the PPSA.
"Termination Date" shall have the meaning provided in Section 10.9 of
this Agreement.
"Trade Secret Rights" shall have the meaning provided in Section 5.1
of this Agreement.
<PAGE>
-27-
ARTICLE 10
MISCELLANEOUS
10.1. Notices. Except as otherwise specified herein, all notices,
-------
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed:
(a) if to the Assignor, to:
Pierce Leahy Command Company
195 Summerlea Road
Brampton, Ontario
L6T 4P6
Fax: (905) 792-2567
with a copy to:
Davies, Ward & Beck
P.O. Box 63
Suite 4400
1 First Canadian Place
Toronto, Ontario, Canada
M5X 1B1
Attention: Nicholas J. Leblovic
Tel: (416) 863-0900
Fax: (416) 863-0871
(b) if to the Canadian Administrative Agent:
Canadian Imperial Bank of Commerce
Commerce Court West
7th Floor
Toronto, Canada
M5H 3A9
Attn: Cindy Grenough
Fax: (416) 980-2804
(c) if to any Lender Creditor (other than the Canadian Administrative
Agent), either (x) to the Canadian Administrative Agent, at the address of the
Canadian Administrative Agent
<PAGE>
-28-
specified above, or (y) at such address as such Lender Creditor shall have
specified in the Credit Agreement;
(d) if to any Other Creditor at such address as the Other Creditors shall
have specified in writing to the Assignor and the Canadian Administrative Agent;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
10.2 Waiver; Amendment. None of the terms or provisions of this Agreement
-----------------
may be waived, amended, supplemented or otherwise modified except by a written
instrument executed by the Assignor and the Canadian Administrative Agent,
provided that any provision of this Agreement imposing obligations on the
Assignor may be waived by the Canadian Administrative Agent in a written
instrument executed by the Canadian Administrative Agent.
10.3 Obligations Absolute. The obligations of the Assignor hereunder
--------------------
shall remain in full force and effect without regard to, and shall not be
impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of the Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement, any other Loan Document or any
Interest Rate Protection Agreement; or (c) any amendment to or modification of
any Loan Document or any Interest Rate Protection Agreement or any security for
any of the Obligations; whether or not the Assignor shall have notice or
knowledge of any of the foregoing.
10.4 Successors and Assigns. This Agreement shall be binding upon the
----------------------
Assignor and its successors and assigns and shall inure to the benefit of the
Canadian Administrative Agent and its successors and assigns; provided, that
--------
the Assignor may not transfer or assign any or all of its rights or obligations
hereunder without the prior written consent of the Canadian Administrative
Agent. All agreements, statements, representations and warranties made by the
Assignor herein or in any certificate or other instrument delivered by the
Assignor or on its behalf under this Agreement shall be considered to have been
relied upon by the Secured Creditors and shall survive the execution and
delivery of this Agreement, the other Loan Documents and the Interest Rate
Protection Agreements entered into from time to time by the Assignor regardless
of any investigation made by the Secured Creditors or on their behalf.
10.5 Headings Descriptive. The headings of the several sections of this
--------------------
Agreement are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.
10.6 Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and
<PAGE>
-29-
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
10.7 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
-------------
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAWS OF THE PROVINCE OF ONTARIO.
10.8 Assignor's Duties. It is expressly agreed, anything herein
-----------------
contained to the contrary notwithstanding, that the Assignor shall remain liable
to perform all of the obligations, if any, assumed by it with respect to the
Collateral and the Canadian Administrative Agent shall not have any obligations
or liabilities with respect to any Collateral by reason of or acting out of this
Agreement, nor shall the Canadian Administrative Agent be required or obligated
in any manner to perform or fulfil any of the obligations of the Assignor under
or with respect to any Collateral.
10.9 Termination: Release. (a) After the Termination Date, this
--------------------
Agreement shall terminate and the Canadian Administrative Agent, at the request
and expense of the Assignor, will promptly execute and deliver to the Assignor a
proper instrument or instruments (including financing change statements under
the PPSA) acknowledging the satisfaction and termination of this Agreement, and
will duly assign, transfer and deliver to the Assignor (without recourse and
without any representation or warranty) such of the Collateral of the Assignor
as may be in the possession of the Canadian Administrative Agent and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement. As used in this Agreement, "Termination Date" shall mean the date
upon which each of the C$ Commitments and all Interest Rate Protection
Agreements entered into by the Assignor have been terminated, no principal or
interest remains unpaid in respect of C$ Loans and all other Obligations have
been paid in full.
(b) In the event that any part of the Collateral is sold in connection
with a sale permitted by Section 8.2 of the Credit Agreement or is otherwise
released at the direction of the Required Lenders (or all the Lenders if
required by Section 11.1 of the Credit Agreement) and so long as the Assignor
certifies to the Canadian Administrative Agent that the proceeds of such sale or
sales or from such release have been applied in the manner, if any, required by
Section 4.4 of the Credit Agreement, the Canadian Administrative Agent, at the
request and expense of the Assignor, will duly assign, transfer and deliver to
the Assignor (without recourse and without any representation or warranty) such
of the Collateral as is then being (or has been) so sold or released and as may
be in the possession of the Canadian Administrative Agent and has not
theretofore been released pursuant to this Agreement.
(c) At any time that the Assignor desires that Collateral be released as
provided in the foregoing Section 10.9(a) or (b), it shall deliver to the
Canadian Administrative Agent a
<PAGE>
-30-
certificate signed by its chief financial officer or controller stating that the
release of the respective Collateral is permitted pursuant to Section 10.9(a) or
(b). If requested by the Canadian Administrative Agent (although the Canadian
Administrative Agent shall have no obligation to make any such request), the
Assignor shall furnish appropriate legal opinions (from counsel acceptable to
the Canadian Administrative Agent) to the effect set forth in the immediately
preceding sentence, which opinion may as to factual matters rely on an officer's
certificate of the Assignor.
10.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with Assignor and the
Canadian Administrative Agent.
10.11 The Canadian Administrative Agent. The Canadian Administrative Agent
---------------------------------
will hold in accordance with this Agreement all items of the Collateral at any
time received under this Agreement. It is expressly understood and agreed that
the obligations of the Canadian Administrative Agent as holder of the Collateral
and interest therein and with respect to the disposition thereof, and otherwise
under this Agreement, are only those expressly set forth in this Agreement. The
Canadian Administrative Agent shall act hereunder on the terms and conditions
set forth in Annex K hereto. By accepting the benefits hereof, each Secured
Creditor shall be deemed to have agreed to the terms and conditions set forth in
Annex K hereto, which are incorporated herein by reference in their entirety.
10.12 Conflict. In the event of and to the extent of any conflict or
--------
inconsistency between the provisions of this Agreement and those of the Credit
Agreement, those of the Credit Agreement shall prevail.
10.13 Acknowledgements. The Assignor:
----------------
(a) acknowledges receipt of a true copy of this Agreement; and
(b) acknowledges receipt of copies of the financing statements registered
under the PPSA evidencing the security interest granted herein.
<PAGE>
-31-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date first
above written.
PIERCE LEAHY COMMAND COMPANY
By:
-----------------------------------
Name: Douglas B. Huntley
By:
------------------------------------
Name:
CANADIAN IMPERIAL BANK OF
COMMERCE
as Canadian Administrative Agent
By:
------------------------------------
Name: Cindy Greenough. Director
By:
------------------------------------
Name:
<PAGE>
Exhibit G to
Credit Agreement
----------------
PLEDGE AND INTERCREDITOR AGREEMENT
PLEDGE AND INTERCREDITOR AGREEMENT, dated as of August 13, 1996, by and
among (a) PLC COMMAND I, L.P., a Pennsylvania limited partnership ("PLC I"), PLC
-----
COMMAND II, L.P., a Pennsylvania limited partnership ("PLC II" and, together
------
with PLC I, the "Pledgors"), (b) CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK
--------
AGENCY, as collateral agent (together with its successors in such capacity, the
"Collateral Agent") for (i) the lenders (the "Lenders") from time to time
---------------- -------
parties to the Credit Agreement (as hereinafter defined) and CANADIAN IMPERIAL
BANK OF COMMERCE, NEW YORK AGENCY, as administrative agent (in such capacity,
the "Administrative Agent") for the Lenders and (ii) the holders from time to
--------------------
time (the "Holders") of the 11 1/8% Senior Subordinated Notes due 2006 ( or any
-------
Exchange Notes or Private Exchange Notes that are issued pursuant to the
Indenture (as defined below), collectively, the "Notes") of Pierce Leahy Corp.
-----
(the "Company") and UNITED STATES TRUST COMPANY OF NEW YORK, a New York
-------
corporation, as trustee (together with its successors in such capacity, the
"Trustee") for the Holders in accordance with the Indenture (as defined below),
-------
(c) the Administrative Agent and (d) the Trustee.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Credit Agreement, dated as of August 13, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"), among the Company, Pierce Leahy Command Company (together with the
- ---------
Company, the "Borrowers"), the Lenders and the administrative agents named
---------
therein, including, without limitation, the Administrative Agent (the
"Administrative Agents"), the Lenders have agreed to make loans (the "Loans") to
--------------------- -----
the Borrowers upon the terms and subject to the conditions set forth therein;
WHEREAS, pursuant to the Indenture, dated as of July 15, 1996 (as amended,
supplemented or otherwise modified from time to time (or replaced, in connection
with the Exchange Offer or Private Exchange), the "Indenture"), between the
---------
Company and the Trustee, the Company has issued the Notes to the Holders, upon
the terms and subject to the conditions set forth therein;
WHEREAS, it is a condition precedent to the obligation of the Lenders to
make their respective Loans to the Borrowers under the Credit Agreement that
each Pledgor shall have executed and delivered this Pledge and Intercreditor
Agreement to the Collateral
<PAGE>
2
Agent for the benefit of the Lenders and the Administrative Agents a first lien
on the Pledged Stock (as hereinafter defined);
WHEREAS, pursuant to the Indenture, the Company has agreed to cause each
Pledgor to grant to the Collateral Agent for the benefit of Holders and the
Trustee a second lien on the Pledged Stock;
WHEREAS, each Pledgor is a Subsidiary of the Company, and it is to the
advantage of such Pledgor that the Lenders make the Loans to, and the Holders
purchase the Notes from, the Company;
WHEREAS, each Pledgor is the legal and beneficial owner of the shares of
the Pledged Stock pledged by it hereunder;
WHEREAS, pursuant to the Credit Agreement, the Administrative Agent has
been granted the authority to act on behalf of all Lenders with respect to
matters specified herein, including the execution and delivery of this Pledge
and Intercreditor Agreement, and pursuant to the Indenture, the Trustee has been
granted the authority to act on behalf of all Holders with respect to matters
specified therein, including the execution and delivery of this Pledge and
Intercreditor Agreement.
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration the receipt and adequacy of which is hereby acknowledged,
the parties hereby agree as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms defined in
-------------
the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, and the following terms shall have the following meanings:
"Agreement": this Pledge and Intercreditor Agreement, as the same may
---------
be amended, modified or otherwise supplemented from time to time.
"Code": the Uniform Commercial Code from time to time in effect in
----
the State of New York.
"Collateral": the Pledged Stock and all Proceeds.
----------
"Collateral Account": any account established to hold money Proceeds,
------------------
maintained under the sole dominion and control of the Collateral Agent,
subject to withdrawal by the Collateral Agent for the account of the
Secured Parties only as provided in paragraph 9(a).
<PAGE>
3
"Event of Default": until the Senior Secured Obligations shall have
----------------
been paid in full and the Commitments shall have expired or terminated, as
defined in the Credit Agreement and, thereafter, as defined in the
Indenture.
"Exchange Notes": as defined in the Registration Rights Agreement.
--------------
"Exchange Offer": as defined in the Registration Rights Agreement.
--------------
"Insolvency Event: (i) Either Pledgor commencing any case, proceeding
----------------
or other action (x) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization,
conservatorship or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (y) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or either Pledgor making a general assignment for the
benefit of its creditors; or (ii) there being commenced against either
Pledgor any case, proceeding or other action of a nature referred to in
clause (i) above which (x) results in the entry of an order for relief or
any such adjudication or appointment or (y) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there being
commenced against either Pledgor any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) either Pledgor taking any action in
furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clause (i), (ii) or (iii) above.
"Issuer": Pierce Leahy Command Company, a company incorporated under
------
the laws of Nova Scotia.
"Pledged Stock": the shares of capital stock listed on Schedule 1
------------- ----------
hereto, together with all stock certificates, options or rights of any
nature whatsoever with respect to the Issuer's Capital Stock that may be
issued or granted by the Issuer to either Pledgor in respect of the Pledged
Stock while this Agreement is in effect.
"Private Exchange": as defined in the Registration Rights Agreement.
----------------
"Private Exchange Notes": as defined in the Registration Rights
----------------------
Agreement.
"Proceeds": all "proceeds" as such term is defined in Section 9-
--------
306(1) of the Uniform Commercial Code in effect in the State of New York on
the date hereof
<PAGE>
4
and, in any event, shall include, without limitation, all dividends or
other income from the Pledged Stock, collections thereon or distributions
with respect thereto.
"Registration Rights Agreement": the Registration Rights Agreement
-----------------------------
dated as of July 23, 1996 between the Company and CIBC Wood Gundy
Securities Corp.
"Secured Obligations": the Senior Secured Obligations and the
-------------------
Subordinated Secured Obligations.
"Secured Parties": collectively, the Senior Secured Parties and the
---------------
Subordinated Secured Parties.
"Securities Act": the Securities Act of 1933, as amended.
--------------
"Senior Secured Obligations": the collective reference to:
--------------------------
(a) unpaid principal of and interest on the Loans and all other
obligations and liabilities of the Borrowers to the Administrative Agents
and the Lenders (including, without limitation, interest accruing at the
then applicable rate provided in the Credit Agreement after the maturity of
the Loans and interest accruing at the then applicable rate provided in the
Credit Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating
to either Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, the Credit
Agreement, this Agreement, the other Loan Documents or any other document
made, delivered or given in connection therewith;
(b) all obligations and liabilities of each Pledgor which may arise
under or in connection with this Agreement or any other Loan Document to
which such Pledgor is a party; and
(c) all obligations of the Borrowers with respect to any Interest Rate
Protection Agreement entered into with any Lender.
"Senior Secured Parties": the Administrative Agents and the Lenders.
----------------------
"Subordinated Secured Obligations": the unpaid principal of and
--------------------------------
interest on the Notes and all other obligations and liabilities of the
Company to the Trustee and the Holders (including, without limitation,
interest accruing at the then applicable rate provided in the Indenture
after the maturity of the Notes and interest accruing at the then
applicable rate provided in the Indenture after the filing of any petition
in
<PAGE>
5
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to either Borrower, whether or not a claim for post-
filing or post-petition interest is allowed in such proceeding), whether
direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in
connection with, the Notes, the Indenture or this Agreement.
"Subordinated Secured Parties": the Trustee and the Holders.
----------------------------
(b) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section and paragraph
references are to this Agreement unless otherwise specified.
(c) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
2. Pledge; Grant of Security Interests. (a) Each Pledgor hereby
-----------------------------------
mortgages, pledges and assigns the Collateral to the Collateral Agent, for the
benefit of the Senior Secured Parties, and grants to the Collateral Agent, for
the benefit of the Senior Secured Parties, a security interest in the
Collateral, in each case as collateral security on a first priority basis for
the prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Senior Secured Obligations.
(b) Each Pledgor hereby mortgages, pledges and assigns the Collateral to
the Collateral Agent, for the benefit of the Subordinated Secured Parties, and
grants to the Collateral Agent, for the benefit of the Subordinated Secured
Parties, a security interest in the Collateral, in each case as collateral
security on a second priority basis for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Subordinated Secured Obligations.
(c) As set forth in the separate granting clauses contained in paragraphs
(a) and (b) above, it is the intent of the parties hereto that this Agreement
shall create two separate and distinct Liens in favor of the Collateral Agent,
the first for the benefit of the Senior Secured Parties and the second for the
benefit of the Subordinated Secured Parties.
3. Subordination of Lien of Subordinated Secured Parties; Bailment. (a)
---------------------------------------------------------------
The Trustee acknowledges and agrees that (1) any interest that it or any Holder
has or may have in the Collateral shall be junior and subordinate to the
interest of the Senior Secured Parties, (2) prior to the date on which the
Senior Secured Obligations have been paid in full and the Commitments shall have
expired or been terminated, it will not take any action to enforce any rights it
may have hereunder, without the prior written consent of the Administrative
Agent; and (3) prior to the date on which the Senior Secured Obligations
<PAGE>
6
have been paid in full, any consent given in accordance with the terms of this
Agreement by the Collateral Agent at the direction of the Administrative Agent
to any amendment, waiver or other modification in respect of the obligations of
each Pledgor hereunder shall be binding upon the Subordinated Secured Parties
with respect to any similar obligations of each Pledgor hereunder as fully as if
such consent had been given by the Subordinated Secured Parties.
(b) The Trustee appoints and authorizes the Collateral Agent, and the
Collateral Agent accepts such appointment and authorization by the Trustee, to
act as the agent of, and bailee for, the Subordinated Secured Parties to hold
for the benefit of the Subordinated Secured Parties those shares of the Pledged
Stock evidenced by certificates, subject, however, to the prior security
interest therein and rights thereto and to the proceeds thereof of the Senior
Secured Parties.
4. Stock Powers. Concurrently with the delivery to the Collateral Agent
------------
of each certificate representing one or more shares of Pledged Stock, each
Pledgor shall deliver an undated stock power, or such other instrument of
transfer as may be reasonably requested by the Collateral Agent, covering such
certificate, duly executed in blank by such Pledgor with, if the Collateral
Agent so requests, signature guaranteed.
5. Representations and Warranties. Each Pledgor hereby represents and
------------------------------
warrants that:
(a) Such Pledgor has the partnership power and authority and the legal
right to execute and deliver, to perform its obligations under, and to grant the
first and second security interests in the Collateral pursuant to, this
Agreement and has taken all necessary action to authorize its execution,
delivery and performance of, and grant each of the security interests in the
Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding obligation of
such Pledgor, enforceable in accordance with its terms , except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
(c) The execution, delivery and performance of this Agreement will not
violate any provision of any Requirement of Law or Contractual Obligation of
such Pledgor and will not result in the creation or imposition of any Lien on
any of the properties or revenues of such Pledgor pursuant to any Requirement of
Law or Contractual Obligation of such Pledgor, except the security interests
created by this Agreement.
<PAGE>
7
(d) No consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority, and no consent of any
other Person (including, without limitation, any stockholder or creditor of such
Pledgor), is required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement.
(e) No litigation, investigation or proceeding of or before any arbitrator
or Governmental Authority is pending or, to the knowledge of such Pledgor,
threatened by or against such Pledgor or against any of its properties or
revenues with respect to this Agreement or any of the transactions contemplated
hereby.
(f) The shares of Pledged Stock constitute 65% of the issued and
outstanding shares of all classes of the Capital Stock of the Issuer.
(g) All the shares of the Pledged Stock have been duly and validly issued
and are fully paid and nonassessable.
(h) Such Pledgor is the record and beneficial owner of, and has good and
marketable title to, the shares of Pledged Stock pledged by such Pledgor, free
of any and all Liens or options in favor of, or claims of, any other Person,
except for the separate and distinct security interests granted to the Senior
Secured Parties, on the one hand, and the Subordinated Secured Parties, on the
other hand, pursuant to this Agreement.
(i) Upon delivery to the Collateral Agent of the stock certificates
evidencing the Pledged Stock and assuming continuous possession by the
Collateral Agent of such certificates, each of the security interests granted
pursuant to this Agreement will constitute a separate, distinct and valid
perfected security interest in the Pledged Stock in favor of the Collateral
Agent, for the benefit of the Senior Secured Parties, on the one hand, and the
Subordinated Secured Parties, on the other hand, enforceable in accordance with
its terms against all creditors of such Pledgor and any Persons purporting to
purchase any shares of Pledged Stock from such Pledgor.
6. Covenants. Each Pledgor covenants and agrees with the Collateral Agent
---------
and the Secured Parties that, from and after the date of this Agreement until
this Agreement is terminated and the security interests created hereby are
released:
(a) If such Pledgor shall, as a result of its ownership of the Pledged
Stock, become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights to Capital Stock, whether in addition to, in substitution of, as a
conversion of, or in exchange for any shares of the Pledged Stock, or otherwise
in respect thereof, such Pledgor shall accept the same as the agent of the
Collateral Agent and the Secured Parties, hold the same in trust for the
Collateral Agent and the Secured Parties
<PAGE>
8
and deliver the same forthwith to the Collateral Agent in the exact form
received, duly indorsed by such Pledgor to the Collateral Agent, if required,
together with an undated stock power, or such other instrument of transfer as
may be reasonably requested by the Collateral Agent, covering such certificate
duly executed in blank by such Pledgor and with, if the Collateral Agent so
requests, signature guaranteed, to be held by the Collateral Agent, subject to
the terms hereof, as additional collateral security for the Secured Obligations.
Any sums paid upon or in respect of the Pledged Stock upon the liquidation or
dissolution of the Issuer shall be paid over to the Collateral Agent to be held
by it hereunder as additional collateral security for the Secured Obligations,
and in case any distribution of capital shall be made on or in respect of the
Pledged Stock or any property shall be distributed upon or with respect to the
Pledged Stock pursuant to the recapitalization or reclassification of the
capital of the Issuer or pursuant to the reorganization thereof, the property so
distributed shall be delivered to the Collateral Agent to be held by it
hereunder as additional collateral security for the Secured Obligations, unless,
in either case, such sums or property are distributed or otherwise paid to the
holders of the equity interests of such Pledgor. Subject to the "unless" clause
at the end of the previous sentence, if any sums of money or property so paid or
distributed in respect of the Pledged Stock shall be received by such Pledgor,
such Pledgor shall, until such money or property is paid or delivered to the
Collateral Agent, hold such money or property in trust for the Secured Parties,
segregated from other funds of such Pledgor, as additional collateral security
for the Secured Obligations.
(b) Without the prior written consent of the Administrative Agent, such
Pledgor will not (1) vote to enable, or take any other action to permit, the
Issuer to issue any stock or other equity securities of any nature or to issue
any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of the Issuer
except as permitted in the Credit Agreement, (2) sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect to, the
Collateral except as permitted in the Credit Agreement, (3) create, incur or
permit to exist any Lien or option in favor of, or any claim of any Person with
respect to, any of the Collateral, or any interest therein, except for the
security interests created by this Agreement or (4) enter into any agreement or
undertaking restricting the right or ability of such Pledgor or the Collateral
Agent to sell, assign or transfer any of the Collateral except as provided for
in this Agreement, the Credit Agreement and the Indenture.
(c) Such Pledgor shall not take any action inconsistent with maintaining
(i) the security interest created by Paragraph 2(a) of this Agreement as a
first, perfected security interest and (ii) the security interest created by
Paragraph 2(b) of this Agreement as a second, perfected security interest and,
in each case of clauses (i) and (ii), shall defend such security interest
against claims and demands of all Persons whomsoever.
(d) At any time and from time to time, upon the written request of the
Collateral Agent, and at the sole expense of such Pledgor, such Pledgor will
promptly and duly
<PAGE>
9
execute and deliver such further instruments and documents and take such further
actions as the Collateral Agent may reasonably request for the purposes of
obtaining or preserving the full benefits of this Agreement and of the rights
and powers herein granted. If any amount payable under or in connection with
any of the Collateral shall be or become evidenced by any promissory note, other
instrument or chattel paper, such note, instrument or chattel paper shall be
immediately delivered to the Collateral Agent, duly endorsed in a manner
satisfactory to the Collateral Agent, to be held as Collateral pursuant to this
Agreement.
(e) Such Pledgor shall pay, and save the Collateral Agent and the Secured
Parties harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all stamp, excise, sales or other similar
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
7. Cash Dividends; Voting Rights. Unless an Event of Default shall have
-----------------------------
occurred and be continuing and the Collateral Agent shall have given notice to
the Pledgors of the Collateral Agent's intent to exercise its corresponding
rights pursuant to Section 9 below, each Pledgor shall be permitted to receive
all cash dividends or other distributions paid in the normal course of business
of the Issuer, to the extent permitted in the Credit Agreement, in respect of
the Pledged Stock and to exercise all voting and corporate rights with respect
to the Pledged Stock; provided, however, that no vote shall be cast or corporate
-------- -------
right exercised or other action taken which, in the Collateral Agent's
reasonable judgment, would impair the Pledged Stock or which would be
inconsistent with or result in any violation of any provision of the Credit
Agreement, any other Loan Document, any Notes, the Indenture or this Agreement.
8. Rights of the Secured Parties and the Collateral Agent. (a) All money
------------------------------------------------------
Proceeds received by the Collateral Agent hereunder shall be held by the
Collateral Agent for the benefit of the Secured Parties in a Collateral Account.
All Proceeds while held by the Collateral Agent in a Collateral Account (or by
each Pledgor in trust for the Collateral Agent and the Secured Parties) shall
continue to be held as collateral security for all the Secured Obligations and
shall not constitute payment thereof until applied as provided in Paragraph
10(c).
(b) If an Event of Default shall occur and be continuing and the
Collateral Agent shall give notice of its intent to exercise any of such rights
to each Pledgor (1) the Collateral Agent shall have the right to receive any and
all cash dividends paid in respect of the Pledged Stock and make application
thereof to the Secured Obligations in the order provided in Paragraph 10(c), and
(2) all shares of the Pledged Stock shall be registered in the name of the
Collateral Agent or its nominee, and the Collateral Agent or its nominee may
thereafter exercise (A) all voting, corporate and other rights pertaining to
such shares of the Pledged Stock at any meeting of shareholders of the Issuer or
otherwise and (B) any and all rights of conversion, exchange, subscription and
any other rights, privileges or
<PAGE>
10
options pertaining to such shares of the Pledged Stock as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of the Issuer, or upon the exercise by either Pledgor or the
Collateral Agent of any right, privilege or option pertaining to such shares of
the Pledged Stock, and in connection therewith, the right to deposit and deliver
any and all of the Pledged Stock with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as the
Collateral Agent may determine), all without liability except to account for
property actually received by it, but the Collateral Agent shall have no duty to
either Pledgee to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
9. Remedies. (a) If an Event of Default shall have occurred and be
--------
continuing, at any time at the Collateral Agent's election, the Collateral Agent
may apply all or any part of Proceeds held in any Collateral Account in payment
of the Secured Obligations in such order as provided in Paragraph 10(c).
(b) If an Event of Default shall have occurred and be continuing, the
Collateral Agent, on behalf of the Secured Parties, may exercise, in addition to
all other rights and remedies granted in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party with respect to the
Collateral under the Code. Without limiting the generality of the foregoing,
the Collateral Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon either Pledgor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
assign, give option or options to purchase or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, in the over-the-counter
market, at any exchange, broker's board or office of the Collateral Agent or any
Lender or Holder or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. The Collateral Agent or
any other Secured Party shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in either Pledgor, which right or equity is hereby waived
or released. The Collateral Agent shall apply any Proceeds from time to time
held by it and the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred in respect thereof or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Collateral Agent and the Secured Parties hereunder, including,
without limitation, reasonable attorneys' fees and disbursements of
<PAGE>
11
counsel to the Collateral Agent, to the payment in whole or in part of the
Secured Obligations, in the order provided in Paragraph 10(c), and only after
such application and after the payment by the Collateral Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Collateral Agent account for the surplus, if
any, to the Pledgors. To the extent permitted by applicable law, each Pledgor
waives all claims, damages and demands it may acquire against the Collateral
Agent or any other Secured Party arising out of the exercise by them of any
rights hereunder. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other disposition.
10. Rights in Collateral; Application of Payments and Proceeds. (a)
----------------------------------------------------------
Notwithstanding anything to the contrary contained in any agreement, document or
instrument in favor of the Subordinated Secured Parties and irrespective of:
(1) the time, order or method of attachment or perfection of the
security interests created hereby,
(2) the time or order of filing or recording of financing statements
or other documents filed or recorded to perfect security interests in any
Collateral,
(3) anything contained in any filing or agreement to which the Senior
Secured Parties or the Subordinated Secured Parties now or hereafter may be
a party, and
(4) the rules for determining priority under the Code or any other
law governing the relative priorities of secured creditors,
any security interest in the Collateral in favor of the Senior Secured Parties
has and shall have priority, to the extent of any unpaid Senior Secured
Obligations, over any security interest in such Collateral in favor of the
Subordinated Secured Parties.
(b) In exercising rights and remedies with respect to the Collateral, the
Collateral Agent may enforce the provisions hereof and exercise remedies
hereunder, all in such order and in such manner as the Senior Secured Parties
may determine in the exercise of their sole business judgment. Such exercise
and enforcement shall include, without limitation, the rights to collect, sell,
dispose of or otherwise realize upon all or any part of the Collateral, to incur
expenses in connection with such collection, sale, disposition or other
realization and to exercise all the rights and remedies of a secured lender
under the Code of any applicable jurisdiction. The Subordinated Secured Parties
hereby (1) waive any right that they may have (whether by contract, by law or
otherwise) to require the Collateral Agent to give notice of any collection,
sale, disposition or other realization of or upon any or all of the Collateral
contemplated by this Agreement or any such right the Subordinated
<PAGE>
12
Secured Parties may have to object to or otherwise contest any such collection,
sale, disposition or other realization of or upon any or all of the Collateral
by the Senior Secured Parties (including, without limitation, any requirement
that the Collateral Agent foreclose upon such Collateral under applicable law)
and (2) agrees not to contest or otherwise challenge any such collection, sale,
disposition or other realization of or upon all or any of the Collateral or to
assert any claim or defense that any such collection, sale, disposition or other
realization of or upon all or any part of the Collateral was not commercially
reasonable or otherwise failed to comply in any respect with applicable law.
(c) Any money, property or securities realized upon the sale, disposition
or other realization by the Collateral Agent or the Subordinated Secured
Parties, as the case may be, upon all or any part of the Collateral (including,
without limitation, any payment or distribution of assets of either Pledgor
consisting of, or in respect of, Collateral, whether in cash, property or
securities during the continuance of an Insolvency Event with respect to such
Pledgor) (collectively, "Realizations"), shall be applied in the following
------------
order:
(1) First, to the payment in full of all reasonable costs and
-----
expenses (including, without limitation, attorneys' reasonable fees and
disbursements) paid or incurred by the Collateral Agent in connection with
the such Realization or the protection of its rights and interests in the
Collateral;
(2) Second, to the Administrative Agent to be applied to the payment
------
in full of all Senior Secured Obligations then due and payable in such
order as the Administrative Agent may elect in its sole discretion;
(3) Third, to the Trustee to be applied to the payment in full of all
-----
Subordinated Secured Obligations then due and payable in such order as the
Trustee may elect in its sole discretion; and
(4) Fourth, to pay to the applicable Pledgor, or its representative
------
or as a court of competent jurisdiction may direct, any surplus then
remaining.
(d) Prior to the indefeasible payment in full of the Senior Secured
Obligations and the termination or expiration of the Commitments under the
Credit Agreement, the Subordinated Secured Parties shall not (1) enforce or
apply any security interest in all or any of the Collateral, (2) collect or
receive any proceeds of any of the Collateral or otherwise enforce or apply any
security interest in the proceeds of any of the Collateral; or (3) in any other
manner interfere with the security interest granted in favor of the Senior
Secured Parties in any of the Collateral (or the proceeds thereof). In
addition, the Subordinated Secured Parties hereby (x) agree not to assert any
claim for marshalling; (y) consent to the collection, sale, disposition or other
realization of or upon all or any of the Collateral by the Collateral Agent free
of any security interest therein in favor of the Subordinated Secured Parties;
and (z) at the sole cost and expense of the Pledgors, agree to
<PAGE>
13
execute all such releases and other documents that the Administrative Agent may
reasonably request in writing to facilitate the collection, sale, disposition or
other realization of or upon any or all of the Collateral by the Collateral
Agent (including, without limitation, the termination of any security interests
in any of the Collateral in favor of the Subordinated Secured Parties
concurrently with such sale, disposition or other realization).
(e) If any payment or distribution, whether consisting of money, property
or securities, from any Realizations is collected or received by the
Subordinated Secured Parties in respect of the Subordinated Secured Obligations
in violation of Paragraph 10(d), the Subordinated Secured Parties shall
forthwith deliver the same to the Collateral Agent, in the form received, duly
indorsed to the Collateral Agent, if required, to be applied to the payment or
prepayment of the Senior Secured Obligations until the Senior Secured
Obligations are paid in full. Until so delivered, such payment or distribution
shall be held in trust by the Subordinated Secured Parties as the property of
the Senior Secured Paries, segregated from other funds and property held by the
Subordinated Secured Parties.
11. Release of Pledged Stock. The Collateral Agent agrees that it will
------------------------
not release or otherwise dispose of any of the Pledged Stock except (a) to the
Trustee in accordance with the terms hereof, unless instructed by the Trustee to
the contrary, or (b) in the exercise of its remedies under the terms hereof or
(c) to the respective Pledgor upon satisfaction of all Secured Obligations.
12. Obligations of the Collateral Agent. (a) Unless the Collateral Agent
-----------------------------------
has theretofore received a written notice from the Trustee to the effect that
the Subordinated Secured Obligations have been paid in full, if the Collateral
Agent shall have resigned as collateral agent hereunder, not later than the
tenth business day following the day on which the Senior Secured Obligations
have been paid in full and the Commitments shall have expired or terminated, the
Collateral Agent will deliver at the cost and expense of the Pledgors, directly
to the successor collateral agent appointed in accordance with Section 15(h) or,
if prior to such tenth business day the Collateral Agent shall not have received
notification of the identity of such successor collateral agent, to the Trustee,
all the certificates representing the Pledged Stock then remaining in the
possession of the Collateral Agent, together with any necessary instruments of
assignment or transfer pertaining thereto. Each Pledgor agrees to give written
notice to the Trustee of the payment in full of the Senior Secured Obligations
and the termination or expiration of the Commitments within three business days
thereof, and, after receipt of such notice, the Subordinated Secured Parties
agree to promptly give written notice to the Collateral Agent requesting
delivery of the Pledged Stock. In no event shall the Collateral Agent relinquish
control over such certificates representing the Pledged Stock after the Senior
Secured Obligations have been paid in full and the Commitments under the Credit
Agreement shall have terminated or expired, except as set forth in this Section
or Section 11(c).
<PAGE>
14
(b) In taking any action hereunder (including the giving of consents and
waivers hereunder) prior to the indefeasible payment in full of the Senior
Secured Obligations and the termination or expiration of the Commitments, the
Collateral Agent shall not be obligated to consider the interests of the
Subordinated Secured Parties except as set forth in Paragraph 12(a) or Paragraph
21.
13. Dispositions of Collateral. Notwithstanding any provision to the
--------------------------
contrary contained in any agreement, document or instrument in favor of the
Subordinated Secured Parties or to which any of the Subordinated Secured Parties
is a party,
(a) upon the occurrence of any sale, lease, transfer or other
disposition of any of the Collateral (a "Disposition"), as between the
-----------
Senior Secured Parties and the Subordinated Secured Parties, until the
Senior Secured Obligations have been paid in full and the Commitment shall
have expired or been terminated, all Collateral, including all proceeds
thereof and all prepayments or distributions in respect thereof, shall be
distributed or applied or paid to the Administrative Agent, acting on
behalf of the Senior Secured Parties, for application to the Senior Secured
Obligations without obtaining any further consent or agreement of the
Subordinated Secured Parties and in any manner as the Administrative Agent
may determine, and the Subordinated Secured Parties shall be deemed to have
consented to such Disposition and no further consent thereto or notice or
accounting in respect thereof on the part of any such Person shall be
required, and until the Senior Secured Obligations are paid in full and the
Commitments shall have expired or been terminated, none of such Collateral
shall be distributed or paid to (or retained by) the Subordinated Secured
Parties for application to the Subordinated Secured Obligations, and the
Subordinated Secured Parties shall not have any right to restrict or
permit, or approve or disapprove, any Disposition of all or any portion or
item of the Collateral. If the Collateral Agent is in possession of any
proceeds from any Disposition of any Collateral following payment in full
of all Senior Secured Obligations and the termination or expiration of all
Commitments, the Collateral Agent shall deliver such remaining proceeds to
the Trustee if any Subordinated Secured Obligations shall be then
outstanding (which each Pledgor hereby irrevocably consents to) or to each
Pledgor or its successors or assigns if the Trustee shall agree in writing,
or to whomever may be lawfully entrusted to receive the same as a court of
competent jurisdiction shall so direct; and
(b) the Subordinated Secured Parties will, immediately upon the
request of the Administrative Agent acting on behalf of the Lenders,
release or otherwise terminate and discharge the subordinated lien in any
Collateral to the extent such Collateral is the subject of a Disposition,
and will deliver to the Collateral Agent all documents and instruments
reasonably deemed by the Collateral Agent to be necessary or appropriate in
connection therewith. In the event that the Collateral Agent, acting on
behalf of the Senior Secured Parties, settles, adjusts or
<PAGE>
15
compromises any claim in respect of all or any portion or item of
Collateral, including, without limitation, any settlement, adjustment or
compromise made in connection with any bankruptcy, reorganization, or
insolvency proceeding by or against either Pledgor or Subsidiary of either
of them, or accepts or is required to accept substitute or replacement
collateral in exchange for or in lieu of or in full or partial settlement
of any Collateral, the Subordinated Secured Parties shall be bound by any
such settlement, adjustment or compromise, and shall, immediately upon the
request of the Collateral Agent, confirm its consent to the same and
release any claim that the Subordinated Secured Parties might otherwise
have in respect of such Collateral; provided that the Subordinated Secured
Parties shall be granted a lien and security interest in any such
substitute or replacement Collateral, which lien and security interest
shall constitute a subordinated lien.
14. Irrevocable Authorization and Instruction to Issuer. Each Pledgor
---------------------------------------------------
hereby authorizes and instructs the Issuer to comply with any instruction
received by it from the Collateral Agent in writing that (a) states that an
Event of Default has occurred and is continuing and (b) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from either Pledgor, and such Pledgor agrees that the Issuer shall
be fully protected in so complying.
15. The Collateral Agent. (a) Appointment. Each Secured Party hereby
-------------------- -----------
irrevocably designates and appoints the Collateral Agent as the agent of such
Secured Party under this Agreement, and each such Secured Party irrevocably
authorizes the Collateral Agent to take such action on its behalf under the
provisions of this Agreement and to exercise such powers and perform such duties
as are expressly delegated to the Collateral Agent by the terms of this
Agreement, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Collateral Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any other Secured
Party, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Collateral Agent.
(b) Delegation of Duties. The Collateral Agent may execute any of its
--------------------
duties under this Agreement by or through agents or attorneys-in-fact and shall
be entitled to advice of counsel concerning all matters pertaining to such
duties. The Collateral Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys in-fact selected by it with reasonable
care.
(c) Exculpatory Provisions. None of the Collateral Agent or any of its
----------------------
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(1) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement (except for its or such
Person's own gross negligence or willful misconduct) or (2) responsible in any
manner to any of the Secured Parties for any recitals, statements,
<PAGE>
16
representations or warranties made by either Pledgor or any officer thereof
contained in this Agreement or in any certificate, report, statement or other
document referred to or provided for in, or received by such Collateral Agent
under or in connection with, this Agreement or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
for any failure of either Pledgor to perform its obligations hereunder. The
Collateral Agent shall not be under any obligation to any other Secured Party to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of either Pledgor.
(d) Reliance by Collateral Agent. The Collateral Agent shall be entitled
----------------------------
to rely, and shall be fully protected in relying, upon any Note, writing,
resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrowers), independent accountants and other
experts selected by the Collateral Agent. The Collateral Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with such Collateral Agent. The Collateral Agent shall be fully justified
in failing or refusing to take any action under this Agreement unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Senior
Secured Parties and/or the Subordinated Secured Parties against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take such action. The Collateral Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Secured Parties and all future holders of the Loans.
(e) Notice of Default. The Collateral Agent shall not be deemed to have
-----------------
knowledge or notice of the occurrence of any Default or Event of Default unless
the Collateral Agent has received notice from a Lender, the Trustee (if the
Senior Secured Obligations have been paid in full and the Commitments shall have
expired or been terminated) or the Company referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". In the event that the Collateral Agent receives such a
notice, the Collateral Agent shall give notice thereof to the Pledgors and the
Subordinated Secured Parties. The Collateral Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Lenders or by the Trustee (if the Senior Secured Obligations have
been paid in full and the Commitments shall have expired or been terminated);
provided that unless and until the Collateral Agent shall have received such
- --------
directions, the Collateral Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as they shall deem advisable and in the best interests of the
Senior Secured Parties.
<PAGE>
17
(f) Non-Reliance on Collateral Agent. Each other Secured Party expressly
--------------------------------
acknowledges that none of the Collateral Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Collateral Agent
hereinafter taken shall be deemed to constitute any representation or warranty
by the Collateral Agent to any Secured Party. Except for notices, reports and
other documents expressly required to be furnished to the Secured Parties by the
Collateral Agent hereunder, the Collateral Agent shall not have any duty or
responsibility to provide any other Secured Party with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of either Pledgor which may come
into the possession of the Collateral Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
(g) Collateral Agent in Its Individual Capacity. The Collateral Agent and
-------------------------------------------
its Affiliates may make loans to, accept deposits from and generally engage in
any kind of business with either Pledgor as though the Collateral Agent were not
the Collateral Agent hereunder.
(h) Successor Collateral Agent. The Collateral Agent may resign as
--------------------------
Collateral Agent upon 10 days' notice to the Lenders. If the Collateral Agent
shall resign as Collateral Agent under this Agreement, then the Required Lenders
shall appoint from among the Lenders a successor Collateral Agent, which
successor agent shall succeed to the rights, powers and duties of such
Collateral Agent hereunder. Upon the payment in full of the Senior Secured
Obligations and the termination or expiration of the Commitments, the Collateral
Agent shall automatically be deemed to have resigned as Collateral Agent under
this Agreement, and the Trustee shall appoint a successor collateral agent for
the Subordinated Secured Parties within 10 days after its receipt of notice from
the Collateral Agent of such resignation or, in the absence of such appointment,
the Trustee shall automatically be appointed as successor collateral agent on
the tenth day after its receipt of such notice, which successor collateral agent
(whether it shall be the Trustee or any other Person) shall succeed to the
rights, powers and duties of such Collateral Agent hereunder. Effective upon any
such appointment, the term "Collateral Agent" shall mean such successor agent,
and such former Collateral Agent's rights, powers and duties as Collateral Agent
shall be terminated, without any other or further act or deed on the part of
such former Collateral Agent or any of the parties to this Agreement or any
Secured Party. After any retiring Collateral Agent's resignation as Collateral
Agent, the provisions of this Section 15 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Collateral Agent under
this Agreement. Anything in this Agreement to the contrary notwithstanding, in
the event of an automatic resignation of the Collateral Agent in the
circumstances described in the third sentence of this paragraph, such
resignation shall become effective upon the appointment of a successor
collateral agent in accordance with the provisions of such sentence, and,
thereafter, the sole obligation of the Collateral Agent hereunder shall be to
make delivery of the certificates representing the Pledged Stock to such
successor collateral agent or, if the Collateral Agent shall not have received
from the
<PAGE>
18
Trustee a written notice of the appointment of a successor collateral agent
other than the Trustee, to the Trustee.
16. Collateral Agent's Appointment as Attorney-in-Fact. (a) Each Pledgor
--------------------------------------------------
hereby irrevocably constitutes and appoints the Collateral Agent and any officer
or agent of the Collateral Agent, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of such Pledgor and in the name of such Pledgor or in the
Collateral Agent's own name, from time to time in the Collateral Agent's
discretion, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, including, without limitation, any financing statements,
endorsements, assignments or other instruments of transfer.
(b) Each Pledgor hereby ratifies all that said attorneys shall lawfully do
or cause to be done pursuant to the power of attorney granted in paragraph
16(a). All powers, authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this Agreement is terminated
and the security interests created hereby are released.
17. Duty of Collateral Agent. The Collateral Agent's sole duty with
------------------------
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the Code or otherwise, shall be to
deal with it in the same manner as the Collateral Agent deals with similar
securities and property for its own account, except that the Collateral Agent
shall have no obligation to invest funds held in any Collateral Account and may
hold the same as demand deposits. Neither the Collateral Agent, any Lender, the
Trustee, any Holder nor any of their respective directors, officers, employees
or agents shall be liable for failure to demand, collect or realize upon any of
the Collateral or for any delay in doing so or shall be under any obligation to
sell or otherwise dispose of any Collateral upon the request of either Pledgor
or any other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof.
18. Execution of Financing Statements. Pursuant to Section 9-402 of the
---------------------------------
Code, each Pledgor authorizes the Collateral Agent to file financing statements
with respect to the Collateral without the signature of such Pledgor in such
form and in such filing offices as the Collateral Agent reasonably determines
appropriate to perfect the security interests of the Collateral Agent under this
Agreement. A carbon, photographic or other reproduction of this Agreement shall
be sufficient as a financing statement for filing in any jurisdiction.
19. Notices. All notices, requests and demands to or upon the Company,
-------
either Pledgee or either Pledgor to be effective shall be in writing (or by
telex, fax or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (1) when delivered by hand or (2) if
given by mail, two days after being deposited in
<PAGE>
19
the mails by certified mail, return receipt requested, or (3) if by telex, fax
or similar electronic transfer, when sent and receipt has been confirmed,
addressed to such party at its address or transmission number for notices
provided under its signature below. Any party hereto may change their addresses
and transmission numbers for notices by notice in the manner provided in this
Section.
20. Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
21. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of
-----------------------------------------------------
the terms or provisions of this Agreement may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by each Pledgor,
the Collateral Agent and, if any Senior Secured Obligations remain outstanding,
the Administrative Agent, provided that any provision of this Agreement may be
--------
waived by the Collateral Agent and, if any Senior Secured Obligations remain
outstanding, the Administrative Agent in a letter or agreement executed by the
Collateral Agent or by telex or facsimile transmission from the Collateral Agent
and, if any Senior Secured Obligations remain outstanding, the Administrative
Agent and, provided, further, that no such waiver, amendment, supplement or
-------- -------
other modification which materially and adversely affects any Subordinated
Secured Party shall be effective unless it shall have been consented to by the
Trustee.
(b) Neither the Collateral Agent nor any Secured Party shall by any act
(except by a written instrument pursuant to Paragraph 21(a) hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Collateral Agent or any Secured
Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Collateral Agent or any
Secured Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Collateral Agent or such
Secured Party would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
22. Section Headings. The section headings used in this Agreement are for
----------------
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
<PAGE>
20
23. Successors and Assigns. This Agreement shall be binding upon the
----------------------
successors and assigns of the Company and shall inure to the benefit of the
Collateral Agent and the Secured Parties and their successors and assigns.
24. Governing Law. This Agreement shall be governed by, and construed and
-------------
interpreted in accordance with, the law of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their respective officers, thereunto duly authorized as of the date
first above written.
PLC COMMAND I, L.P., as Pledgor
By PLC COMMAND I, INC., its general partner
By: ______________________________
Title:
Address for Notices:
PLC Command I, L.P.
631 Park Avenue
King of Prussia, PA 19406
Attention: General Partner
Fax: (610) 992-8394
PLC COMMAND II, L.P., as Pledgor
By PLC COMMAND II, INC., its general partner
By: ____________________________
Title:
Address for Notices:
PLC Command II, L.P.
631 Park Avenue
King of Prussia, PA 19406
Attention: General Partner
Fax: (610) 992-8394
<PAGE>
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY,
as Collateral Agent and Administrative Agent
By: ____________________________
Title:
Address for Notices:
425 Lexington Avenue
New York, NY 10017
Attention: Aimee Evans
Fax: (212) 856-3763
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By: ____________________________
Title:
Address for Notices:
114 West 47th Street
15th Floor
New York, NY 10036-1532
Attention: James McGinley
Fax: (212) 852-1625
<PAGE>
ACKNOWLEDGEMENT AND CONSENT/1/
The undersigned hereby acknowledges receipt of a copy of the Pledge and
Intercreditor Agreement dated August __, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Pledge Agreement"), made by and among
----------------
(a) PLC COMMAND I L.P., PLC COMMAND II L.P., (b) CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY, (together with its successors in such capacity, the
"Collateral Agent"), (c) CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as
----------------
administrative agent (in such capacity, the "Administrative Agent") and (d)
--------------------
UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking corporation, as
trustee (together with its successors in its capacity, the "Trustee"). The
-------
undersigned agrees for the benefit of the Collateral Agent and the Secured
Parties (as defined in the Pledge Agreement) as follows:
1. The undersigned will be bound by the terms of the Pledge Agreement and
will comply with such terms insofar as such terms are applicable to the
undersigned.
2. The undersigned will notify the Collateral Agent promptly in writing
of the occurrence of any of the events described in Paragraph 6(a) of the Pledge
Agreement.
3. The only evidence which will be required by the Company to prove the
Collateral Agent's right to a transfer of the Pledged Collateral will be the
certificates pertaining thereto and an instrument of transfer as contemplated in
Sections 14 and 15 of the Company's Memorandum of Association
PIERCE LEAHY COMMAND COMPANY
By__________________________________
Title_______________________________
Address for Notices:
____________________________________
____________________________________
Attention:__________________________
Fax:________________________________
________________________
/1/ Execution and delivery of this Acknowledgement will be included among the
conditions to the initial borrowing specified in the Credit Agreement.
<PAGE>
EXHIBIT 10.5
MOORE CORPORATION LIMITED
- and -
PIERCE LEAHY CORP.
- --------------------------------------------------------------------------------
SHARE PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
September 30, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE 1.
INTERPRETATION
1.1. Definitions.................................................. 1
1.2. Schedules.................................................... 5
1.3. Headings and Table of Contents............................... 5
1.4. Gender and Number............................................ 5
1.5. Currency..................................................... 6
1.6. Generally Accepted Accounting Principles..................... 6
1.7. Invalidity of Provisions..................................... 6
1.8. Entire Agreement............................................. 6
1.9. Waiver, Amendment............................................ 7
1.10. Governing Law................................................ 7
ARTICLE 2.
PURCHASE AND SALE
2.1. Agreement to Purchase and Sell and Purchase Price.............. 7
2.2. Payment of Purchase Price and Delivery of Share Certificates... 7
2.3. Deposit........................................................ 8
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
3.1. By The Vendor................................................ 8
3.1.1. Incorporation and Status of the Vendor....................... 8
3.1.2. Corporate Power of the Vendor and Due Authorization.......... 8
3.1.3. Incorporation and Status of the Corporation.................. 8
3.1.4. Corporate Power of the Corporation........................... 9
3.1.5. Capital of the Corporation................................... 9
3.1.6. No Subsidiaries.............................................. 9
3.1.7. No Other Agreements to Purchase.............................. 9
3.1.8. No Obligations to Issue Securities........................... 9
3.1.9. Title to, and Right to Sell, Purchased Shares................ 10
3.1.10. No Contravention............................................. 10
3.1.11. Liabilities and Guarantees................................... 10
3.1.12. Absence of Unusual Transactions and Events................... 11
3.1.13. Material Contracts........................................... 13
<PAGE>
3.1.14. Software, Distributorship and Franchise Agreements....... 13
3.1.15. Employment Matters....................................... 13
3.1.16. Employees................................................ 14
3.1.17. No Default Under Agreements.............................. 14
3.1.18. Owned and Leased Property................................ 14
3.1.19. Title to Real Property................................... 15
3.1.20. Matters Relating to Real Property........................ 15
3.1.21. Title to Assets Other Than Real Property................. 17
3.1.22. Tax Matters.............................................. 17
3.1.23. Pension Plans............................................ 18
3.1.24. Insurance................................................ 18
3.1.25. Intellectual Property.................................... 18
3.1.26. Litigation and Other Proceedings......................... 19
3.1.27. Corporate Records........................................ 19
3.1.28. Books of Account......................................... 19
3.1.29. Bank Accounts, etc....................................... 20
3.1.30. Vendor Resident of Canada................................ 20
3.1.31. Environmental Issues..................................... 20
3.1.32. Compliance with Laws..................................... 20
3.1.33. Non-Arm's Length Transactions............................ 20
3.1.34. Correct and Complete Copies.............................. 20
3.1.35. Consents and Approvals................................... 21
3.1.36. Financial Statements..................................... 21
3.1.37. Termination of Contracts................................. 21
3.1.38. Full Disclosure.......................................... 22
3.2. By the Purchaser......................................... 22
3.2.1. Incorporation and Status of the Purchaser................ 22
3.2.2. Corporate Power of the Purchaser and Due Authorization... 22
3.2.3. Discussions with Franchises.............................. 22
3.2.4. Bank Financing........................................... 23
3.3. No Finder's Fees......................................... 23
3.4. Survival of Covenants, Representations and Warranties.... 23
ARTICLE 4.
CONDITIONS
4.1. Conditions for the Benefit of the Purchaser.............. 24
<PAGE>
4.1.1. Accuracy of Representations of Vendor and
Compliance With Covenants................................ 24
4.1.2. Closing Documents and Proceedings........................ 24
4.1.3. Opinion of Vendor's Counsel.............................. 25
4.1.4. Bank Approvals........................................... 25
4.1.5. Other Consents and Approvals............................. 25
4.1.6. Gordon Joyce Employment Agreement........................ 25
4.1.7. Computerized Systems Software............................ 25
4.1.8. Environmental Conditions or Liabilities.................. 26
4.1.9. Transfer of Real Property................................ 26
4.1.10. No Action or Proceeding.................................. 26
4.2 Conditions for the Benefit of the Vendor................. 26
4.2.1. Accuracy of Representations of Purchaser and Compliance
With Covenants........................................... 27
4.2.2. Opinion of Purchaser's Counsel........................... 27
4.2.3. Guarantees............................................... 28
4.2.4. Gordon Joyce Employment Agreement........................ 28
4.2.5. No Action or Proceeding.................................. 28
ARTICLE 5.
ADDITIONAL AGREEMENTS OF THE PARTIES
5.1. Access to Information.................................... 29
5.2. Conduct of Business Until Time of Closing................ 29
5.3. Negative Covenant........................................ 30
5.4. Purchaser's Covenant..................................... 30
5.5. Corporate Action, Resignations and Releases.............. 31
5.6. Satisfaction of Conditions, Other Matters................ 31
5.7. Delivery of Books and Records............................ 32
5.8. Cooperation.............................................. 32
5.9. Repayment of Indebtedness................................ 32
5.10. Non-Competition.......................................... 32
5.11. Non-Solicitation......................................... 34
5.12. Termination of Franchise Agreements...................... 35
5.13. Environmental Matters.................................... 35
5.14. Reports Prior to Closing................................. 36
<PAGE>
ARTICLE 6.
INDEMNIFICATION
6.1. Indemnification by the Vendor............................ 36
6.2. Notice of Claim.......................................... 38
6.3. Procedure for Indemnification............................ 38
6.3.1. Purchaser's Claims....................................... 38
6.3.2. Third Party Claims....................................... 39
6.4. Additional Rules and Procedures.......................... 40
6.5. Indemnification by the Purchaser......................... 41
ARTICLE 7.
CLOSING
7.1. Location and Time of the Closing......................... 42
7.2. Deliveries at the Closing................................ 42
ARTICLE 8.
GENERAL MATTERS
8.1. Confidentiality.......................................... 43
8.2. Expenses................................................. 43
8.3. Assignment............................................... 44
8.4. Notices.................................................. 44
8.5. Public Announcements..................................... 46
8.6. Reasonable Commercial Efforts............................ 46
8.7. Time of Essence.......................................... 47
8.8. Further Assurances....................................... 47
8.9. Counterparts............................................. 48
<PAGE>
SHARE PURCHASE AGREEMENT
THIS AGREEMENT is made on the 30th day of September, 1995
BETWEEN:
MOORE CORPORATION LIMITED, a corporation
incorporated under the laws of the Province of
Ontario, Canada
(the "Vendor")
- and -
PIERCE LEAHY CORP., a corporation incorporated
under the laws of the State of New York, United
States
(the "Purchaser")
RECITALS:
A. The Vendor wishes to sell all of the shares it owns in the capital of
the Corporation and the Purchaser, after inquiry, wishes to purchase
such shares, on and subject to the terms and conditions of this
Agreement;
NOW THEREFORE in consideration of the mutual covenants and
agreements contained in this Agreement and other good and valuable consideration
(the receipt and sufficiency of which are hereby acknowledged), the parties
hereto agree as follows:
ARTICLE 1.
----------
INTERPRETATION
--------------
1.1. Definitions
-----------
1.1.1. In this Agreement,
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"affiliate" has the meaning attributed to such term in the Business Corporations
Act (Ontario) as of the date hereof;
"Agreement" means this agreement and all schedules attached to this agreement,
in each case as they may be amended or supplemented from time to time, and the
expressions "hereof", "herein", "hereto", "hereunder", "hereby" and similar
expressions refer to this agreement; and unless otherwise indicated, references
to Articles and sections are to Articles and sections in this agreement;
"Business" means all businesses presently carried on by the Corporation;
"Business Day" means any day, other than Saturday, Sunday or any statutory
holiday in the Province of Ontario;
"Charge" means any security interest, lien, charge, pledge, encumbrance,
mortgage, adverse claim or title retention agreement of any nature or kind;
"Claim" has the meaning attributed to such term in section 6.2;
"Closing" means the completion of the sale and purchase of the Purchased Shares
pursuant to this Agreement at the Time of Closing;
"Closing Date" means October 26, 1995 provided that if the Closing shall not
occur on such date (i) the Closing shall be deferred to a later date agreed to
in writing by the parties; and (ii) failing the agreement in writing of the
parties, the closing date shall be October 31, 1995;
"Corporation" means Command Records Services Limited, a corporation incorporated
under the laws of Ontario;
"Financial Statements" means the balance sheet of the Corporation as at June 30,
1995 and December 31, 1994 and income statements for each of the six months
ended June 30,
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1995 and for the year ended December 31, 1994, including the notes thereto,
attached as Schedule A;
"Financial Statements Date" means June 30, 1995;
"Franchisees" has the meaning attributed to such term in section 3.2.3;
"Intellectual Property" means trade marks and trade mark applications, trade
names, certification marks, patents and patent applications, copyrights, know-
how, formulae, processes, inventions, technical expertise, research data, trade
secrets, industrial designs and the other similar property, whether registered
or unregistered;
"Leased Property" has the meaning attributed to such term in section 3.1.18;
"Leases" has the meaning attributed to such term in section 3.1.20.8;
"Person" means any individual, partnership, limited partnership, joint venture,
syndicate, sole proprietorship, company or corporation with or without share
capital, unincorporated association, trust, trustee, executor, administrator or
other legal personal representative, regulatory body or agency, government or
governmental agency, authority or entity however designated or constituted;
"Purchase Price" has the meaning attributed to such term in section 2.1;
"Purchased Shares" has the meaning attributed to such term in section 2.1;
"Purchaser's Claim" has the meaning attributed to such term in section 6.2;
"Purchaser's Counsel" means the firm of Cozen and O'Connor of Philadelphia,
Pennsylvania, or such other counsel as the Purchaser may appoint with respect to
this Agreement and the matters contemplated hereby;
"Real Property" has the meaning attributed to such term in section 3.1.18;
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"subsidiaries" has the meaning attributed to such term in the Business
Corporations Act (Ontario) as of the date hereof;
"Tax Reassessment Period" has the meaning attributed to such term in section
3.4;
"Third Party" has the meaning attributed to such term in section 6.4.3;
"Third Party Claim" has the meaning attributed to such term in section 6.2;
"Time of Closing" means 10:00 a.m., Toronto time, on the Closing Date or such
other time on the Closing Date as may be agreed upon in writing by the parties;
"Vendor's Counsel" means the firm of Tory Tory DesLauriers & Binnington of
Toronto, Ontario, or such other counsel as the Vendor may appoint with respect
to this Agreement and the matters contemplated hereby.
1.1.2. In this Agreement, the phrase "to the knowledge of the Vendor" means to
the knowledge of:
1.1.2.1. any of the following officers of the Corporation: Gordon Joyce,
President; Joseph Hamilton, Vice President, Operations; or Stephen
D'Arcy, Treasurer and Controller; or
1.1.2.2. any of the following officers or employees of the Vendor:
Stephen Holinski, Senior Vice President and Chief Financial Officer;
George Gilmore Jr., Vice President; Joseph Duane, Vice President and
General Counsel; or Dean Rech;
in each case, after appropriate inquiry.
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1.2. Schedules
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The following are the schedules attached to this Agreement:
Schedule A - Financial Statements(1.1)
Schedule B - Liabilities and Guarantees, etc.(3.1.11 and 4.2.3.1)
Schedule B1 - Vendor Guarantees of Leased Facilities(4.2.3.2)
Schedule C - Unusual Transactions(Restructuring)(3.1.12)
Schedule D - Material Contracts(including Leases)(3.1.13)
Schedule E - Software, Distributorship and Franchise
Agreements(3.1.14)
Schedule F - Employment Matters(3.1.15 and 3.1.23)
Schedule F1 - Form of Employment Agreement(4.1.6)
Schedule G - Employees(3.1.16)
Schedule H - Description of Real Property and Leased Property
(3.1.18)
Schedule H1 - Environmental Searches(4.1.8)
Schedule I - Charges(3.1.19.1 and 3.1.21)
Schedule J - Real Property Sold(3.1.20.9)
Schedule K - Insurance(3.1.24 and 3.1.34)
Schedule L - Intellectual Property(3.1.25)
Schedule M - Litigation(3.1.26)
Schedule N - Bank Accounts, etc.(3.1.29)
Schedule O - Non-Arm's Length Transactions(3.1.33)
Schedule P - Consents and Approvals(3.1.35)
Schedule Q - Arbitration Procedures(6.3.1)
1.3. Headings and Table of Contents
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The inclusion of headings and a table of contents in this Agreement is
for convenience of reference only and shall not affect the construction or
interpretation hereof.
1.4. Gender and Number
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In this Agreement, unless the context otherwise requires, words
importing the singular include the plural and vice versa and words importing
gender include all genders.
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1.5. Currency
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Except where otherwise expressly provided, all amounts in this Agreement
are stated and shall be paid in Canadian currency.
1.6. Generally Accepted Accounting Principles
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In this Agreement, except to the extent otherwise expressly provided,
references to "generally accepted accounting principles" mean, for all
principles stated in the Handbook of the Canadian Institute of Chartered
Accountants, such principles so stated.
1.7. Invalidity of Provisions
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Each of the provisions contained in this Agreement is distinct and
severable and a declaration of invalidity or unenforceability of any such
provision or part thereof by a court of competent jurisdiction shall not affect
the validity or enforceability of any other provision thereof.
1.8. Entire Agreement
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This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter hereof. There are no warranties, conditions, or
representations (including any that may be implied by statute) and there are no
agreements in connection with such subject matter except as specifically set
forth or referred to in this Agreement. No reliance is placed on any warranty,
representation, opinion, advice, or assertion of fact made by any party hereto
or its directors, officers, employees or agents, to any other party hereto or
its directors, officers, employees or agents, except to the extent that the same
has been reduced to writing and included as a term of this Agreement.
Accordingly, there shall be no liability, either in tort or in contract,
assessed in relation to any such warranty, representation, opinion, advice or
assertion of fact, except to the extent aforesaid.
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1.9. Waiver, Amendment
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Except as expressly provided in this Agreement, no amendment or waiver
of this Agreement shall be binding unless executed in writing by the party to
be bound thereby. No waiver of any provision of this Agreement shall constitute
a waiver of any other provision nor shall any waiver of any provision of this
Agreement constitute a continuing waiver unless otherwise expressly provided.
1.10. Governing Law
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This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the laws of Canada applicable therein.
ARTICLE 2.
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PURCHASE AND SALE
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2.1. Agreement to Purchase and Sell and Purchase Price
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Subject to the terms of this Agreement, at the Closing the Vendor
shall sell and the Purchaser shall purchase 50,855 common shares in the capital
of the Corporation (the "Purchased Shares"), constituting all the issued and
outstanding common shares in the capital of the Corporation, for an aggregate
price of [text omitted as confidential and filed separately with the Securities
and Exchange Commission] (the "Purchase Price").
2.2. Payment of Purchase Price and Deliver of Share Certificates
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The Purchase Price shall be paid in full at the Closing by the
Purchaser by delivery of a negotiable cheque certified by a Canadian chartered
bank or Canadian trust company or an official bank draft drawn on a Canadian
chartered bank in the amount of the Purchase Price payable to or to the order of
the Vendor against delivery by the Vendor of share certificates representing the
Purchased Shares duly endorsed in blank for transfer or accompanied by duly
signed powers of attorney for transfer in blank.
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2.3. Deposit
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The Purchaser agrees to wire transfer on Monday, October 2, 1995
to the Vendor's Counsel, in trust, the amount of [text omitted as confidential
and filed separately with the Securities and Exchange Commission], as a deposit
to be held by the Vendor's Counsel in escrow pursuant to the terms of the escrow
agreement made as of the date hereof between the Purchaser, the Vendor and
Vendor's Counsel.
ARTICLE 3.
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REPRESENTATIONS AND WARRANTIES
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3.1. By The Vendor
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The Vendor represents and warrants to the Purchaser as follows
and acknowledges that the Purchaser is relying upon the following
representations and warranties in connection with its purchase of the Purchased
Shares:
3.1.1. Incorporation and Status of the Vendor. The Vendor is
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duly incorporated and validly existing under the laws of its jurisdiction
of incorporation.
3.1.2. Corporate Power of the Vendor and Due Authorization. The
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Vendor has the corporate power and capacity to enter into, and to perform
its obligations under this Agreement. Each of this Agreement and the
agreements, contracts, and instruments required by this Agreement to be
delivered by the Vendor at the Closing has been duly authorized by the
Vendor. This Agreement has been duly executed and delivered by the Vendor
and is a valid and binding obligation of the Vendor, enforceable in
accordance with its terms, subject to the usual exceptions as to
bankruptcy and the availability of equitable remedies.
3.1.3. Incorporation and Status of the Corporation. The
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Corporation is duly incorporated and organized, and is validly existing
and up-to-date in the filing of all corporate and similar returns under
the laws of its jurisdiction of incorporation. The
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Corporation is duly registered, licensed or qualified as an extra-provincial or
foreign corporation, and is up-to-date in the filing of all corporate and
similar returns, under the laws of the Provinces of Ontario, British Columbia,
Alberta and Quebec, which are the only jurisdictions, in which the nature of the
Business or the assets owned or leased by it makes such registration, licensing
or qualification necessary other than the Province of Manitoba where the
Business carried on by the Corporation is not significant. The Vendor has
provided to the Purchaser a complete and correct copy of the articles and
by-laws of the Corporation, in each case as amended to the date hereof.
3.1.4. Corporate Power of the Corporation. The Corporation has the corporate
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power and capacity to own or lease its assets and to carry on the Business as
the same is presently conducted.
3.1.5. Capital of the Corporation. The issued and outstanding capital of the
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Corporation consists of 50,855 common shares. All such shares have been validly
issued and are outstanding as fully paid and non-assessable shares, and are
owned by the Vendor.
3.1.6. No Subsidiaries. The Corporation has no subsidiaries.
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3.1.7. No Other Agreements to Purchase. The Vendor has not entered into or
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granted any written or oral agreement or option or any right or privilege
(whether by law, pre-emptive or contractual) capable of becoming an agreement or
option for the purchase or acquisition from the Vendor of any of the Purchased
Shares.
3.1.8. No Obligations to Issue Securities. There are no agreements, options,
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warrants, rights of conversion or other rights pursuant to which the Corporation
is, or may become, obligated to issue any shares or any securities convertible
or exchangeable, directly or indirectly, into any shares or other securities of
the Corporation.
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3.1.9. Title to, and Right to Sell Purchased Shares. The Vendor is the
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sole registered and beneficial owner of the Purchased Shares with good and
marketable title thereto, free of all Charges. There are no agreements or
restrictions which in any way limit or restrict the transfer to the Purchaser of
any of the Purchased Shares other than share transfer restrictions contained in
the Corporation's articles and there are no shareholders agreements, pooling
agreements, voting trusts or other agreements or understandings with respect to
the voting of the Purchased Shares or any of them.
3.1.10. No Contravention. Subject to obtaining any consents and approvals
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referred to in Schedule P, neither the entering into of this Agreement, the sale
of the Purchased Shares nor the performance by the Vendor of any of its other
obligations under this Agreement will contravene, breach or result in any
default under (a) the articles, by-laws, constating documents or other
organizational documents of the Vendor or the Corporation, (b) any resolution of
the board of directors (or any committee thereof) or the shareholders of the
Vendor or the Corporation, (c) any mortgage, lease, agreement or other legally
binding instrument, license, permit, statute, regulation, order, judgment,
decree or law to which any of them is a party or by which any of them or any of
their properties may be bound.
3.1.11. Liabilities and Guarantees. The Corporation does not have
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outstanding any debts, obligations or liabilities (contingent or otherwise), and
the Corporation is not a party to or bound by any agreement of guarantee,
support, indemnification, assumption, or endorsement of, or any other similar
commitment with respect to the debts, obligations or liabilities (contingent or
otherwise) of any Person, other than:
3.1.11.1. debts, obligations or liabilities in respect of trade or
business obligations incurred in the ordinary course of the Business,
consistent with past practice, none of which has been or is expected to be
materially adverse to the
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nature, results of operations, assets or financial condition of, or manner
of conducting, the Business; and
3.1.11.2. debts, obligations or liabilities to the extent reflected in the
Financial Statements or set out in Schedule B.
3.1.12. Absence of Unusual Transactions and Events. Except as set out in
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Schedule C, the Corporation has not, since the Financial Statements Date:
3.1.12.1. paid or satisfied any obligation or liability, absolute or
contingent, other than current liabilities or obligations disclosed in the
Financial Statements and current liabilities or obligations incurred since
the Financial Statements Date in the ordinary course of the Business,
consistent with past practice;
3.1.12.2. sold or otherwise disposed of any fixed or capital assets having
a fair market value, in the case of any single sale or disposition, in
excess of $50,000 and, in the case of all sales and dispositions, in excess
of $100,000 in the aggregate;
3.1.12.3. made any capital expenditures, in the case of any single capital
expenditure, in excess of $50,000 and, in the case of all capital
expenditures, in excess of $100,000 in the aggregate; the Purchaser
acknowledges that the Corporation is currently negotiating a prospective
outsourcing contract with Banque Nationale du Canada and in connection with
such contract the Corporation may commit to make capital expenditures not
exceeding $538,000; the Vendor agrees to consult with the Purchaser prior
to the Corporation entering into such contract and/or committing to such
capital expenditures provided that if the Vendor and the Purchaser do not
otherwise agree, the Purchaser hereby consents to the Corporation entering
into such contract and making capital expenditures not exceeding $538,000
for such purpose;
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3.1.12.4. made any material change in the manner of its billings, or the
credit terms made available by it, to any of its customers;
3.1.12.5. made or suffered any change or changes in its financial
condition, assets, liabilities or the Business which singly or in the
aggregate, have materially adversely affected or could materially adversely
affect its financial condition, assets, liabilities or the Business;
3.1.12.6. made any increase in the compensation or other benefits payable
or to become payable to its employees or any of them, other than general salary
increases in the ordinary course of the Business, consistent with past practice;
3.1.12.7. borrowed any monies other than for requirements in the ordinary
course of the Business under the Corporation's existing banking facilities;
3.1.12.8. knowingly waived or cancelled any right or claim of a material
value;
3.1.12.9. failed to use reasonable efforts to preserve its business
organization intact, to keep available the services of its employees and to
preserve its relationships with its customers and suppliers;
3.1.12.10. declared or paid any dividend or made any distribution, whether
in cash, stock or specie, in respect of any of its shares or repurchased,
redeemed or otherwise acquired any of its securities;
3.1.12.11. authorized or agreed or otherwise become committed to do any of
the foregoing; or
3.1.12.12. taken any other action outside of the ordinary course of the
Business.
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3.1.13. Material Contracts. The Corporation is not a party to or bound
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by any contract, agreement or commitment except as follows:
3.1.13.1. the leases and agreements referred to or set forth in
Schedule D or in this Agreement; and
3.1.13.2. agreements requiring the payment of, or the incurring
of an obligation on the part of the Corporation for, an amount not
exceeding $100,000 in the aggregate.
3.1.14. Software, Distributorship and Franchise Agreements. Except as
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set out in Schedule E, the Corporation has not:
3.1.14.1. sold, leased, licensed or otherwise provided any "active
file management" software to any Person, and has not conducted
negotiations with respect to any such future agreements or commitments;
or
3.1.14.2. entered into any distributorship or franchise
agreements, and has not conducted negotiations with respect to the
entering into of any such agreements.
The Corporation has not approved the entering into by Command Services Atlantic
Limited of any sub-franchise agreements for the establishment of record centres
in the provinces of New Brunswick, Prince Edward Island and/or Newfoundland with
any Person pursuant to the franchise agreement made June 10, 1980 between the
Corporation, Command Services Atlantic Limited and John G. McD. Brown, and
Command Services Atlantic Limited is no longer permitted to enter into any such
agreements pursuant to such franchise agreement.
3.1.15. Employment Matters. Except as set out in Schedule F, the
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Corporation is not a party to or is bound by any:
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3.1.15.1. written or, to the knowledge of the Vendor, oral, contract or
commitment for the employment of any employee, officer or agent (other
than casual employees hired through agencies); or
3.1.15.2. contract with or commitment to any trade union, council of
trade unions, employee bargaining agent or affiliated bargaining agent
(collectively called "labour representatives"); no labour
representatives hold bargaining rights with respect to any employees of
the Corporation; and no labour representatives have applied to have the
Corporation declared a related employer pursuant to the Labour Relations
Act(Ontario) or similar legislation, and to the knowledge of the Vendor
there are no current or threatened attempts to organize or establish any
trade union or employee association with respect to the Corporation.
There is no work stoppage or other concerted action, grievance or dispute
existing or, to the knowledge of the Vendor, threatened against the Corporation.
3.1.16. Employees. Schedule G contains a complete and accurate list of the
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names of all individuals who are full-time or part-time employees or individuals
engaged on contract to provide employment services (other than casual employees
hired through agencies) or sales or other agents or representatives of the
Corporation as of the date of this Agreement, specifying their length of hire,
title or position, birth date, hourly rate(if applicable), social insurance
number and annual salary.
3.1.17. No Default Under Agreements. The Corporation is not in default or
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breach in any respect of any contract, agreement, lease or other instrument to
which it is a party or by which it may be bound.
3.1.18. Owned and Leased Property. Schedule H contains a complete legal and
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municipal description of all of the real property owned by the Corporation (the
"Real Property") and leased by the Corporation (the "Leased Property"). The
Corporation does
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not own or lease and has not agreed to acquire or lease any real property or
interest in real property other than the Real Property and the Leased Property.
3.1.19. Title to Real Property. The Corporation has the exclusive
----------------------
right to posssess, use and occupy, and has good and marketable title in fee
simple to all the Real Property, free and clear of all Charges except for:
3.1.19.1. the Charges set out in Schedule I;
3.1.19.2. liens for current taxes not yet due; and
3.1.19.3. minor title defects which do not, in the aggregate,
materially adversely affect the value of such real property or
materially impair or affect the use of such real property as it is
presently used by the Corporation in connection with the Business.
3.1.20. Matters Relating to Real Property.
---------------------------------
3.1.20.1. The Corporation has adequate rights of ingress and
egress in respect of the Real Property and Leased Property for the
operation of the Business in the ordinary course;
3.1.20.2. None of the buildings, structures, improvements or
appurtenances situated on the Real Property or the Leased Property, nor
the operation or maintenance thereof as currently operated and
maintained by the Corporation, violates any restrictive covenant which
runs with the Real Property or the Leased Property or any provision of
any federal, provincial or municipal law, ordinance, rule or regulation,
other than any such provision relating to environmental matters, and
none of the buildings, structures, improvements or appurtenances
situated on the Real Property encroaches on any property owned by
others;
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3.1.20.3. the Real Property, the Leased Property, the current uses thereof
and the conduct of the Business on such property comply in all respects with all
regulations, statutes, enactments, laws and by-laws, including, without
limitation, those dealing with zoning, parking, access, loading facilities,
landscaping areas, building construction, fire and public health and safety
laws;
3.1.20.4. no alteration, repair, improvement, or other work has been
ordered, directed or requested in writing by any governmental authority or, in
respect of Leased Property, by applicable landlord, to be done or performed to
or in respect of the Real Property of the Leased Property, and to the knowledge
of the Vendor, no notification has been given to the Vendor or the Corporation
by any such person ordering, directing or requesting any such work, other than
those notifications which have been compiled with;
3.1.20.5. there is nothing owing in respect of the Real Property of the
Leased Property by the Corporation to any municipal corporation or to any other
corporation or commission owning or operating a public utility for water,
gas, electrical power or energy, steam or hot water, or for the use thereof, and
there are no outstanding levees, charges or fees assessed against the Real
Property or Leased Property by any public authority, other than current accounts
and assessments in respect of which the payment due date has not yet passed;
3.1.20.6. no part of the Real Property or the Leased Property has been
taken or expropriated by any federal, provincial, municipal or other competent
authority nor has any notice or proceeding in respect thereof been given to the
Vendor or the Corporation, or to the knowledge of the Vendor, commenced;
3.1.20.7. all of the Real Property and the Leased Property (including all
buildings, improvements and fixtures) is reasonably fit for its present use and
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there are no material repairs or replacements which are necessary to
such property;
3.1.20.8. the Corporation is not a party to any lease or agreement in
the nature of a lease in respect of any real property, whether as lessor
or lessee, other than the leases (the "Leases") described in Schedule D
relating to the Leased Property. Except as described in Schedule D, the
Corporation occupies the Leased Property and has the exclusive right to
occupy and use the Leased Property. Each of the Leases is in good
standing and in full force and effect without amendment thereto, and
neither the Corporation nor, to the knowledge of the Vendor, any other
party thereto is in breach of any covenants, conditions or obligations
contained therein; and
3.1.20.9. except as disclosed in Schedule J, since December 31, 1987,
the Corporation has not sold, assigned or otherwise disposed of any real
property owned by it.
3.1.21. Title to Assets Other Than Real Property. The Corporation is the
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absolute beneficial owner of, and has good and marketable title, free of all
Charges, to all of its properties and assets (other than the Real Property)
except for the Charges referred to in Schedule I.
3.1.22. Tax Matters. The Corporation has filed all tax returns required to be
-----------
filed by it in all applicable jurisdictions and has paid all taxes, levies,
assessments, reassessments, penalties, interest and fines due and payable by it.
Assessments have been issued to the Corporation covering all past periods up to
and including (a) the fiscal year ended December 31, 1993 in respect of Canadian
federal and Ontario provincial income tax, (b) the fiscal year ended December
31, 1994 in respect of Alberta provincial income tax, and (c) the fiscal year
ended December 31, 1992 in respect of British Columbia provincial capital tax,
and such assessments, if any amounts were owing in respect
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thereof, have been paid. Assessment for all other applicable federal and
provincial taxes and levies have been issued and any amounts owing thereunder
have been paid. The Corporation has withheld or collected and remitted all
amounts required to be withheld or collected and remitted by it in respect of
any taxes, government charges or assessments. Correct and complete copies of
all federal and provincial income tax returns, including schedules thereto,
filed by the Corporation since December 31, 1991, all federal goods and services
tax returns filed by the Corporation since December 31, 1993 (other than for the
month ended October 31, 1994), and all written communications relating thereto
have been provided to the Purchaser.
3.1.23. Pension Plans. The only pension plans (the "plans") provided by the
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Corporation or to employees of the Corporation, and the only bonus, profit
sharing, deferred compensation, retirement, hospitalization, disability,
insurance, benefit or similar plan, practice or agreement, formal or informal,
with respect to any of its employees, former employees or others, other than the
Canada Pension Plan, to which the Corporation is a party or is bound, are those
set out in Schedule F. The Corporation has not received, or applied for, any
payment of surplus from any of the pension plans of the Corporation.
3.1.24. Insurance. All physical assets of the Corporation are covered until
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the Closing Date by fire and other insurance with responsible insurers against
such risks and in such amounts as are reasonable for prudent owners of
comparable assets, the particulars of which are set out in Schedule K. Upon
Closing, the existing insurance will lapse, and the Purchaser will be
responsible for arranging replacement coverage.
3.1.25. Intellectual Property. Schedule L is a list of all Intellectual
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Property which is comprised of all of the trade marks and trade mark
applications, trade names, certification marks, patents and patent applications,
copyrights and industrial designs which is owned by the Corporation or used by
the Corporation in the Business (other than
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the Vendor's name or any variation thereof) and the offices (if any) in which
the same is registered. The Corporation is the sole owner of the Intellectual
Property listed on Schedule L and has the sole and exclusive right to use the
Intellectual Property, except as noted on Schedule L. To the knowledge of the
Vendor, the conduct of the Business does not infringe the Intellectual Property
of any Person, and neither the Vendor nor the Corporation is aware of any claim,
existing or threatened, by any Person regarding the Intellectual Property listed
on Schedule L.
3.1.26. Litigation and Other Proceedings.
--------------------------------
3.1.26.1. There is no litigation in progress or, to the knowledge
of the Vendor, threatened which affects the Vendor's ability to
consummate the transactions contemplated by this Agreement.
3.1.26.2. Except as set out in Schedule M, there is no court,
administrative, regulatory or similar proceeding (whether civil, quasi-
criminal or criminal); arbitration or other dispute settlement
procedure; investigation or inquiry by any governmental, administrative,
regulatory or similar body; or any similar matter or proceeding; in
progress or involving the Corporation or, to the knowledge of the
Vendor, threatened against the Corporation.
3.1.27. Corporate Records. The corporate records and minute books of
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the Corporation contain complete and accurate minutes of all meetings of
directors and committees thereof and shareholders held since its date of
incorporation. The share certificate books, register of shareholders, register
of transfers and register of directors of the Corporation are complete and
accurate.
3.1.28. Books of Account. The books and records of the Corporation
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fairly present and disclose the financial position of the Corporation as at the
relevant dates and
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all material financial transactions of the Corporation have been accurately
recorded in such books and records.
3.1.29. Bank Accounts, etc. Schedule N is a complete and correct list
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(including addresses and account numbers) of each bank, trust company or similar
institution in which the Corporation has an account or safety deposit box.
3.1.30. Vendor Resident of Canada. The Vendor is not a non-resident of
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Canada under the Income Tax Act (Canada).
3.1.31. Environmental Issues. There are no orders or directions of which
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the Vendor or the Corporation has received notice relating to environmental
matters requiring any work, repairs, construction or capital expenditures with
respect to the Business or any of the real property owned or leased by the
Corporation.
3.1.32. Compliance with Laws. The Corporation is, and is conducting the
--------------------
Business, in compliance in all respects with all applicable laws of each
jurisdiction in which the Business is carried on.
3.1.33. Non-Arm's Length Transactions. Except as disclosed in Schedule
-----------------------------
O or Schedule F, the Corporation is not a party to any written contract or
agreement and, to the knowledge of the Vendor, the Corporation is not a party to
any oral contract or agreement, with any officer, director, employee,
shareholder or any Person not dealing at arm's length with the Corporation
(within the meaning the Income Tax Act (Canada)) or any affiliate of any of the
foregoing.
3.1.34. Correct and Complete Copies. Correct and complete copies have
---------------------------
been provided to the Purchaser of:
3.1.34.1. all leases and agreements (other than sales contracts)
referred to in Schedules D, E and F, including all amendments thereto;
<PAGE>
-21-
3.1.34.2. the deferred profit sharing plan and all pension plans
referred to in Schedule F; and
3.1.34.3. all insurance policies referred to in Schedule K.
3.1.35. Consents and Approvals. There is no requirement to make any
----------------------
filing with, give any notice to or obtain any licence, permit, certificate,
registration, authorization, consent or approval of, any governmental or
regulatory authority as a condition to the lawful consummation of the
transactions contemplated by this Agreement, except for the filings,
notifications, licences, permits, certificates, registrations, consents and
approvals which relate solely to the identity of the Purchaser or the nature of
any business carried on by the Purchaser. There is no requirement under any
agreement, instrument or commitment relating to the Business or the Corporation
to which the Vendor or the corporation is a party or by which either of them is
bound to give any notice to, or to obtain the consent or approval of, any party
to such agreement, instrument or commitment relating to the consummation of the
transactions contemplated by this Agreement, except for the notifications,
consents and approvals described in Schedule P.
3.1.36. Financial Statements. The Financial Statements have been
--------------------
prepared in accordance with generally accepted accounting principles in Canada
applied on a basis consistent with prior periods and present fairly the assets,
liabilities (whether accrued, absolute, contingent, or otherwise) and financial
condition of the Corporation as at the respective dates of the Financial
Statements and the sales, earnings and results of operations of the Corporation
for the respective periods covered by the Financial Statements.
3.1.37. Termination of Contracts. To the knowledge of the Vendor, no
------------------------
customer which is a party to any sales contract referred to in Schedule D
intends to terminate such contract, and the Vendor does not currently
contemplate the termination of any of the
<PAGE>
-22-
agreements or arrangements between the Vendor and the Corporation
referred to in Schedule O.
3.1.38. Full Disclosure. Neither the Vendor or the Corporation
---------------
has any information or knowledge of any facts relating to the Business
which have not been disclosed to the Purchaser and which would reasonably
be expected to be material to a purchaser of the Purchased Shares.
3.2. By the Purchaser
----------------
The Purchaser represents and warrants to the Vendor as follows
and acknowledges that the Vendor is relying upon the following representations
and warranties in connection with its sale of the Purchased Shares:
3.2.1. Incorporation and Status of the Purchaser. The Purchaser
-----------------------------------------
is duly incorporated and validly existing under the laws of its
jurisdiction of incorporation.
3.2.2. Corporate Power of the Purchaser and Due Authorization.
------------------------------------------------------
The Purchaser has the corporate power and capacity to enter into, and to
perform its obligations under, this Agreement. Each of this Agreement and the
agreements, contracts and instruments required by this Agreement to be delivered
by the Purchaser at Closing has been duly authorized by the Purchaser. This
Agreement has been duly executed and delivered by the Purchaser and is a valid
and binding obligation of the Purchaser enforceable in accordance with its
terms, subject to the usual exceptions as to bankruptcy and the availability of
equitable remedies.
3.2.3. Discussions with Franchisees. The Purchaser has had
----------------------------
preliminary discussions with the franchisees which are parties to the two
franchise agreements referred to in Schedule E (the "Franchisees") and,
on the basis of those preliminary discussions believes that it will be
able prior to or at Closing to negotiate obtaining a confirmation which
will satisfy the condition set forth in section 4.1.7.
<PAGE>
- 23 -
3.2.4. Bank Financing. The Purchaser has had discussions with
--------------
its bankers with respect to this Agreement and is confident that
it will be able to satisfy prior to or at Closing the condition
set forth in section 4.1.4.
3.3. No Finder's Fees
----------------
Each of the parties represents and warrants to the other that neither
such party nor its affiliates has taken, and agrees that neither will take, any
action that would cause the other party to become liable to any claim or demand
for a brokerage commission, finder's fee or other similar payment.
3.4. Survival of Covenants, Representations and Warranties
-----------------------------------------------------
To the extent that they have not been fully performed at or prior the
Time of Closing, the representations and warranties contained in this Agreement
and in all certificates and documents delivered pursuant to or contemplated by
this Agreement shall survive the Closing and shall continue for two years
provided, however, that the representations and warranties set out in section
3.1.22 shall terminate at the expiration of the Tax Reassessment Period.
For the purposes of this Agreement, "Tax Reassessment Period" means the
period ending on the ninetieth day following the last date on which an
assessment, reassessment or other document assessing liability for tax, interest
or penalties may be issued to the Corporation in respect of any taxation year
ended prior to the date hereof pursuant to any applicable tax legislation.
<PAGE>
-24-
ARTICLE 4.
----------
CONDITIONS
----------
4.1. Conditions for the Benefit of the Purchaser
-------------------------------------------
The obligation of the Purchaser to complete the purchase of the Purchased
Shares pursuant to this Agreement is subject to the satisfaction of, or
compliance with, at or prior to the Time of Closing, each of the following
conditions (each of which is acknowledged to be for the exclusive benefit of the
Purchaser):
4.1.1. Accuracy of Representations of Vendor and Compliance With
---------------------------------------------------------
Covenants. The representations and warranties of the Vendor made in or
---------
pursuant to this Agreement shall be true and correct in all material
respects at the Time of Closing with the same force and effect as if made
at and as of the Time of Closing; the covenants contained in this
Agreement to be performed by the Vendor at or prior to the Time of Closing
shall have been performed in all material respects; the Vendor shall not
be in breach of any material agreement on its part contained in this
Agreement; and the Purchaser shall have received a certificate confirming
the foregoing, signed for and on behalf of the Vendor by senior officers
or directors of the Vendor or other persons acceptable to the Purchaser,
in form and substance satisfactory to the Purchaser and the Purchaser's
Counsel.
4.1.2. Closing Documents and Proceedings. All documents relating to the
---------------------------------
authorization and completion of the transaction contemplated by this Agreement
and all actions and proceedings taken at or prior to the Time of Closing in
connection with the performance by the Vendor of its obligations under this
Agreement shall be satisfactory to the Purchaser and to the Purchaser's Counsel,
acting reasonably, and the Purchaser shall have received copies of all such
documents and evidence that all such actions and proceedings have been taken as
it may reasonably request, in form and substance reasonably satisfactory to the
Purchaser and the Purchaser's Counsel.
<PAGE>
-25-
4.1.3. Opinion of Vendor's Counsel. The Purchaser shall have received
---------------------------
an opinion of Vendor's Counsel in form and substance satisfactory to the
Purchaser's Counsel, acting reasonably, substantially to the same effect as the
representations and warranties of the Vendor in sections 3.1.1, 3.1.2,
3.1.3, 3.1.4, 3.1.5, 3.1.9, 3.1.10 and 3.1.19 and as to such other matters
incidental to the matters herein contemplated as the Purchaser and the
Purchaser's Counsel may reasonably request. In rendering such opinion, the
Vendor's Counsel shall be entitled to rely, as to matters of fact, on
certificates of senior officers of the Vendor or the corporation and shall be
entitled to qualify, by reference to his knowledge after appropriate enquiry,
those portions of the opinion which it is reasonable and customary to so
qualify.
4.1.4. Bank Approvals. The Purchaser shall have received approval and
--------------
funding from the Purchaser's banks with respect to the completion of the
purchase of the Purchased Shares.
4.1.5. Other Consents and Approvals. The Vendor shall have delivered
----------------------------
to the Purchaser, in form and substance satisfactory to the Purchaser and the
Purchaser's Counsel, acting reasonably, the consents and approvals referred to
in Schedule P.
4.1.6. Gordon Joyce Employment Agreement. The Corporation and Gordon
---------------------------------
Joyce shall have entered into an employment agreement substantially in the form
of the draft employment agreement set forth in Schedule F1.
4.1.7. Computerized Systems Software. The Purchaser shall have
-----------------------------
received confirmation from the Franchisees that the Corporation is not required
to furnish to the Franchisees or permit them to use any computerized systems
software other than that previously furnished to or used by the Franchisees, and
that the Corporation shall have no obligation to further modify or enhance the
computerized systems software previously furnished to or used by the
Franchisees, which confirmation shall be in form and substance satisfactory to
the Purchaser, acting reasonably, it being understood that such
<PAGE>
-26-
confirmation is proposed to be obtained as part of the negotiations
between the Corporation, the Purchaser and the Franchisees for the
termination of the franchise agreements referred to in Schedule E as
contemplated in section 5.12.
4.1.8. Environmental Conditions or Liabilities. The tests and enquiries
---------------------------------------
referred to in section 5.13 and the searches referred to in Schedule H1
shall not have disclosed any environmental conditions or liabilities
which, in the aggregate, would reasonably be expected to cost $1,000,000
or more to correct or remediate, provided that the absence of such
conditions or liabilities shall not be a condition of Closing if the
Vendor corrects or remediates such conditions or liabilities or provides
to the Purchaser an indemnity in respect thereof on terms and conditions
satisfactory to the Purchaser, acting reasonably.
4.1.9 Transfer of Real Property. The Vendor shall have transferred to
-------------------------
the Corporation at or prior to the Time of Closing legal title to the real
property (the "Brampton Property") municipally known as 195 Summerlea
Road, Brampton, Ontario and more particularly described in Schedule H,
which real property is Real Property for all purposes of this Agreement.
4.1.10. No Action or Proceeding. No legal or regulatory action or
-----------------------
proceeding shall be pending or threatened by any Person to enjoin,
restrict or prohibit the purchase and sale of the Purchased Shares
hereunder.
If any of the conditions contained in this section 4.1 shall not be
fulfilled or performed at or prior to the Time of Closing to the satisfaction of
the Purchaser (acting reasonably), the Purchaser may, by notice to the Vendor,
terminate this Agreement and the obligations of the Vendor and the Purchaser
under this Agreement other than the obligations contained in sections 3.3, 8.1
and 8.2. The Purchaser may also bring an action against the Vendor for damages
suffered by the Purchaser where the non-performance or non-fulfilment of a
condition is as a result of a breach of covenant, representation or warranty by
the Vendor which
<PAGE>
- 27 -
is in the Vendor's control. Any condition may be waived in whole or in part by
the Purchaser without prejudice to any claims it may have for breach of
covenant, representation or warranty.
4.2. Conditions for the Benefit of the Vendor
----------------------------------------
The obligation of the Vendor to complete the sale of the Purchased
Shares hereunder is subject to the satisfaction of or compliance with, at or
prior to the Time of Closing, each of the following conditions (each of which is
acknowledged to be for the exclusive benefit of the Vendor):
4.2.1. Accuracy of Representations of Purchaser and Compliance
-------------------------------------------------------
With Covenants. The representations and warranties of the Purchaser made in or
- --------------
pursuant to this Agreement (other than the representations and warranties in
sections 3.2.3 and 3.2.4) shall be true and correct in all material respects at
the Time of Closing with the same force and effect as if made at and as of the
Time of Closing; the covenants contained in this Agreement to be performed by
the Purchaser at or prior to the Time of Closing shall have been performed in
all material respects; the Purchaser shall not be in breach of any material
agreement on its part contained in this Agreement; and the Vendor shall have
received a certificate confirming the foregoing, signed for and on behalf of the
Purchaser by senior officers or directors of the Purchaser or other persons
acceptable to the Vendor, in form and substance satisfactory to the Vendor and
the Vendor's Counsel.
4.2.2. Opinion of Purchaser's Counsel. The Vendor shall have received an
------------------------------
opinion of the Purchaser's Counsel substantially to the same effect as the
representations and warranties of the Purchaser in sections 3.2.1 and 3.2.2. In
rendering such opinion, Purchaser's Counsel shall be entitled to rely, as to
matters of fact, on certificates of senior officers of the Purchaser and shall
be entitled to qualify, by reference to his knowledge after appropriate enquiry,
those portions of the opinion which it is reasonable and customary to so
qualify.
<PAGE>
-28-
4.2.3. Guarantees.
----------
4.2.3.1. The Purchaser shall have arranged to the satisfaction of the
Vendor to replace all guarantees and similar commitments of the Vendor in
favour of The Bank of Nova Scotia listed in Schedule B.
4.2.3.2. The Purchaser shall have used all reasonable commercial efforts
to arrange to the satisfaction of the Vendor to replace all other guarantees
listed in Schedule B1, and the Vendor shall have received from the Purchaser
an indemnity in form and substance satisfactory to the Vendor, acting
reasonably, in respect of any such guarantee for which no replacement shall
have been arranged.
4.2.4. Gordon Joyce Employment Agreement. The Vendor shall have entered into
---------------------------------
an agreement with Gordon Joyce on terms and conditions satisfactory to the
Vendor, acting reasonably, terminating Mr. Joyce's employment with the Vendor
and releasing the Vendor and the Corporation from any liability thereunder or in
respect thereof (other than as contemplated below or in the employment contract
referred to in section 4.1.6); it being understood that in negotiating such
termination, the Vendor is prepared to pay all compensation and other incentive
payments to which Mr. Joyce is otherwise entitled under his existing employment
contract with the Vendor to the date of termination (other than severance
payments payable upon termination of Mr. Joyce's employment) and to treat Mr.
Joyce for purposes of entitlement under the Vendor's pension plan as an employee
of the Vendor until December 31, 1995.
4.2.5. No Action or Proceeding. No legal or regulatory action or proceeding
-----------------------
shall be pending or threatened by any Person to enjoin, restrict or prohibit the
purchase and sale of the Purchased Shares hereunder.
If any of the conditions contained in this section 4.2 shall not be
fulfilled or performed at or prior to the Time of Closing to the satisfaction of
the Vendor (acting reasonably),
<PAGE>
-29-
the Vendor may, by notice to the Purchaser, terminate this Agreement and the
obligations of the Vendor and the Purchaser under this Agreement other than the
obligations contained in sections 3.3, 8.1 and 8.2. The Vendor may also bring
an action against the Purchaser for damages suffered by the Vendor where the
non-performance or non-fulfillment of a condition is as a result of a breach of
covenant, representation or warranty by the Purchaser which is in the
Purchaser's control. Any condition may waived in whole or in part by the
Vendor without prejudice to any claims it may have for breach of covenant
representation or warranty.
ARTICLE 5
---------
ADDITIONAL AGREEMENTS OF THE PARTIES
------------------------------------
5.1. Access to Information
---------------------
The Vendor shall cause the Corporation to give, until the Time of
Closing, to the Purchaser and its accountants, legal advisers and
representatives during normal business hours full access to its premises,
accounts, tax returns, contracts, commitments and records.
5.2. Conduct of Business Until Time of Closing
-----------------------------------------
Except as expressly provided in this Agreement or except with the
prior written consent of the Purchaser, prior to the Time of Closing the Vendor
shall cause the Corporation to:
5.2.1. operate the Business in the ordinary course, consistent with
past practice;
5.2.2. maintain its books, records and accounts in the ordinary
course on a basis consistent with past practice; and
5.2.3. do or refrain from doing all acts and things in order to ensure
that the representations and warranties in section 3.1 remain true and
correct at the Time of Closing.
<PAGE>
-30-
5.3. Negative Covenant
-----------------
Except as expressly provided in this Agreement or except with
the prior written consent of the Purchaser, prior to the Time of Closing the
Vendor shall ensure that the Corporation does not:
5.3.1. amend its articles, by-laws, constating documents or
other organizational documents;
5.3.2. amalgamate, merge or consolidate with, or acquire all or
substantially all the shares or assets of, any Person;
5.3.3. transfer, lease, license, sell or otherwise dispose of
any of its assets, other than inventory in the ordinary course of the
Business, consistent with past practice;
5.3.4. do any act or thing of the kind described in sections
3.1.12 or 3.1.13 or enter into any contract, agreement or commitment of
the kind described in sections 3.1.12, 3.1.13, 3.1.14 or 3.1.15;
5.3.5. reveal any confidential Intellectual Property of the
Corporation to any Person other than the Purchaser or its agents; or
5.3.6. fail to keep the premises occupied by the Corporation
and the physical assets of the Corporation in good operating condition
and in a state of good maintenance and repair having regard to the use
to which the assets are put and the age thereof.
5.4. Purchaser's Covenant
--------------------
Except as otherwise expressly provided in this Agreement or
except with the prior written consent of the Vendor, prior to the Time of
Closing the Purchaser (a) shall do or refrain from doing all acts and things in
order to ensure that the representations and warranties in sections 3.2.1. and
3.2.2. remain true and correct at the Time of Closing as if such representations
<PAGE>
- 31 -
and warranties were made at and as of such date and (b) shall use all reasonable
commercial efforts to satisfy or cause to be satisfied the conditions in
sections 4.1. and 4.2. If, notwithstanding such efforts, the Purchaser is unable
to satisfy such conditions, the Purchaser shall not be liable to the Vendor for
any breach of covenant, provided that nothing contained herein shall affect any
condition precedent to the Vendor's obligation to complete the transaction
contemplated hereby referred to in section 4.2. or any obligation of the
Purchaser to indemnify the Vendor pursuant to section 6.5.
5.5. Corporate Action, Resignations and Releases
-------------------------------------------
At or prior to the Time of Closing, the Vendor shall cause all necessary
corporate action to be taken for the purpose of approving the transfer of the
Purchased Shares to the Purchaser. At or prior to such time, the Vendor shall
also obtain the resignations of all the directors of the Corporation. If
requested by the Purchaser, the Vendor shall cause nominees of the Purchaser to
be elected or appointed directors of the Corporation to fill any vacancies.
5.6. Satisfaction of Conditions, Other Matters
-----------------------------------------
The Vendor shall use all reasonable commercial efforts to (a) satisfy or
cause to be satisfied the conditions in sections 4.1 and 4.2, (b) deliver, at
or prior to the Time of Closing, the consents and approvals referred to in
Schedule P, and (c) obtain and register against the applicable Real Property
discharges of the Charges referred to in paragraphs 33, 34 and 35 of Schedule I.
If, notwithstanding such efforts, the Vendor is unable to satisfy such
conditions, deliver any of such consents and approvals or obtain and register
any such discharges, the Vendor shall not be liable to the Purchaser for any
breach of covenant, provided that nothing contained herein shall affect any
condition precedent to the Purchaser's obligation to complete the transaction
contemplated hereby referred to in section 4.1 or any obligation of the Vendor
to indemnify the Purchaser pursuant to section 6.1. If the Purchaser completes
the transaction contemplated hereby on the Closing Date notwithstanding that any
consents, approvals or discharges have not been obtained, the Vendor shall
continue after the Closing to use reasonable
<PAGE>
-32-
commercial efforts as requested by the Purchaser from time to time in order to
attempt to obtain any such consent, approval or discharge.
5.7. Delivery of Books and Records
-----------------------------
The Vendor shall deliver or cause to be delivered to the Purchaser, at
the Time of Closing, all of the books and records of and relating to the
Corporation and the Business subject to the right of the Vendor to retain copies
of extracts of such books or records to the extent necessary to maintain its own
books and records or as required by law.
5.8. Cooperation
-----------
The parities shall cooperate fully in good faith with each other and
their respective legal advisers, accountants and other representatives in
connection with any steps required to be taken as part of their respective
obligations under this Agreement.
5.9. Repayment of Indebtedness
-------------------------
At the Time of Closing, the Purchaser shall pay to the Vendor the
outstanding amounts owing by the Corporation to the Vendor (not exceeding
$4,000,000). The Purchaser will also satisfy in full any amounts outstanding
under the bank facilities of the Corporation with the Bank of Nova Scotia (to a
maximum amount of $2.7 million) which have been guaranteed in whole or in part
by the Vendor.
5.10. Non-Competition
---------------
Neither the Vendor nor its affiliates shall (without the prior written
consent of the Corporation and the Purchaser), for a period of 3 years from the
Closing Date, directly or indirectly, in any manner whatsoever including,
without limitation, either individually, in partnership, jointly or in
conjunction with any other Person, or as principal, agent or shareholder:
5.10.1. carry on or be engaged in any business;
<PAGE>
-33-
5.10.2. permit its name or any part thereof to be used or
employed by any Person carrying on or engaged in any business; or
5.10.3. have any material financial or other interest (including
an interest by way of loan or guarantee of debts and obligations or
royalty or other compensation arrangements) in or in respect of the
business of any Person which carries on or is engaged in any business:
in Canada which is the same as or substantially similar to or which competes
with the Business provided, however, that nothing in this section shall prevent
the Vendor from owning not more than 10% of the issued shares of the Corporation
or of a corporation, the shares of which are listed on a recognized stock
exchange or traded in the over the counter market in Canada, which; carries
on a business which is the same as or substantially similar to or which competes
with the Business.
For the purposes of this section 5.10 (and notwithstanding
section 1.1.1.), "Business" means the following businesses as presently carried
on by the Corporation in Canada:
(a) the storage of hard copy records and, in connection with such
storage, related management, retrieval, delocation and security
shredding services;
(b) the storage of magnetic media records and, in connection with
such storage, related bar-code driven retrieval services,
including on-line retrieval and refile services, and an "Orange
Card" disaster recovery premium service;
(c) the conversion for storage purposes of hard copy records into
microfilm; and
(d) in connection with the business referred to in paragraph (a),
(b) or (c), the sale of records storage cartons, disk tape,
cartridge carriers, mobile/fixed shelving systems and CasTraC,
SlotTraC, DRTraC, Info-Sort and FileTraC interface software
developed by the Corporation.
<PAGE>
-34-
5.11. Non-Solicitation
----------------
5.11.1. Neither the Vendor nor any of its affiliates will (without
the prior written consent of the Corporation and the Purchaser) at any time
during the period from the Closing Date until two years from the Closing Date:
5.11.1.1. contact any Person who is a customer or client of the
Corporation, the Purchaser or their affiliates for the purpose of
soliciting such customer or client to cease to do any Business (as
such term is defined in section 5.10) with the Corporation or the
Purchaser; or
5.11.1.2. initiate contact with any employee or officer of the
Corporation, the Purchaser or their affiliates for the purpose of
offering him or her employment with any Person other than the
Corporation, the Purchaser or their affiliates provided the foregoing
shall not prevent the Vendor or any of its affiliates from contacting
or hiring any such employee or officer in response to an initial
contact from such employee or officer; or
5.11.1.3. except as may be required by law or in connection with any
reasonably necessary corporate or governmental filing or in connection
with any dispute under this Agreement, disclose any confidential
information relating to the Corporation or the Business (other than
information which is generally available to the public) to any Person
or use the same for any purpose other than those of the Corporation
or the Purchaser.
5.11.2. The Vendor agrees not to solicit Bank of Montreal or Canada Trust
with respect to the "Stock Select Service" fulfilment services currently
rendered to them by the Corporation provided, however, that the Vendor may
submit a bid to provide such services in the event of a solicitation of bids by
Bank of Montreal or Canada Trust for the provision of such services.
<PAGE>
-35-
5.12. Termination of Franchise Agreements
-----------------------------------
The Purchaser and the Vendor agree to use all reasonable commercial
efforts to terminate the two franchise agreements referred to in Schedule E
between the Corporation and each of the Franchisees in their entirety effective
prior to or at the Time of Closing, such that upon the termination of such
franchise agreements the Corporation will no longer have any obligations to the
Franchisees except as contemplated below. In connection with such efforts and
notwithstanding any other provision of this Agreement, the Purchaser and the
Vendor agree that in consideration for terminating the franchise agreements the
Purchaser and the Corporation will offer (a) to provide the Franchisees with the
source codes for the computer systems software previously furnished by the
Corporation to the Franchisees, (b) to eliminate the royalty payable to the
Corporation under the franchise agreements, (c) to participate with the
Franchisees in future joint business opportunities where it is commercially
reasonable for the Corporation to do so, and (d) in the case of the London,
Ontario franchise, not to compete with the relevant Franchisee within a
twenty-five mile radius of the City of London, and, in the case of the Nova
Scotia franchise, not to compete with the relevant Franchisee in the Province of
Nova Scotia. The Purchaser and the Vendor acknowledge and agree that if the
franchise agreements are terminated as aforesaid the condition precedent to
closing contained in subsection 4.1.7 shall be deemed to have been satisfied.
5.13. Environmental Matters
---------------------
The Purchaser shall arrange (at its expense) as soon as reasonably
practicable:
(a) to have the sprayed on insulation observed by Dames and Moore in its
1995 Phase 1 Environmental Audit Report relating to the 640 Coronation
Drive property in Scarborough, Ontario (the "Coronation Drive Property")
tested to determine whether it contains any asbestos;
<PAGE>
-36-
(b) to pressure test the underground storage tank identified by Dames
and Moore in its 1995 Phase 1 Environmental Audit Report relating
to the 34 Ste. Helene property in St. Lambert, Quebec to
determine whether the tank is sound (that is, there is no
evidence of leakage) and, if the tank is not sound, to test the
surrounding soil to determine whether there is contamination; and
(c) for Dames and Moore to confirm whether the two pipes leading to a
floor drain identified by Dames and Moore in its 1995 Phase 1
Environmental Audit Report relating to the Coronation Drive
Property do not and have not discharged any hazardous substances.
5.14. Reports Prior to Closing
------------------------
The Purchaser shall notify the Vendor forthwith upon the
fulfilment of each of the conditions set forth in sections 4.1.4, 4.1.6, 4.1.7,
4.1.8 and 4.2.3, and the Vendor shall notify the Purchaser forthwith upon the
fulfilment of each of the conditions set forth in sections 4.1.5, 4.1.9 and
4.2.4, or upon such party concluding for any reason that any such condition will
not be fulfilled on or prior to Closing. Prior to Closing, each party shall
report from time to time to the other with respect to the status of the
fulfilment of each such conditions and in any event shall report to the other on
October 16, 1995 and October 23, 1995 with respect to the status of the
fulfilment of each such condition.
ARTICLE 6.
----------
INDEMNIFICATION
---------------
6.1. Indemnification by the Vendor
-----------------------------
The Vendor shall indemnify and save the Purchaser and its
affiliates, directors, officers, agents and employees (collectively, the
"Indemnified Party") harmless for and from:
<PAGE>
- 37 -
6.1.1. any assessment or reassessment for taxes payable by the Corporation,
whether relating to income, sales, real or personal property, or other types of
taxes, including interest and penalties, for any period up to the Closing Date
for which no adequate reserve has been provided and disclosed:
6.1.2. any losses, damages or deficiencies suffered by the Indemnified Party as
a result of any breach of representation, warranty, covenant or agreement on the
part of the Vendor contained in this Agreement;
6.1.3. any losses or damages suffered by the Indemnified Party as a result of
any claim by Gordon Joyce pursuant to his existing employment contract with the
Vendor or the termination agreement referred to in section 4.2.4 and any
liability for pension payments to Mr. Joyce pursuant to the Vendor's pension
plan;
6.1.4. any liability for land transfer tax or other tax or expense payable by
reason of the transfer of the Brampton Property from the Vendor to the
Corporation as contemplated in section 4.1.9;
6.1.5. any liability of the Corporation in respect of the Charges referred to
in paragraphs 33, 34 and 35 of Schedule I; and
6.1.6. all claims, demands, costs and expenses, including legal fees, in
respect of the foregoing.
The Purchaser shall hold and obtain the right and benefits of
this section 6.1 on behalf of and in trust for each of its affiliates and the
directors, officers, employees and agents of the Purchaser and its affiliates
(for greater certainty, an "affiliate" of the Purchaser shall include, without
limitation, a Person with which the Purchaser becomes an affiliate as a result
of the closing of the transaction contemplated hereby).
<PAGE>
-38-
6.2. Notice of Claim
---------------
An Indemnified Party shall promptly give notice to the Vendor of any claim
for indemnification pursuant to section 6.1 (a "Claim", which term shall include
more than one Claim) provided, however, that failure to give prompt notice of a
Claim shall not relieve the Vendor of its obligations hereunder except and to
the extent that the Vendor is prejudiced by such failure. Such notice shall
specify whether the Claim arises as a result of a claim by a Person against the
Indemnified Party (a "Third Party Claim") or whether the Claim does not so arise
(a "Purchaser's Claim"), and shall also specify with reasonable particularity
(to the extent that the information is available):
6.2.1. the factual basis for the Claim; and
6.2.2. the amount of the Claim, or, if an amount is not then determinable,
an approximate and reasonable estimate of the likely amount of the Claim.
6.3. Procedure for Indemnification
-----------------------------
6.3.1. Purchaser's Claims. With respect to Purchaser's Claims, following
------------------
receipt of notice from an Indemnified Party of a Claim, the Vendor shall have 30
days to make such investigation of the Claim as the Vendor considers necessary
or desirable. For the purpose of such investigation, the Indemnified Party shall
make available to the Vendor and its authorized representatives the information
relied upon by the Indemnified Party to substantiate the Claim. If the
Indemnified Party and the Vendor agree at or prior to the expiration of such 30
day period (or any mutually agreed upon extension thereof) to the validity and
amount of such Claim, the Vendor shall immediately pay to the Indemnified Party
the full agreed upon amount of the Claim.
If the Indemnified Party and the Vendor do not agree within such period (or
any mutually agreed upon extension thereof), the Indemnified Party and the
Vendor
<PAGE>
-39-
agree that the dispute shall be submitted to arbitration pursuant to the
Arbitration Act, 1991 (Ontario). Such dispute shall not be made the subject
matter of an action in a court of law or equity by either the Indemnified Party
or the Vendor unless the dispute has first been submitted to arbitration and
finally determined in accordance with the provisions of Schedule Q. Any such
action commenced thereafter shall only be for judgment in accordance with the
decision of the arbitrators and the costs incidental to the action. In any
such action the decision of the arbitrators shall be conclusively deemed to
determine the rights and liabilities as between the parties to the arbitration
in respect of the matter in dispute.
6.3.2. Third Party Claims. With respect to any Third Party Claim, provided
------------------
that it shall have confirmed in writing its obligation to indemnify the
Indemnified Party in respect of any potential liability arising therefrom, the
Vendor shall have the right, at its own expense, to participate in or assume
control of the negotiation, settlement or defence of such Third Party Claim and,
in such event, the Vendor shall reimburse the Indemnified Party for all the
Indemnified Party's out-of-pocket expenses as a result of such participation or
assumption. If the Vendor elects to assume such control, the Indemnified Party
shall cooperate with the Vendor, and shall have the right to participate in the
negotiation, settlement or defence of such Third Party Claim and to retain
counsel to act on its behalf, provided the fees and disbursements of such
counsel shall be paid by the Indemnified Party unless the Vendor consents to the
retention of such counsel or unless the named parties to any action or
proceeding include both the Vendor and the Indemnified Party and the
representation of both the Vendor and the Indemnified Party by the same counsel
would be inappropriate due to the actual or potential differing interest between
them (such as the availability of different defences). If the Vendor, having
elected to assume such control, thereafter fails to defend the Third Party Claim
within a reasonable time, the Indemnified Party shall be entitled to assume such
control and the Vendor shall be bound by the results obtained by the Indemnified
Party with
<PAGE>
-40-
respect to such Third Party Claim. The Vendor agrees to consult with the
Indemnified Party with respect to the selection and retention of
counsel.
6.4. Additional Rules and Procedures
-------------------------------
Notwithstanding any other provision of this Agreement, the
obligation of the Vendor to indemnify an Indemnified Party shall be subject to
the following:
6.4.1. Any Claim arising as a result of a breach of a
representation or warranty contained in this Agreement shall be made not
later than the date on which, pursuant to section 3.4. such
representation or warranty terminated.
6.4.2. The Vendor's obligation to indemnify the Indemnified Party
shall apply only to the extent that the Claims of one or more
Indemnified Parties, including the Claim in question, exceed $1,000,000
in the aggregate; provided that this limitation shall not apply to the
Claims referred to in sections 6.1.3, 6.1.4 or 6.1.5 in respect of which
Claims the Vendor shall have an absolute obligation to indemnify in
accordance with such sections and any such Claims shall not be treated
as Claims in calculating the aggregate amount of Claims for the purposes
of this section 6.4.2.
6.4.3. In the event that any Third Party Claim is of a nature such
that the Indemnified Party is required by applicable law to make a
payment to any Person (a "Third Party") with respect to such Third Party
Claim before the completion of settlement negotiations or related legal
proceedings, the Indemnified Party may make such payment and the Vendor
shall, forthwith after demand by the Indemnified Party, reimburse the
Indemnified Party for any such payment, subject to the limitation in
section 6.4.2. If the amount of any liability of the Indemnified Party
under the Third Party Claim in respect of which such a payment was made,
as finally determined (net of any repayments or refunds by the Third
Party to the Indemnified Party), is less than the amount which was paid
by
<PAGE>
-41-
the Vendor to the Indemnified Party, the Indemnified Party shall,
forthwith, pay the amount of such difference to the Vendor.
6.4.4. Except in the circumstance contemplated by section 6.4.3, and
whether or not the Vendor assumes control of the negotiation, settlement or
defence of any Third Party Claim, the Indemnified Party shall not
negotiate, settle, compromise or pay any Third Party Claim except with the
prior written consent of the Vendor (which consent shall not be
unreasonably withheld), unless the Vendor fails to have confirmed its
obligation to indemnify in accordance with section 6.3.2.
6.4.5. The Indemnified Party shall not permit any right of appeal in
respect of any Third Party Claim to terminate without giving the Vendor
notice thereof and an opportunity to contest such Third Party Claim.
6.4.6. The Indemnified Party and the Vendor shall cooperate fully with
each other with respect to Third Party Claims, shall keep each other fully
advised with respect thereto (including supplying copies of all relevant
documentation promptly as it becomes available) and shall each designate a
senior officer who will keep himself informed about and be prepared to
discuss the Third Party Claim with his counterpart and with counsel at all
reasonable times.
6.4.7. Notwithstanding section 6.3.2, the Vendor shall not settle any
Third Party Claim or conduct any related legal or administrative proceeding
in a manner which would, in the opinion of the Purchaser, acting
reasonably, have a material adverse impact on the Purchaser.
6.5. Indemnification by the Purchaser
--------------------------------
The Purchaser shall indemnify and save the Vendor and its affiliates,
directors, officers, agents and employees harmless for and from all claims,
demands, payments, liabilities,
<PAGE>
-42-
costs or expenses arising under or by reason of the agreement referred to in
section 4.1.6. including legal fees incurred by the Vendor. The Vendor shall
promptly give notice to the Purchaser of any claim for indemnification pursuant
to this section 6.5 provided, however, that the failure to give prompt notice of
a claim shall not relieve the Purchaser of its obligations hereunder except and
to the extent that the Purchaser is prejudiced by such failure. The provisions
of section 6.3.2 and Sections 6.4.3 to 6.4.7, inclusive, shall apply, mutatis
mutandis, to all claims for indemnity by the Vendor under this section 6.5.
ARTICLE 7.
----------
CLOSING
-------
7.1. Location and Time of the Closing
--------------------------------
The Closing shall take place at the Time of Closing on the Closing
Date at the offices of Vendor's Counsel.
7.2. Deliveries at the Closing
-------------------------
At the Closing, the Vendor shall deliver the share certificates
representing the Purchased Shares and such other documents as are required or
contemplated to be delivered by the Vendor or the Vendor's Counsel pursuant to
this Agreement, and the Purchaser shall pay the Purchase Price and shall deliver
such documents as are required or contemplated to be delivered by the Purchaser
or the Purchaser's Counsel pursuant to this Agreement.
<PAGE>
-43-
ARTICLE 8.
----------
GENERAL MATTERS
---------------
8.1. Confidentiality
---------------
If the transaction contemplated by this Agreement is not completed, the
Purchaser shall not, except as contemplated below, directly or indirectly use
for its own purposes or communicate to any other Person any confidential
information or data relating to the Vendor, the Corporation or to the Business
which become known to the Purchaser, its accountants, legal advisers or
representatives as a result of the Vendor making the same available in
connection with the transaction contemplated hereby. The foregoing shall not
prevent the Purchaser from disclosing or making available to its accountants,
professional advisers and bankers and other lenders, whether current or
prospective, any such information or data and shall not apply to any information
that (a) is known to the Purchaser prior to being disclosed to the Purchaser by
the Vendor or the Corporation, (b) subsequently becomes available to the
Corporation from a Person (other than the Vendor or the Corporation or their
officers, employees, agents or representatives), who is not in violation of any
confidentiality obligation owed to the Vendor or the Corporation, (c) is or
becomes generally available to the public, or (d) is required to be disclosed by
the Purchaser by law.
8.2. Expenses
--------
Each of the Vendor and the Purchaser shall be responsible for the
expenses (including fees and expenses of legal advisers, accountants and other
professional advisers) incurred by them, respectively, in connection with the
negotiation and settlement of this Agreement and the completion of the
transaction contemplated hereby.
<PAGE>
-44-
8.3. Assignment
----------
Except as provided in this section, no party may assign its rights or
benefits under this Agreement. The Purchaser may assign its rights hereunder to
a corporation legally controlled directly or indirectly by the Purchaser
provided, however, that such assignment shall not release the Purchaser from its
obligations under this Agreement.
8.4. Notices
-------
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be given by prepaid first-class mail, by
facsimile or other means of electronic communication or by hand-delivery as
hereinafter provided. Any such notice or other communication, if mailed by
prepaid first-class mail at any time other than during a general discontinuance
of postal service due to strike, lockout or otherwise, shall be deemed to have
been received on the fourth Business Day after the post-marked date thereof, or
if sent by facsimile or other means of electronic communication, shall be deemed
to have been received on the Business Day following the sending, or if delivered
by hand shall be deemed to have been received at the time it is delivered to the
applicable address noted below either to the individual designated below or to
an individual at such address having apparent authority to accept deliveries on
behalf of the addressee. Notice of change or address shall also be governed by
this section. In the event of a general discontinuance of postal service due to
strike, lock-out or otherwise, notices or other communications shall be
delivered by hand or sent by facsimile or other means of electronic
communication and shall be deemed to have been received in accordance with this
section. Notices and other communications shall be addressed as follows:
<PAGE>
-45-
(a) if to the Vendor:
Moore Corporation Limited
P.O. Box 78, 1 First Canadian Place
Toronto, Ontario
M5X 1G5 Canada
Attention: Chief Financial Officer
Telecopier Number: (416) 364-3364
with a copy to:
Tory Tory DesLauriers & Binnington
Suite 3000, Aetna Tower
P.O. Box 270
Toronto-Dominion Centre
Toronto, Ontario
M5K 1N2 Canada
Attention: James E. A. Turner
Telecopier Number: (416) 865-7380
(b) if to the Purchaser:
Pierce Leahy Corp.
631 Park Avenue
King of Prussia, PA
19406 U.S.A.
Attention: J. Peter Pierce, President
Telecopier Number: (610) 992-8394
with a copy to:
<PAGE>
-46-
Cozen and O'Connor
1900 Market Street
Philadelphia, PA
19103 U.S.A.
Attention: Richard J. Busis
Telecopier Number: (215) 665-2013
Notwithstanding the foregoing, any notice or other communication required or
permitted to be given by either party pursuant to or in connection with any
arbitration procedures contained herein or in any Schedule hereto may only be
delivered by hand.
The failure to send or deliver a copy of a notice to the Purchaser's
Counsel or the Vendor's Counsel, as the case may be, shall not invalidate any
notice given under this section.
8.5. Public Announcements
--------------------
No press release, general communication (oral or written) to employees
of the Corporation or other Persons or other general announcement or disclosure
concerning the transaction contemplated by this Agreement shall be made by the
Vendor or by the Purchaser without the prior written consent of the other (such
consent not to be unreasonably withheld or delayed); provided, however, that
any party may, without such consent make any such disclosure where the same is
required by law or by any stock exchange on which any of the securities of such
party or any of its affiliates are listed or by any securities commission or
other similar regulatory authority having jurisdiction over such party or any of
its affiliates, and if such disclosure is required, the party making the
disclosure shall use reasonable commercial efforts to give prior oral or written
notice to the other, and if such prior notice is not possible, to give such
notice immediately following the making of such disclosure.
8.6. Reasonable Commercial Efforts
-----------------------------
The parties acknowledge and agree that, for all purposes of this
Agreement (unless expressly provided otherwise), an obligation of a party to use
all reasonable commercial
<PAGE>
-47-
efforts to obtain any waiver, consent, approval, permit, license, release or
other document shall not require such party to pay any monies or give any
other consideration for the purpose of procuring same, provided that the Vendor
shall pay reasonable legal fees incurred by third parties (if requested by the
third party to make such payment) in connection with a request by the Vendor
for a consent or approval required under this Agreement and the expenses of the
Vendor (including the fees and disbursements of Vendor's Counsel) in obtaining
such consents and approvals.
8.7. Time of Essence
---------------
Time is of the essence of this Agreement.
8.8. Further Assurances
------------------
Each of the parties shall promptly do, make, execute, deliver, or
cause to be done, made, executed or delivered, all such further acts, documents
and things as the other party hereto may reasonably require from time to time
for the purpose of giving effect to this Agreement and shall use reasonable
efforts and take all such steps as may be reasonably within its power to imple-
ment to their full extent the provisions of this Agreement.
<PAGE>
8.9. Counterparts
------------
This Agreement may be signed in counterparts and each such
counterpart shall constitute an original document and such counterparts, taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties hereto have executed this Agreement.
MOORE CORPORATION LIMITED
By: [SIGNATURE APPEARS HERE]
----------------------------------------
[SIGNATURE APPEARS HERE]
----------------------------------------
PIERCE LEAHY CORP.
By: /s/ J. Peter Pierce
----------------------------------------
J. Peter Pierce, President
----------------------------------------
<PAGE>
Exhibit 10.6
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into on this __ day of April,
1996, by and among SECURITY ARCHIVES, INC., a Texas corporation, with its
principal offices at 1707 Wall Street, Dallas, Texas 75250-0880 (the "Company"),
PATRICK G. CLAYTON, CAROL A. CLAYTON and BYRON WOOD CLAYTON (collectively, the
"Shareholders"), and PIERCE LEAHY CORP., a New York corporation, with its
principal offices at 631 Park Avenue, King of Prussia, Pennsylvania 19406
("Purchaser").
WITNESSETH:
The Company is engaged in the business of storage and management of
business type records as well as providing document disintegration services (the
"Business"). The Shareholders own all of the issued and outstanding shares of
capital stock of the Company, the number of such shares owned by each
Shareholder being set forth opposite his or her respective name on Exhibit A
hereto. Purchaser desires to purchase, and the Shareholders desire to sell, all
of the issued and outstanding shares of capital stock of the Company (the
"Shares").
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual agreements and covenants hereinafter set forth, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
Section 1.1 Purchase and Sale of Shares. On the Closing Date (as
---------------------------
hereinafter defined), the Shareholders shall convey, transfer, assign and
deliver the Shares to Purchaser, free and clear of all liens, encumbrances,
security interests, pledges and claims of every kind, nature and description,
and Purchaser shall purchase and accept the Shares from the Shareholders.
Section 1.2 Purchase Price. [Portions of this Section have been
--------------
omitted as confidential and filed separately with the Securities and Exchange
Commission.]
(a) Purchase Price. The consideration to be paid to the Shareholders
--------------
for the Shares shall be (the Purchase Price"), which
shall be paid on the Closing Date as follows:
(i) Purchaser shall pay to the Shareholders, pro rata in
accordance with their respective
1
<PAGE>
holdings of the Shares as specified on Exhibit A hereto, the
sum of by wire
transfer of federal funds to an account(s) at a bank(s)
designated by the Shareholders; and
(ii) Purchaser shall pay to
May Financial Corporation, as escrow agent (the "Escrow
Agent"), in accordance with the terms and conditions of the
Escrow Agreement attached hereto as Exhibit B, to be held by
the Escrow Agent pursuant to the terms of the Escrow
Agreement.
Section 1.3 Date, Time and Place of Closing. The transactions provided
-------------------------------
for in this Agreement shall be consummated (the "Closing") at 10:00 a.m., local
time, on April 30, 1996, at the officers of Messrs. Erhard, Ruebel & Jennings,
3030 LTV Tower, 1525 Elm Street, Dallas, Texas, or at such other place and time
as Purchaser and the Shareholders shall mutually agree. The date and time of
Closing is hereinafter sometimes called the "Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
As a material inducement to Purchaser to enter into this Agreement and
purchase the Shares, the Shareholders and the Company, in each case, jointly and
severally, make the following representations and warranties to Purchaser:
Section 2.1 Status; Authority. The Company is a corporation duly
-----------------
organized, validly existing and in good standing under the laws of the State of
Texas and has full power and authority to own its properties and to carry on the
Business as presently conducted by it. The Company is duly qualified to do
business and is in good standing in all other jurisdictions where the conduct of
its business so requires. The Company has the full legal right and power
required to execute and deliver this Agreement and any and all agreements,
documents or instruments to be executed and/or delivered in connection herewith
and to perform its obligation hereunder and thereunder. The minute books, stock
ledgers and stock records of the Company which have heretofore been provided to
Purchaser are complete and accurate and all signatures included therein are the
genuine signatures of the persons whose signatures are required. True, correct
and complete copies of the Articles of Incorporation and By-laws of the Company,
and all amendments to both, have been delivered to Purchaser. The Shareholders
each have the full personal right and power required to execute and deliver this
Agreement and any and all agreements, documents or instruments
2
<PAGE>
to be executed and/or delivered in connection herewith and to perform their
obligations hereunder and thereunder.
Section 2.2 Authorization; Effective Agreement. The Board of Directors of
----------------------------------
the Company and the Shareholders have duly authorized and approved the execution
and delivery of this Agreement and the performance of the transactions provided
for herein. No other action by the Company or any of its officers, directors or
shareholders is required in connection with the foregoing. This Agreement is a
legal, valid and binding obligation of the Company and each Shareholder and is
enforceable against the Company and each Shareholder in accordance with its
terms. The execution, delivery and performance of this Agreement by the Company
and each Shareholder and the consummation of the transactions provided for
herein do not and will not: (i) conflict with, violate or result in the breach
of any of terms or conditions of, or constitute a default under (A) the Articles
of Incorporation or Bylaws of the Company, (B) any contract, agreement,
commitment, indenture, mortgage, pledge, note, bond, license, permit or other
instrument or obligation to which the Company or any Shareholder is a party or
by which the Company or any Shareholder or any of their assets or properties are
bound or affected, or (C) any law, regulation, ordinance or decree to which the
Company or any Shareholder or any of their assets or properties are subject, or
(ii) result in the creation or imposition of any lien, security interest,
encumbrance, restriction or right, including rights of termination or
cancellation, in or with respect to, or otherwise materially adversely effect,
the Company or any Shareholder or any of their assets or properties.
Section 2.3 Capital Stock. The Company has an authorized capital
-------------
consisting of 100 shares of Common Stock, par value $50 per share, of which 56
shares are held in the Treasury of the Company and 44 shares are validly issued
and outstanding, fully paid and non-assessable. The Shareholders are the
registered and beneficial owners of all of the outstanding capital stock of the
Company which are held in the amounts set forth on Exhibit A hereto. The Shares
are free and clear of all liens, encumbrances, security interests, pledges and
claims of any kind or nature. There are no options, warrants, rights or other
instruments or agreements giving any person the right to acquire any shares of
the capital stock of the Company nor are there any commitments to issue or
execute any such options, warrants, rights, instruments or agreements.
Section 2.4 Subsidiaries and Joint Ventures. The Company has no
-------------------------------
subsidiaries and does not own, directly or indirectly, any capital stock,
security, partnership interest or other interest of any kind in any corporation,
partnership, joint venture, association or other entity.
Section 2.5 Directors, Officers, Bank Accounts. Schedule 2.5 is a correct
---------------------------------- ------------
and complete list of (i) the directors of the Company,
3
<PAGE>
(ii) the officers of the Company, (iii) the bank accounts and safe deposit boxes
of the Company, and (iv) the persons authorized to sign checks drawn on such
accounts and to have access to such safe deposit boxes.
Section 2.6 Management Agreements. Schedule 2.6 attached hereto is a list
--------------------- ------------
as of February 29, 1996 of all customers whose files and records are stored,
held and maintained by the Company in cartons and containers and otherwise and
further indicates which thereof are subject of written agreements between the
Company and such customers (collectively, the "Management Agreements"). The
rights and benefits of the Company under and pursuant to the Management
Agreements are presently the property of the Company and will be the property of
the Company at the Closing, except for items or files returned to customers in
the ordinary course of business between March 1, 1996 and the Closing Date. No
Management Agreement has been pledged as collateral or is subject to any
security agreement, lease, conditional sales contract or other title retention
or security arrangement. Also included with Schedule 2.6 is a true, correct and
------------
accurate copy of all forms of Management Agreement used by the Company.
Section 2.7 Financial Statements.
--------------------
(a) Financial Statements. Schedule 2.7 contains the balance sheets of
-------------------- ------------
the Company at June 30, 1995 (the "1995 Balance Sheet") and March 31, 1996, and
statements of earnings and cash flows of the Company for the fiscal year ended
June 30, 1995 and the nine (9) months ended March 31, 1996. Such statements
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods reported upon and present fairly and
accurately the financial position of the Company and the results of operations
for the periods reported upon, subject, in the case of the unaudited financial
statements, to normal year-end accruals and audit adjustments (none of which are
expected to be material) and the absence of footnotes. The balance sheets at
June 30, 1995 and March 31, 1996 and the statements of earnings for the fiscal
year and nine (9) month period ended June 30, 1995 and March 31, 1996 are
sometimes herein called the "Financial Statements".
(b) Accounts Receivable. The accounts receivable of the Company
-------------------
constitute a valid claim in the full amount thereof against the debtor charged
therewith on the books of the Company, as the case may be, have been acquired in
the ordinary course of the Company's business, and no such account receivable
has arisen from any transaction with the United States or any department or
agency thereof. To the best knowledge of each Shareholder and the Company,
each such account receivable is fully collectible to the extent of the face
value thereof (less the amount of the reserve for doubtful accounts, if any,
reflected on the books of the Company with respect to such account); provided,
however, that the
4
<PAGE>
aggregate amount of all non-fully collectable accounts receivables does not
exceed $20,000. No account debtor has any valid setoff, deduction or defense
with respect thereto and no account debtor has asserted any such setoff,
deduction or defense.
Section 2.8 Liabilities. The Company has no liabilities, whether related
-----------
to tax or non-tax matters, due or not yet due, liquidated or unliquidated, fixed
or contingent, or otherwise, and not incurred in the ordinary course of
business, except as and to the extent reflected on the Financial Statements or
as set forth on Schedule 2.8 attached hereto.
------------
Section 2.9 Real Property.
-------------
(a) The Company holds fee simple title to the real property listed or
described on Schedule 2.9 attached hereto, together with (a) all buildings,
------------
structures, improvements, fixtures, facilities and construction in progress
located on such real property, including all heating, ventilation, electrical,
plumbing and other mechanical or operational systems, (b) all rights, benefits,
privileges, easements, rights-of-way, air rights, use rights, rights to adjacent
streets or alleys, riparian rights, water rights, development rights, surface
rights, subsurface rights, access rights, reversionary rights and rights under
any covenants, conditions or restrictions, benefitting, belonging or pertaining
to any part of such real property, (c) all right, title and interest of the
Company or any Shareholder in, to or under all strips and gores and any land
lying in the bed of any street, road or alley, open or proposed, adjoining any
of such real property, and (d) all other property around, adjoining or
contiguous to any part of such real property owned, claimed or used by the
Company or in connection with the Business (collectively, the "Real Property").
The Company does not conduct any portion of the Business or keep and maintain
any of its assets in any location other than the Real Property; and the Company
does not occupy any realty as a tenant or licensee under a written or oral lease
or license.
(b) The Company has delivered or caused to be delivered to Purchaser
true, complete and correct copies of all documents evidencing its ownership of
the Real Property, including any survey plans thereof. The Company has good and
marketable title to all of the Real Property, free and clear of all liens,
encumbrances and security interests except Permitted Exceptions (as described in
Section 7.9). With respect to the Real Property, none of the Permitted
Exceptions interferes with or prevents the continuation or expansion of current
operations or the conduct of planned future operations of the Business on the
Real Property. With respect to all documents which evidence the Company's title
or otherwise relate to the Real Property, Permits (as described in Section 2.23)
and Permitted Exceptions (collectively, the "Real Property Documents"), (i)
there is no default (or alleged default) under any
5
<PAGE>
of the Real Property Documents by any of the parties to the Real Property
Documents, nor has any event occurred which, with the passage of time or notice,
or both, would constitute a default under or violation of the terms (or permit
the termination of) any of the Real Property Documents; and (ii) none of the
transactions or documents required or contemplated by this Agreement will
constitute or create a default or event of default under (or permit the
termination of or require third party consent or other action pursuant to) any
of the Real Property Documents. None of the Real Property Documents shall be
amended or terminated by the Company or by any Shareholder without the prior
written consent of Purchaser.
(c) The Company has not leased or sublet, as lessor or sublessor, and
no third party is in possession of, any of the Real Property.
(d) Neither the whole nor any portion of any tract of the Real
Property has been condemned, requisitioned or otherwise taken by any
governmental authority and, to the best knowledge of each Shareholder or the
Company, no such condemnation, requisition or taking is threatened or
contemplated
(e) Except as described on Schedule 2.9 hereof, the structures,
------------
improvements and fixtures at or upon the Real Property, including, but not
limited to, roofs and structural elements thereof and the electrical, plumbing,
heating, ventilation, air conditioning and similar units and systems, have to
date been reasonably maintained and are in good operating condition for their
intended use subject to the provision of usual and customary maintenance and
repair performed in the ordinary course of business with respect to similar
properties of like age and construction
(f) All facilities located on the Real Property are supplied with
utilities and other services necessary for the operation of such facilities as
presently operated, and all of such services are adequate to conduct that
portion of the Business as presently is conducted at such facility
(g) None of the Real Property is located in either a special service
district or an area for which federal flood risk insurance is necessary.
(h) There is no water diffusion or other intrusion into any buildings,
structures or other improvements included in the Real Property which would
impair the value or use thereof in connection with the conduct of the Business.
(i) No notice of any increase in the assessed valuation of the Real
Property and no notice of any contemplated special assessment has been received
by the Company and, to the best knowledge of each Shareholder or the Company,
except with respect to the portion of the Real Property located at 1819 South
Lamar
6
<PAGE>
Street, Dallas, Texas, there is no threatened special assessment pertaining to
any of the Real Property.
Section 2.10 Personal Property. Schedule 2.10 attached hereto is a list
----------------- -------------
of all personal property owned by the Company or used by the Company in the
Business ("Personal Property"), including, without limitation, all equipment
(telecommunications and computer equipment included), fixtures and furnishings,
storage racking, and inventory items, such as folding cartons, containers and
other storage materials. The Personal Property also includes lists of all
customers of the Business and the books and records (whether electronically
maintained or otherwise) which will provide Purchaser with the ability to
generate such lists, as well as all business addresses, post office boxes,
telephone, telex and telecopier numbers and marketing and administrative data.
Also included among the Personal Property is the computerized records management
and billing system currently utilized by the Company to manage the Business.
The Company has good and marketable title to, and is the absolute owner of, all
of the Personal Property, free and clear of all liens and encumbrances, except
the Company leases or licenses the Personal Property described as leased or
licensed on Schedule 2.10. All of the Personal Property is in good operating
-------------
condition and repair and does not require any repairs other than normal routine
maintenance to maintain the Personal Property in good operating condition and
repair.
Section 2.11 Trade Names, Trademarks and Service Marks. The corporate
-----------------------------------------
name of the Company and the trade names and trademarks listed on Schedule 2.11
-------------
are the only names and trademarks which are used by the Company in the operation
of the Business. The Company is the sole and exclusive owner of its trade names
and trademarks and has the sole and exclusive right to use the trade names and
trademarks. No claim has been asserted against the Company that its trade names
or trademarks conflict with the trade names, trademarks, corporate names or
other proprietary rights of others, and the Company has no knowledge of any
basis for any such claim or conflict. The Company does not own any patents, and
has no patent applications pending and, to the Company's knowledge, the Company
is not engaged in any activity which infringes upon any patent, patent
application, trademark, trade name, copyright or proprietary right of any other
party.
Section 2.12 Insurance. The Company maintains insurance policies bearing
---------
the numbers, for the terms, with the companies, in the amounts, providing the
general coverage, and with the premiums set forth on Schedule 2.12. All of such
-------------
policies are in full force and effect and the Company is not in default of any
provision thereof. The Company has not received notice from any issuer of any
such policies of its intention to cancel or refusal to renew any policy issued
by it.
Section 2.13 Taxes.
-----
7
<PAGE>
(a) For purposes of this Agreement: "Tax" and "Taxes" shall mean any
federal, state (including the District of Columbia), local, foreign (including
possessions or territories of the United States) or other tax (whether income,
excise, sales or use, ad valorem, franchise, real or personal property,
transfer, employment, or any other kind of tax no matter how denominated), or
any assessment, customs duty, levy, impost, withholding, or other governmental
charge in the nature of a tax, and shall include all additions to tax, interest,
penalties and fines with respect thereto. "Return" and "Returns" shall mean all
reports, estimates, information statements and returns of any nature, including
amended versions of any of the foregoing, relating to or required to be filed in
connection with any Taxes pursuant to the statutes or regulations of any
federal, state, local or foreign government taxing authority.
(b) The Company has not within any applicable period of limitations
relating to Taxes been included in a consolidated federal income tax return
filed by any common parent of a consolidated group under Section 1501 et seq. of
-- ----
the Code.
(c) There have been or will have been filed all Returns that are
required to be filed on or before the Closing Date (giving regard to valid
extensions) by the Company, in each case in respect of the Company or its
businesses. All of such Returns are or will be true, accurate and complete in
all material respects. Schedule 2.13 contains a list of all such Returns
-------------
required to be filed since January 1, 1991; true and correct copies of such
Returns as filed (including any amended Returns) have been provided to
Purchaser. None of such Returns contains (or is required to contain) a
disclosure statement under Section 6662(d) of the Code (or any predecessor
provision) or any similar provision of state, local or foreign law which is
necessary to avoid penalties under Sections 6662(b) or 6662(d) of the Code.
(d) All Taxes for which the Company is or will be liable (or that are
imposed in respect to the Company) and that are due on or before the Closing
Date (including without limitation Taxes shown to be due on all Returns filed on
or before the Closing Date and any Taxes for which the Company is liable in
relation to the transactions contemplated herein) have been paid or will be paid
in full on or before the Closing Date, and all Taxes which are required to be
withheld or collected by the Company have been duly withheld and collected and,
to the extent required, have been paid to the appropriate governmental authority
or properly deposited as required by applicable law. The Financial Statements
accurately reflect accruals or reserves for all liabilities for Taxes accrued by
the Company on or prior to the date of the Financial Statements. Since the date
of the 1995 Balance Sheet, the Company has not incurred or accrued any liability
for Taxes other than in connection with transactions in the ordinary course of
business,
8
<PAGE>
and neither has changed its method of accounting for Taxes or any method of
accounting used in calculating Taxes.
(e) As of the date of this Agreement, no taxing authority has asserted
or threatened to assert any deficiency or assessment, or proposed (formally or
informally) any adjustment, for any Taxes against the Company, except for the
Taxes listed on Schedule 2.13(e), and neither any Shareholder nor the Company
----------------
knows of any audit or investigation by any taxing authority with respect to any
Tax liability of the Company except as set forth on Schedule 2.13(e). In the
----------------
event the Company or any Shareholder becomes aware of any such asserted or
threatened deficiency or assessment, or any investigation or audit, after the
date of this Agreement, the Shareholders will immediately notify Purchaser of
same.
(f) As of the Closing Date, the Company will not be required to file
any foreign Return and will not be subject to any foreign Tax. Schedule 2.13
-------------
sets forth all foreign returns required to be filed by the Company since January
1, 1991 and all foreign Taxes for which the Company has been liable since
January 1, 1991 or will be liable as of the Closing Date.
(g) Except as set forth on Schedule 2.13, neither the Shareholders or
-------------
any of them nor the Company has entered into, or will, at any time until the
Closing Date, enter into any contract or arrangement with any "disqualified
individual" within the meaning of Section 28G(c) of the Code with respect to the
Company which may result in the making of any "parachute payment" within the
meaning of Section 28G(b)(2) of the Code to any such "disqualified individual."
(h) Schedule 2.13 sets forth the amount, as of the date of the
-------------
Financial Statements, of (i) all federal, state or local net operating loss, tax
credit or charitable contribution carryovers available to the Company and (ii)
the tax basis of the Company's assets, by reasonable category, reflected in the
Financial Statements, and includes an explanation of how such items are
reflected in the Financial Statements. The Company has provided to Purchaser
complete and accurate workpapers supporting the "Deferred Taxes" or other
similar account on the Financial Statements.
(i) Schedule 2.13 sets forth all federal income tax elections that
-------------
have been made or will be made by any Shareholder or the Company with respect to
the Company with respect to any period ending on or prior to the Closing Date
that will apply to any subsequent period.
(j) The Company is not a party to nor has assumed (i) any "safe
harbor" lease described in Section 168(f)(8) of the Internal Revenue Code of
1954; (ii) any corporate acquisition indebtedness" as defined in Section 279(b)
of the Code or any obligations described in Section 279(a) of the Code; (iii)
any
9
<PAGE>
agreement with respect to industrial development bonds or similar tax-exempt
obligations the tax characteristics of which may be affected by the transactions
contemplated by this Agreement; (iv) any waiver or agreement extending the
statute of limitations with respect to any Tax; (v) any tax sharing or similar
agreement; or (vi) any power of attorney currently in force with respect to
Taxes.
(k) None of the following has been filed with respect to the Company:
(i) a consent described in Section 341(f) of the Code; (ii) any deemed or actual
elections under Section 338 of the Code; or (iii) any request for a ruling by a
Tax authority or similar matter.
(l) The Company has provided to Purchaser complete information
regarding the procedures followed for filing state and local sales and use Tax
Returns by or on behalf of the Company; (ii) the procedures followed for filing
real, personal and intangible property Tax Returns by or on behalf of the
Company; and (iii) the method used by or on behalf of the Company for
determining whether a nexus exists in a particular jurisdiction for purposes of
income, franchise, sales and use Taxes, including the manner in which the
Company solicits and maintains business in each jurisdiction in which it has or
does business.
(m) The Company has provided to Purchaser a true and correct copy of
any and all correspondence of the Company with the Internal Revenue Service (the
"Service"), including but not limited to all Revenue Agent Response letters
prepared by the Service with respect to the Taxes owed and Returns prepared by
the Company since January 1, 1991.
(n) The Company is not, and has not been at any time during the five-
year period ending on the Closing Date, a "United States real property holding
corporation" as defined in Section 897(c) of the Code and applicable regulations
thereunder.
Section 2.14 No Payment to Shareholders or Others. Except as set forth on
------------------------------------
Schedule 2.14, since June 30, 1995, there has not been any purchase or
- -------------
redemption of any shares of stock of the Company or any transfer, distribution
or payment by it, directly or indirectly, of any money or other property or
assets to any Shareholder or to any other person, other than payment of
liabilities shown on the 1995 Balance Sheet on or after the scheduled maturity
or due date thereof, payment of compensation for services actually rendered at
rates not in excess of the rates prevailing on the date of the Balance Sheet,
payments due under the Corporation Agreements, and payments in the ordinary
course of business for goods and services in arm's length transactions.
Section 2.15 Legal Matters. Except as set forth on Schedule 2.15, the
------------- -------------
Company is not a party to or, to the best knowledge of
10
<PAGE>
each Shareholder and the Company, threatened with, any suit, action, arbitration
or other legal or administrative proceeding or governmental inquiry or
investigation by which the Company, its assets or the Business would be
adversely effected. There are no judgments, orders, decrees or awards before
any court, department, commission, board, instrumentality or arbitrator which
affects the Company, its assets or the Business.
Section 2.16 Contracts, Leases, Agreements and Other Commitments. The
---------------------------------------------------
Company is not a party to or bound by any written, oral or implied contract,
agreement, lease, power of attorney, guaranty, surety agreement, or other
commitment except for the following (collectively, the "Corporation
Agreements"):
(a) the Management Agreements described on Schedule 2.6;
------------
(b) agreements involving a maximum possible liability or obligation
on the part of the Company of less than $5,000 each and less than
$15,000 in the aggregate; and
(c) the agreements listed on Schedule 2.16 attached hereto.
-------------
True, correct and complete copies of all of the Corporation
Agreements, including all amendments thereto, have been delivered to Purchaser.
Except as shown on Schedule 2.16, the Company and all other parties to all of
-------------
the Corporation Agreements have performed all of the obligations required to be
performed under the Corporation Agreements, and neither the Company nor any
other party is in default or in arrears under the terms thereof, and no
condition exists or event has occurred which, with the giving of notice or lapse
of time or both, would constitute a default under such Corporation Agreements.
The consummation of the transactions provided for in this Agreement will not
result in an impairment or termination of any of the Company's rights under any
Corporation Agreement and do not require the consent of or notice to any party
other than the Company. None of the terms or provisions of any Corporation
Agreement materially adversely affects the Assets or Business of the Company.
Schedule 2.16 also contains a listing of all outstanding written and oral
proposals, bids, offers, guaranties, advances or credit granted which, if
accepted, could impose any debts, obligations or liabilities upon Purchaser
after the Closing Date.
Section 2.17 Employees and Employment Contracts.
----------------------------------
(a) Employees. Schedule 2.17 is a complete and accurate list as of
--------- -------------
February 29, 1996 of all employees of the Business and their positions and
salaries the Company shall deliver at the
11
<PAGE>
Closing Schedule 2.17 revised to reflect changes therein up to the date of the
-------------
Closing.
(b) Union Representation, Compliance With Employment Law. The Company
----------------------------------------------------
is not a party to any union agreement or collective bargaining agreement, or to
any written or oral employment agreement with any of its employees, and is in
compliance with all laws respecting employment and employment practices, terms
and conditions of employment and wages and hours. The Company is not aware of
any union organizing activity involving its employees or the Business. There is
no complaint filed or threatened to be filed against the Company before any
federal, state or local governmental or quasigovernmental agency or authority
alleging violation of law (federal, state or local) relating to employment
practices or discrimination in employment.
Section 2.18 Employee Pensions and ERISA.
---------------------------
(a) Except as set forth on Exhibit 2.18, the Company does not
------------
maintain, sponsor, contribute to or have any liability under any agreement,
plan, practice or program, whether written or oral, providing for bonus
payments, child or dependent care benefits, death benefits, accidental death and
dismemberment benefits, deferred compensation benefits, disability or other wage
continuation benefits, educational assistance or tuition benefits, health
benefits, paid holiday benefits, incentive compensation payments, leave of
absence rights, medical expense payment or reimbursement benefits, retiree
medical benefits, retiree life insurance benefits, profit sharing, pension or
other retirement benefits, stock option, stock appreciation rights or stock
purchase benefits, severance or termination pay or benefits (including post-
employment consulting arrangements) or vacation. Items of the nature described
in the prior sentence, whether involving the Company or any entity which would
be considered a single employer with the Company under Paragraph 4001(b)(1) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Paragraph 414(b), (c) or (m) of the Internal Revenue Code of 1986, as amended
(the "Code") (an "ERISA Affiliate"), are individually referred to as an
"Employee Benefit Plan" and collectively referred to as "Employee Benefit
Plans." Exhibit 2.18 includes, but is not limited to, each plan involving
employees of the Company and maintained or contributed to by the Company or an
ERISA Affiliate which is an "employee benefit plan" as such term is defined in
Paragraph 3(3) of ERISA. The Company has delivered to Purchaser a true and
complete copy of each Employee Benefit Plan covering employees of the Company,
including all texts, amendments and other agreements (whether formal or
informal) adopted in connection therewith. The Company has provided Purchaser a
true and complete copy of the most recently filed IRS Form 5500 (including
Schedule B) for each Employee Benefit Plan (other than a multi-employer plan)
that is subject to Title IV of ERISA.
12
<PAGE>
(b) No employee or former employee of the Company or an ERISA
Affiliate, and no beneficiary thereof, participates in or has any rights to
benefits, with respect to employment with the Company under any agreement, plan,
practice or program not listed on Exhibit 2.18. No person who is not a current
------------
or former employee (or a beneficiary thereof) of the Company participates in or
is entitled to any benefits under any plan listed on Exhibit 2.18.
------------
(c) No actions, suits or claims with respect to the Employee Benefit
Plans are pending or threatened, and the Company has no knowledge of any facts
which would reasonably be expected to give rise to or result in any such action,
suit or claim. The Company and its ERISA Affiliates are in compliance with all
requirements of applicable law relating to Employee Benefit Plans.
(d) No Employee Benefit Plan covering employees of the Company
provides post-employment medical, health or life insurance benefits for present
or future retirees or present or future terminated employees, except for
continuation coverage provided pursuant to the requirements of Paragraph 4980B
of the Code or Paragraphs 601-608 of ERISA or a similar state law, or continued
coverage under an insurance policy for a period not to exceed 60 days following
termination of employment.
(e) Except as set forth on Exhibit 2.18, neither the Company nor any
------------
of its ERISA Affiliates have maintained or maintain, contribute to or are
contingently liable for, any pension plan or retirement plan that is subject to
Title IV of ERISA.
(f) The fair market value of the assets of each Employee Benefit Plan
that is subject to Title IV of ERISA equals or exceeds such Plan's "benefit
liabilities" (as that term is defined in Section 4001(a)(16) of ERISA) as of the
date hereof.
Section 2.19 Consents. Except as set forth on Schedule 2.19, no consents,
-------- -------------
approvals, licenses, permits or waivers are required to execute and deliver this
Agreement and to consummate the transactions provided for herein, including the
sale of the Shares.
Section 2.20 Conflicts of Interest. Except as shown on Schedule 2.20, no
--------------------- -------------
partner, shareholder, director, officer or employee of the Company or of any of
its partners or any relative of any affiliate of any of the foregoing: (a) has
any pecuniary interest in any supplier or customer of the Company or in any
other business with which the Company conducts business or with which the
Company is in competition; (b) has any interest in any property or assets used
by the Company; or (c) has any contractual or other claim, express or implied,
of any kind whatsoever against the Company in connection with its assets or the
Business.
13
<PAGE>
Section 2.21 No Material Change. Since June 30, 1995, there has been no
------------------
material adverse change in the business, assets or financial condition of the
Company or the Business.
Section 2.22 Actions Since 1995 Balance Sheet Date. Except as set forth
-------------------------------------
on Schedule 2.22, since June 30, 1995, the Company:
-------------
(a) has not taken any action outside of the ordinary course of
business;
(b) has not borrowed any money or become contingently liable for any
obligation or liability of others;
(c) has paid all of its debts and obligations as they became due;
(d) has not incurred any debt, liability or obligation of any nature
to any party except for obligations arising in the ordinary course of business;
(e) has used its best efforts to preserve its business organization
intact, to keep available the services of its employees, and to preserve its
relationships with its customers, suppliers and others with whom it deals;
(f) has not knowingly waived any right of substantial value;
(g) has not purchased or redeemed any shares of its capital stock, or
transferred, distributed or paid, directly or indirectly, any money or other
property or assets to the Shareholders; and
(h) has not sold or otherwise issued any shares of its capital stock.
Section 2.23 Permits and Licenses. The Company holds all franchises,
--------------------
licenses, permits, consents, approvals, waivers and other authorizations
(collectively, the "Permits") which are necessary for the operation of its
Business, including, without limitation, all Permits issued by federal, state or
local governments and governmental agencies. The Company is not in default, nor
has the Company received any notice of any claim of default, with respect to any
of the Permits or of any notice of any other claim or proceeding or threatened
proceeding relating to any of the Permits. All of the Permits are in full force
and effect. The transactions provided for in this Agreement will not result in
the cancellation or termination of any of the Permits, and no consent from or
notice to any federal, state or local government or governmental agency is
required to transfer any Permit to the Purchaser.
14
<PAGE>
Section 2.24 Compliance with Laws. The Company is in compliance with all
--------------------
requirements of law, Federal, state and local, and all requirements of all
governmental bodies or agencies having jurisdiction over it, the operations of
the Business and the use of its assets, including the Real Property. The
Company has not received any notice, not previously complied with, from any
Federal, state or municipal authority or any insurance or inspection body, that
any of its properties (including the Real Property), facilities, equipment or
business procedures or practices fails to comply with any applicable law,
ordinance, regulation, building or zoning law, or requirement of any public
authority or body. There are no regulations or legislation pending before any
Federal, state, local or foreign or governmental body or legislature which, if
adopted, would have a materially adverse effect on its assets or the Business.
Section 2.25 Environmental Matters.
---------------------
(a) To the best knowledge of the Company, the Company's facilities and
all activities and conditions at the Real Property and at any real property now
or formerly owned or operated by the Company (collectively "the Property"),
including those involving the use and operation of the Business, are in
compliance with the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. (S)(S)9601 et seq., as amended from time to time
-- ----
("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C. (S)(S)6901 et
seq., as amended from time to time ("RCRA"), and with all other federal, state
and local environmental statutes, ordinances, regulations, orders and
requirements of common law, including without limitation, the discharge,
emission or release of any Contaminant (hereinafter defined) to the air, soil,
surface water or ground water; the discharge of any dredge or fill material to a
wetland or other water of the United States (as hereinafter defined); the
storage, treatment, disposal or handling of any Contaminant; or the
construction, operation, maintenance or repair of aboveground or underground
storage tanks (collectively, "Environmental Laws").
------------------
(b) To the best knowledge of the Company, no Contaminant that may
require remediation under any Environmental law is present on, over or under or
is migrating from the Property or under any premises adjacent to the Property.
The term "Contaminant" shall mean any "hazardous substance", "pollutant or
contaminant" as defined pursuant to CERCLA, "petroleum" as defined pursuant to
RCRA or any material containing petroleum, any polychlorinated biphenyls (PCBS)
or substances containing PCBS, any urea formaldehyde foam, or any asbestos or
materials containing asbestos.
(c) To the best knowledge of the Company, without any independent
investigation, neither radon nor any radon progeny is present at any area of the
Property in excess of 4 picocuries/liter.
15
<PAGE>
(d) The Company has not, nor to the best knowledge of the Company, has
anyone else, generated, stored, treated, disposed of, discharged, released,
emitted or otherwise handled any Contaminant on, over, under, from or in any
manner affecting the Property or any premises adjacent to the Property. For the
purposes of this subsection (d) only, "Contaminant" shall not include
construction materials (other than asbestos, polychlorinated biphenyls or urea
formaldehyde foam), office equipment, fuel and other similar products contained
in vehicles and cleaning solutions and other maintenance materials that are
customarily used or stored incidental to and are reasonably necessary for the
operation or maintenance of the Property.
(e) Except as set forth on Schedule 2.25, no underground or above
-------------
ground storage tanks are present at the Property.
(f) The Company has provided Purchaser with copies of all (i) permits,
licenses, certificates, registrations, approvals, and any amendments thereto
required for the Property and for the conduct of the Company's activities at the
Property pursuant to or necessary for compliance with Environmental Laws and any
materials submitted to any governmental agency in connection with any
Environmental Law; and (ii) records and analyses of any environmental tests
pertaining to the Property, including without limitation the results of any air,
water or soil analyses or tank integrity testing, which are in the possession of
the Company for the Property or the existence of which is known to the Company.
(g) No civil, criminal or administrative proceeding is pending or
threatened relating to Environmental Laws or Contaminants on, over, under, from
or affecting the Property; and the Company has not entered into any consent
order, consent decree, administrative order, judicial order or settlement
relating to Environmental Laws or Contaminants on, over, under, migrating from
or affecting the Property.
(h) The Company does not know or have reason to know of any lien
imposed, or any circumstance which might lead to imposition of a lien, upon its
revenues or personal or real property pursuant to any Environmental law.
Section 2.26 Statements and Other Documents Not Misleading. Neither this
---------------------------------------------
Agreement, including all Exhibits and Schedules, nor any other financial
statements, documents or instruments delivered by the Company or any Shareholder
to Purchaser in connection with this Agreement and the transactions contemplated
by this Agreement, contains or will contain any untrue statement of any material
fact or omits or will omit to state any material fact required to be stated to
make such statement, document or instrument not misleading.
16
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to
Shareholders that:
Section 3.1 Corporate Status. Purchaser is a corporation duly
----------------
organized, validly existing and in good standing under the laws of the State of
New York and has full power and authority to own its properties and to carry on
the business presently conducted by it.
Section 3.2 Corporate Authority. The Board of Directors of Purchaser
-------------------
has duly authorized and approved the execution and delivery of this Agreement
and the performance of the transactions provided for herein. No other corporate
action is required in connection herewith. This Agreement constitutes a legal,
valid and obligation of Purchaser and is enforceable against Purchaser in
accordance with its terms.
ARTICLE IV
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 4.1 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties shall continue to be true and correct at and as
of the Closing Date and at all times between the date of this Agreement and the
Closing Date as if made at each of such times, and shall survive the
consummation of the transactions provided for in this Agreement for a period of
two (2) years from the Closing Date; provided, however, that the representations
and warranties of the Company and the Shareholders pertaining to tax matters,
environmental matters and employee pension and ERISA matters shall terminate on
the date upon which the applicable statute of limitations expires. Each
representation and warranty contained herein is independent of all other
representations and warranties contained herein (whether or not covering an
identical or a related subject matter) and must be independently and separately
complied with and satisfied. Exceptions or qualifications to any
representations or warranties contained herein shall not be construed as
exceptions or qualifications to any other representation or warranty and shall
not be deemed to have been waived, affected or impaired by any investigation
made by any party to this Agreement.
17
<PAGE>
ARTICLE V
CONDUCT OF BUSINESS PENDING CLOSING
Section 5.1 Conduct of Business Pending Closing. The Company agrees
-----------------------------------
that between the date hereof and the Closing Date, the Company shall:
(a) not take any action or omit to take any action which would cause
any of the representations and warranties of the Company contained in this
Agreement or in any Schedule or Exhibit to become untrue or incorrect;
(b) conduct its business in a good and diligent manner in the ordinary
and usual course of its business;
(c) not enter into any contract, agreement, commitment or other
arrangement with any party, other than contracts in the ordinary course of its
business, and not amend, modify or terminate any Corporation Agreement, without
the prior written consent of Purchaser;
(d) use its best efforts to preserve its business organization intact,
to keep available the service of its employees and to preserve its relationships
with customers, suppliers and others with whom it deals;
(e) not reveal to any party, other than Purchaser or its authorized
representatives ("Agents"), any of the business procedures and practices
followed by it in the conduct of the Business;
(f) maintain in full force and effect all insurance currently
maintained by the Company;
(g) keep the Real Property and all of its equipment and tangible
Personal Property in good operating repair and perform all necessary repairs and
maintenance;
(h) comply with all provisions of any Corporation Agreement applicable
to it as well as with all applicable Federal, state and local laws, rules and
regulations;
(i) not dispose of any assets except in the ordinary course of
business, or terminate any Management Agreement;
(j) not engage in any transaction with respect to the Business which
involves the expenditure or commitment of more than $10,000 and which is not
disclosed in any Schedule hereto, without the prior written consent of
Purchaser;
18
<PAGE>
(k) continue to maintain all of the Company's usual business books and
records in accordance with past practices;
(l) not amend the Company's Articles of Incorporation or By-Laws;
(m) not declare or make any dividend or other payment on or with
respect to the Company's capital stock, redeem or otherwise acquire any shares
of the Company's capital stock or issue any capital stock or any option, warrant
or right relating thereto;
(n) not waive any right or cancel any claim;
(o) not increase the compensation or rate of compensation payable to
any of the Company's employees;
(p) maintain the Company's corporate existence and not merge or
consolidate with any other entity;
(q) not place any encumbrances on any of the inventory or assets
(including the Real Property and the Personal Property) of the Company; and
(r) not borrow any money or become contingently liable for any
obligation or liability of others and not incur any debt, liability or
obligation of any nature to any party except for obligations arising from the
purchase of goods or the rendition of services in the ordinary course of
business.
ARTICLE VI
FURTHER COVENANTS AND AGREEMENTS
Section 6.1 Access to Information. The Company shall give to
---------------------
Purchaser and its Agents access to all of the properties and assets of the
Company and all of the Company's documents, books and records relating to its
current and past operations and to the Business, and shall permit Purchaser and
its Agents to make copies thereof, and the Company shall permit Purchaser to
interview the Company's employees during reasonable business hours and upon
reasonable prior notice. If the transactions contemplated by this Agreement are
not consummated and completed (whether or not this Agreement is canceled or
terminated), then Purchaser and its Agents, upon the written request of the
Shareholders and/or the Company, shall return to the Shareholders and the
Company all copies of the Company's documents, books and records in Purchaser's
possession and will not retain any copies thereof, except as otherwise expressly
permitted by the Shareholders and/or the Company in writing.
19
<PAGE>
Section 6.2 Cooperation. Purchaser and the Company agree to execute
-----------
and deliver all other instruments and take all such other actions as either
party may reasonably request from time to time, before or after Closing, and
without payment of further consideration, to effectuate the transactions
provided herein and to confer to Purchaser the benefits intended by such
transactions. The parties shall cooperate fully with each other and with their
respective counsel and accountants in connection with any steps required to be
taken as part of their respective obligations under this Agreement. Without
limiting anything herein to the contrary, the Company shall make available to
Purchaser, solely for the purposes of permitting Purchaser to respond to
inquiries regarding the assets of the Company or the Business, the status of the
assets of the Company and the activities of the Business and the employees of
the Company, representatives of the Company's electronic data processing,
personnel and quality assurance functions.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, on or prior to
the Closing Date, of each of the following conditions, any or all of which
Purchaser may waive:
Section 7.1 No Material Adverse Change. During the period from the
--------------------------
date hereof to the Closing Date there shall not have been any material adverse
change in the business, assets, results of operations, financial condition or
prospects of the Company.
Section 7.2 Representations and Warranties. Each of the
------------------------------
representations and warranties of the Company set forth in this Agreement and
any Exhibit or Schedule hereto shall be true and correct on and as of the
Closing Date as if made on and as of the Closing Date.
Section 7.3 Performance of Agreements. The Company shall have
-------------------------
performed and complied with all of its covenants and agreements contained in
this Agreement which are required to be performed or complied with on or prior
to the Closing Date.
Section 7.4 Opinion of Counsel. Purchaser shall have received an
------------------
opinion from the Company's counsel, dated as of the Closing Date, in form and
content reasonably acceptable to Purchaser.
Section 7.5 No Actions, Etc. No action, suit, proceeding or
---------------
investigation by or before any court, administrative agency or other
governmental authority shall have been instituted or threatened, the effect of
which would restrain, prohibit or
20
<PAGE>
invalidate the transactions contemplated by this Agreement or affect the right
of Purchaser to own or control, after the Closing, the assets or to operate the
Business.
Section 7.6 Lenders' Approval. Purchaser shall have obtained from
-----------------
the banking and other institutions who are the holders of the Company's Senior
Notes their written consent and approval to the transactions subject of this
Agreement.
Section 7.7 Non-Competition Agreements. Purchaser shall have entered
--------------------------
into non-competition agreements with each of the Shareholders substantially in
the form attached as Exhibit C hereto.
---------
Section 7.8 Consulting Agreements. Purchaser shall have entered into
---------------------
consulting agreements with Patrick . Clayton and Byron Wood Clayton
substantially in the form attached as Exhibit D hereto.
---------
Section 7.9 Title Insurance. Not less than ten (10) days prior to
---------------
the Closing, Purchaser shall, at Purchaser's sole cost and expense, obtain a
preliminary title report for an owner's policy of title insurance for the Real
Property from a title insurance company selected by Purchaser (the "Title
Company"), along with copies of all documents and instruments reflecting items
noted as exceptions to title (the "Preliminary Title Report"). The Preliminary
Title Report shall be in sufficient detail to provide the basis for the issuance
of the Policy (as defined below). Not less than ten (10) days prior to the
Closing, Purchaser shall, at Purchaser's sole cost and expense, obtain an ALTA
Survey of the Real Property in form and substance acceptable to Purchaser and
otherwise sufficient to enable the Title Company to delete from the Policy the
so-called standard exception for matters disclosed by an accurate survey (the
"Survey"). After Purchaser has received the Preliminary Title Report and the
Survey, Purchaser shall indicate which exceptions, liens, encumbrances, security
interests, encroachments, overlaps, protrusions, boundary line disputes or other
matters shown in the Preliminary Title Report and the Survey (collectively
"Defects") may remain on the title (the "Permitted Exceptions"). The
Shareholders shall, prior to the Closing, at their sole cost and expense, cure
or remove or cause the Title Company to provide affirmative coverage, in form
and substance acceptable to Purchaser, with respect to all Defects that are not
Permitted Exceptions; provided, however, that (a) with respect to Defects
consisting of monetary liens of an ascertainable amount, the Shareholders shall
satisfy all thereof; (b) with respect to easements and the like, none thereof
shall be deemed Defects unless they materially and adversely affect the use of
the particular parcel of the Real Property for the purpose(s) now used and would
cause a reversion or forfeiture of title as a consequence of the violation(s)
thereof; and (c) as respects any other title matters constituting Defects, the
Shareholders shall have no obligation to
21
<PAGE>
expend more than $25,000 in the aggregate in order to cure such matters. Prior
to the Closing, Purchaser will obtain either an ALTA Extended Owner's Form B
Policy of Title Insurance or its equivalent from the Title Company (the
"Policy") or a binding undertaking from the Title Company to issue such policy,
insuring that fee simple title to the Real Property is vested in the Company,
such insurance to be in an amount reasonably determined by Purchaser. The
Policy will contain no exceptions other than the Permitted Exceptions (including
any so-called "standard exceptions") and will insure fee simple title to the
Real Property in the Company with such affirmative endorsements as may be
requested by Purchaser, including, but not limited to, zoning, survey, access,
contiguity, comprehensive, mechanics liens, and non-imputation. The cost of the
premium charged by the Title Company shall be borne solely by Purchaser. The
Shareholders shall execute such affidavits and indemnities in favor of the Title
Company in order to permit the Title Company to issue the Policy including the
endorsements.
Section 7.10 Officer's Certificate. The President of the Company
---------------------
shall execute and deliver to Purchaser a certificate, dated as of the Closing
Date, confirming (i) the truth, correctness and accuracy of all of the
representations and warranties of the Company and the Shareholders contained
herein as of the Closing Date and at all times between the date hereof and the
Closing Date, and (ii) that all agreements and covenants of the Company
specified herein have been complied with.
Section 7.11 Shareholders' Certificate. The Shareholders shall
-------------------------
execute and deliver to Purchaser a certificate, dated the Closing Date,
confirming (i) the truth, correctness and accuracy of all of the representations
and warranties of the Shareholders contained herein as of the Closing Date and
at all times between the date hereof and the Closing Date and (ii) that all
agreements and covenants of the Shareholders specified herein have been complied
with.
Section 7.12 Secretary's Certificate. The Secretary of the Company
-----------------------
shall execute and deliver to Purchaser a certificate, dated the Closing Date,
that the necessary corporate action by the Board of Directors and the
Shareholders of the Company has been taken to authorize this Agreement and the
other transactions and agreements provided for herein, and setting forth copies
of such approvals and copies of the Company's Articles of Incorporation and By-
laws, each as in effect as of such date.
Section 7.13 Good Standing Certificate. A Good Standing or
-------------------------
Subsistence Certificate for the Company and certified copies of the Articles of
Incorporation of the Company and all amendments thereto issued by the Department
of State of the State of Texas, each dated as of a date within ten (10) days
prior to the Closing Date, shall
22
<PAGE>
be delivered to Purchaser. On the Closing Date, the Company shall deliver to
Purchaser a certificate from Department of State of the State of Texas
confirming that the Company remains in good standing on the Closing Date.
Section 7.14 Releases. General releases in favor of the Company
--------
executed by each director and officer of the Company, in form and substance
satisfactory to counsel for Purchaser, releasing the Company from all liability
to such person, except to the extent of any rights to indemnity by statute,
contract or the Company's Articles of Incorporation or By-laws. No such
instrument shall act to defect or impair a Shareholder's rights under the Escrow
Agreement.
Section 7.15 Environmental Audit. Purchaser shall, at its sole cost
-------------------
and expense, have obtained an ASTM Phase I Environmental Audit or Assessment,
produced by a qualified engineer selected by Purchaser, respecting the items
described in Section 2.25 hereof (the "Phase I Report") which shall be
------------
acceptable and satisfactory to Purchaser in all respects. The Shareholders and
the Company shall allow Purchaser and Purchaser's representatives reasonable
access to the Real Property for the purpose of completing such audit. In the
event that the engineer, Purchaser, or any appropriate authority, governmental
or otherwise, with legal jurisdiction over such matters, requires or recommends
further investigation of such items described herein, the cost of such further
investigation shall be borne by the Shareholders and shall be accounted for as
an adjustment to the Purchase Price payable on the Closing Date. Where such
audit or investigation results in any type of recommendation, order or other
requirement for the removal from the Real Property of any underground tanks or
of any Hazardous Materials, or for the installation of any monitoring equipment,
or for other environmental remediation, the cost of such removal, installation
and remediation shall be borne by the Shareholders and shall be accounted for as
an adjustment to the Purchase Price payable on the Closing Date.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS
The obligations of the Shareholders to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, on or prior to
the Closing Date, of each of the following conditions, any or all of which the
Shareholder may waive:
Section 8.1 Representations and Warranties. Each of the
------------------------------
representations and warranties of Purchaser set forth in this Agreement and any
Exhibit hereto shall be true and correct on and as of the Closing Date as if
made on and as of the Closing Date.
23
<PAGE>
Section 8.2 Performance of Agreements. Purchaser shall have performed
-------------------------
and complied with all of its covenants and agreements contained in this
Agreement which are required to be performed or complied with on or prior to the
Closing Date.
Section 8.3 No Actions, Etc. No action, suit, proceeding or
---------------
investigation by or before any court, administrative agency or other
governmental authority shall have been instituted or threatened, the effect of
which would restrain, prohibit or invalidate the transactions contemplated by
this Agreement or affect the right of Purchaser to own, after the Closing, the
assets or operate the Business.
Section 8.4. Officers's Certificate. The President or any Vice
----------------------
President of Purchaser shall execute and deliver to the Shareholders a
certificate, dated as of the Closing Date, confirming (i) the truth, correctness
and accuracy of all of the representations and warranties of Purchaser contained
herein as of the Closing Date and at all times between the date hereof and the
Closing Date, and (ii) that all agreements and covenants of Purchaser specified
herein have been complied with.
Section 8.5 Secretary's Certificate. The Secretary or the Assistant
-----------------------
Secretary of Purchaser shall execute and deliver to the Shareholders a
certificate, dated as of the Closing Date, that the necessary corporate action
by the Board of Directors and the stockholders of Purchaser have been taken to
authorize this Agreement and the other transactions and agreements provided for
herein, setting forth copies of such approvals and copies of Purchaser's
Articles of Incorporation and Bylaws, each as in effect as of such date.
ARTICLE IX
CLOSING
Section 9.1 The Shareholders and The Company's Deliveries.
---------------------------------------------
At the Closing, the Shareholders and the Company shall deliver
the following to Purchaser:
(a) all certificates representing the Shares accompanied by
stock transfer powers or assignments of certificates duly
executed by each Shareholder.
(b) keys, security codes and other means of access to the Real
Property.
(c) original Permits as contemplated in Section 2.2.
(d) original Consents as contemplated in Section 2.19.
24
<PAGE>
(e) the Escrow Agreement duly executed by the Shareholders.
(f) the stock books, ledgers and records, corporate minute
books (containing the originals of all minutes and
resolutions ever adopted or consented to or agreed by the
shareholders, directors or any committee of directors of
the Company) and corporate seal of the Company shall be
delivered to Purchaser.
(g) each of the officers and directors of the Company shall
have tendered their resignations, effective as of the
Closing Date.
(h) all documents required to be delivered by the Company or
any Shareholder at or prior to Closing, including, without
limitation, the agreements provided for in Sections 7.7 and
7.8 hereof.
Section 9.2 Purchaser's Deliveries.
----------------------
At the Closing, Purchaser will deliver the following to the
Shareholders:
(a) the Purchase Price.
(b) the Escrow Agreement duly executed by Purchaser.
(c) all documents required to be delivered by Purchaser at or
prior to Closing, including, without limitation, the
agreements provided for in Sections 7.7 and 7.8 hereof.
ARTICLE X
INDEMNIFICATION
Section 10.1 Indemnifications.
----------------
(a) Indemnification by the Shareholders. The Shareholders and, if
-----------------------------------
Purchaser does not purchase the Shares, the Company and the Shareholders in each
case, as applicable, jointly and severally agree to indemnify, defend and hold
harmless Purchaser and its directors, officers, agents and employees from and
against any and all losses, damages, liabilities and expenses, including,
without limitation, legal fees and court costs, to which any of them may become
subject as the result of:
(i) any and all loss or damage resulting from any
misrepresentation, breach of warranty, or any
25
<PAGE>
non-fulfillment of any warranty, representation, covenant or
agreement on the part of any Shareholder or the Company
contained in this Agreement;
(ii) any and all loss or damage resulting from any error
contained in any statement, report, certificate or other
document or instrument delivered to Purchaser pursuant to
this Agreement or contained in any Exhibit or Schedule; and
(iii) any and all acts, suits, proceedings, demands, assessments,
judgments, reasonably attorneys' fees, costs and expenses
incident to any of the foregoing.
(b) Indemnification by Purchaser. Purchaser hereby agrees to
----------------------------
indemnify, defend and hold harmless Shareholders from and against any and all
losses, damages, liabilities and expenses, including, without limitation, legal
fees and court costs, which any of them may become subject to as the result of:
(i) any and all loss or damage resulting from any
misrepresentation, breach of warranty, or any non-
fulfillment of any warranty, representation, covenant or
agreement on the part of Purchaser contained in this
Agreement;
(ii) any and all loss or damage resulting to the Shareholders by
reason of any claim, debt, liability or obligation expressly
assumed by Purchaser hereunder; and
(iii) any and all acts, suits, proceedings, demands, assessments,
judgments, reasonably attorneys' fees, costs and expenses
incident to any of the foregoing.
(c) Procedures for Establishment of Indemnification.
-----------------------------------------------
(i) In the event that any claim shall be asserted by any party
which, if sustained, would result in a right of a party to
indemnification hereunder (a "Loss"), the person entitled to
indemnification hereunder (the "Indemnitee"), within a
reasonable time after learning of such claim, shall notify
the person obligated to provide indemnification hereunder
with respect to such claim (the "Indemnitor"), and shall
extend to the Indemnitor a reasonable opportunity to defend
against such claim, at
26
<PAGE>
the Indemnitor's sole cost and expense and through legal
counsel reasonably acceptable to the Indemnitee, provided
that the Indemnitor proceeds in good faith, expeditiously
and diligently. No determination shall be made pursuant to
subparagraph (ii) below while such defense is still being
made until the earlier of (A) the resolution of said claim
by the Indemnitor with the claimant, or (B) the termination
of the defense by the Indemnitor against such claim or the
failure of the Indemnitor to prosecute such defense in good
faith in an expeditious and diligent manner. The Indemnitee
shall be entitled to rely upon the opinion of its legal
counsel as to the occurrence of either of said events. The
Indemnitee shall, at its option and expense, have the right
to participate in any defense undertaken by the Indemnitor
with legal counsel of its own selection. No settlement or
compromise of any claim which may result in a Loss may be
made by the Indemnitor without the prior written consent of
the Indemnitee unless (A) prior to such settlement or
compromise the Indemnitor acknowledges in writing its
obligation to pay in full the amount of the settlement or
compromise and all associated expenses and (B) the
Indemnitee is furnished with security reasonably
satisfactory to the Indemnitee that the Indemnitor will in
fact pay such amount and expenses.
(ii) In the event that an Indemnitee asserts the existence of any
Loss, the Indemnitee shall give written notice to the
Indemnitor of the nature and amount of the Loss asserted.
If the Indemnitor, within a period of 15 days after the
giving of the Indemnitee's notice, shall not give written
notice to the Indemnitee announcing its intention to contest
such assertion of the Indemnitee (such notice by the
Indemnitor being hereinafter called the "contest notice"),
such assertion of the Indemnitee shall be deemed accepted
and the amount of the Loss shall be deemed established.
(iii) The Indemnitee and the Indemnitor may agree in writing, at
any time, as to the existence and amount of a Loss, and,
upon the execution of
27
<PAGE>
such agreement, such Loss shall be deemed established.
(iv) Payment of any Loss shall be made to the person entitled
thereto within ten (10) business days following the
establishment of the Loss.
ARTICLE XI
GENERAL
Section 11.1 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be sent by certified mail, postage prepaid, return
receipt requested; by an overnight express courier service that provides written
confirmation of delivery; or by facsimile with confirmation, addressed as
follows:
If to the Company and Shareholders:
Security Archives, Inc.
1707 Wall Street
Dallas, TX 75225-0880
Attention: Patrick G. Clayton
Fax: (214) 426-3623
With a copy to:
Alfred L. Ruebel, Esquire
Erhard, Ruebel & Jennings
3030 LTV Tower
1525 Elm Street
Dallas, TX 75201-3509
Fax: (214) 871-1655
If to Purchaser:
J. Peter Pierce, President
Pierce Leahy Corp.
Pierce Leahy Corporate Center
631 Park Avenue
King of Prussia, Pennsylvania 19406
Fax: (610) 992-8394
With a copy to:
John F. Dougherty, Jr., Esquire
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
Fax: (215) 564-8120
28
<PAGE>
Any party may change its address for receiving notice by giving notice of a
new address in the manner provided herein. Any notice so given, shall be deemed
to be delivered on the second (2nd) business day after the same is deposited in
the United States Mail, on the next business day if sent by overnight courier,
or on the same business day if sent by facsimile before the close of business,
or the next day, if sent by facsimile after the close of business.
Section 11.2 Broker's Commission; Expenses. Each party agrees to
-----------------------------
indemnify and hold harmless the other party from and against any and all
liability, loss, damage, cost or expense (including court costs and attorney's
fees) arising out of or relating to any claim that such party entered into any
brokerage agreement or similar arrangement, whether oral or written. Whether or
not the transactions contemplated by this Agreement are consummated and except
as otherwise provided for herein, Purchaser and the Shareholders shall each bear
their respective expenses relating to or arising out of this Agreement,
including, but not limited to, fees for attorneys, accountants and other
advisors.
Section 11.3 Headings. The descriptive article, section and paragraph
--------
headings set forth herein are inserted for convenience of reference only, do not
constitute a part of this Agreement and shall not control or affect the meaning
or construction of any provision of the within Agreement.
Section 11.4 Entire Agreement. This Agreement, together with Exhibits and
----------------
Schedules attached hereto, constitutes the entire agreement between the parties
pertaining to this subject matter and supersedes all prior or contemporaneous
agreements and understandings of the parties relating to the same. This
Agreement may be amended only in writing signed by both parties.
Section 11.5 Severability. If any term or provision of this Agreement or
------------
any application thereof shall be invalid or unenforceable, the remainder of this
Agreement and any other application of such term or provision shall not be
affected thereby.
Section 11.6 Counterpart Execution. This Agreement may be executed in any
---------------------
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 11.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of Texas without
reference to choice of law principles thereof.
Section 11.8 Waiver. Any of the terms or conditions of this Agreement may
------
be waived at any time by the party entitled to the
29
<PAGE>
benefit thereof, but only by written notice signed by the party waiving such
terms or conditions.
Section 11.9 Further Assurances. Both parties will take such reasonable
------------------
steps as are necessary to consummate the transactions contemplated herein.
Section 11.10 Assignability; Effect. This Agreement may not be assigned
---------------------
by either party without the prior written consent of the other party. This
Agreement shall be binding upon the parties hereto, and their respective
successors and permitted assigns.
Section 11.11 Jurisdiction. The Shareholders, the Company and Purchaser
------------
hereby irrevocably consent to the jurisdiction of the United States District
Court for the Northern District of Texas for the purpose of any judicial
proceedings which may be instituted with respect to any matter arising under
this Agreement. The parties hereto each agree to bring any suit or proceeding
in such court.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
SECURITY ARCHIVES, INC.
a Texas corporation, the Company
By: /s/ Patrick G. Clayton
-------------------------------
Title: President
/s/ Patrick G. Clayton
----------------------------------
PATRICK G. CLAYTON, a Shareholder
/s/ Carol A. Clayton
----------------------------------
CAROL A. CLAYTON, a Shareholder
/s/ Byron Wood Clayton
----------------------------------
BYRON WOOD CLAYTON, a Shareholder
PIERCE LEAHY CORP.,
a New York corporation, Purchaser
By:/s/ J. Peter Pierce
----------------------------------
Title: President
30
<PAGE>
Exhibit 10.7
PURCHASE AGREEMENT
------------------
AGREEMENT made as of the 31st day of July, 1996, by and between PIERCE
FAMILY PARTNERSHIP, LTD., a Pennsylvania limited partnership (hereinafter called
"Seller"), and PIERCE LEAHY CORP., a New York corporation, (hereinafter called
"Buyer").
The parties hereto, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged and intending to be legally
bound hereby, agree as follows:
1. Sale. Seller shall sell, assign, transfer and deliver to Buyer
----
and Buyer shall purchase, acquire and take from Seller all of the "Included
Assets" (as such quoted term is hereinafter defined) for the "Purchase Price"
(as such quoted term is hereinafter defined) to be paid at the times and in the
manner specified, and in accordance with the terms and conditions of this
Agreement.
2. Included Assets. The "Included Assets" shall mean and shall
---------------
consist of all of Seller's right, title and interest in the following:
(a) All of Seller's right, title and interest as tenant in and under
those certain lease agreements more particularly described on Exhibit "A"
attached hereto ("Lease Agreements"), together with all the leasehold
improvements (the "Improvements") located on each of the demised premises which
form part of the leaseholds and which are owned by Seller ("Leaseholds"), and
together with all of Seller's right, title and interest, if any, in and to any
leasehold improvements
<PAGE>
located on the demised premises which form part of the Leasehold and are not
owned by Seller.
(b) Those certain parcels of land described in Exhibit "B-1" through
"B-4" attached hereto, constituting all of the Seller's interest in real estate
owned as of the date hereof, together with any and all buildings, structures and
improvements thereon, any and all rights and privileges pertaining thereto or to
any of such buildings, structures and improvements and, to the extent
constituting real property, all fixtures, machinery, installations, equipment
and other property attached thereto (the "Real Property").
(c) All of the plants, improvements, furnishings, trade fixtures,
machinery, equipment, tools, spare parts, supplies, and other personal property
owned by Seller, if any, and now installed in, attached to or situated in or
upon the Leaseholds or the Real Property and used in conjunction with such
Leaseholds or Real Property and the operation of the document storage warehouses
which are operated on the Leaseholds and Real Property ("Included Personal
Property").
(d) All of Seller's interest as a general or limited partner in any
lessor of the Leaseholds (the "Partnership Interests") described on Exhibit "C"
hereto.
(e) All of Seller's title to, interest in and rights under and to (i)
leases of personal property, if any, (the "Personal Property Leases"), (ii)
refunds and proceeds and, to the extent assignable, other rights under insurance
policies held
-2-
<PAGE>
by the Seller, if any; (iii) purchase orders, contracts and all other contracts,
commitments and agreements of Seller entered into in the ordinary course of
business prior to Closing, if any (the "Executory Contracts"), and (iv) licenses
and permits, if any.
(f) All documents and records of Seller relating to the Included
Assets.
3. Purchase Price. The Purchase Price for all of the Included
--------------
Assets, which Buyer hereby agrees to pay to Seller is nine million, three-
hundred forty one thousand, eighty-nine dollars ($9,341,089.00) which is
allocated $5,752,000 to the Real Property, $2,764,223, to the Leaseholds, and
$824,866.00 to the Partnerships, and shall be paid by bank treasurer's or
cashier's check of a member bank of the Federal Reserve System or by wire
transfer to the order of Seller at Closing.
4. Closing. (a) Closing shall be made on July 31, 1996 at the
-------
offices of Cozen and O'Connor, 1900 Market Street, Philadelphia, PA. 19103 at
9:30 a.m. or at such other time and place as Seller and Buyer may agree. All of
the exhibits and schedules to this Agreement shall be attached hereto and
executed at Closing by the Buyer and Seller.
(b) Notwithstanding any other provision of this Agreement, Closing
hereunder is conditioned upon and shall occur substantially simultaneously with
the closing of a private placement offering of certain notes by the Buyer and
the refinancing of certain credit facilities by the Buyer.
-3-
<PAGE>
5. Transaction at Closing.
----------------------
(a) Possession of the Included Assets shall be given by Seller to
Buyer at closing by:
(i) execution by Seller and delivery to Buyer of the assignment of
the Leaseholds ("Assignment, Assumption and Indemnification Agreement") in the
form of Exhibit "D" attached hereto;
(ii) except as provided in Section 6(b) below, delivery by Seller to
Buyer of the consent of those lessors under the Lease Agreements whose consent
is necessary or required to the Assignment, Assumption and Indemnification
Agreement substantially in the form of Exhibit "E" attached hereto;
(iii) delivery by Seller to Buyer of a copy of the notices delivered
to those lessors to whom notice of the Assignment is required under the Lease
Agreements substantially in the form of Exhibit "F" attached hereto;
(iv) if, and only if, required by any lender of Buyer, delivery by
Seller to Buyer of a statement from such lessors under the Lease Agreements
specifically designated by Buyer acknowledging the subsistence of the Lease
Agreements, the termination date of the present term, that Seller is not in
default, and the date to which all rent and all other charges have been paid in
the form of Exhibit "G" attached hereto;
-4-
<PAGE>
(v) execution by Seller and delivery to Buyer of those Deeds for the
Real Property in the form of Exhibits "H-1" through "H-4" attached hereto;
(vi) delivery by Seller to Buyer of such consents, assignments of
Partnership Interests, amendments to partnership agreements, and amendments to
certificates of limited partnership, all of which will have been executed by
Seller and all other general and, if necessary, limited partners of the lessors
of the Leaseholds, as may be necessary or required in order to transfer and
assign Seller's Partnership Interests in the lessors of any Leasehold to Buyer;
(vii) termination of all of the subleases between Seller as sublessor
and Buyer as sublessee for the Leaseholds in the form attached hereto as Exhibit
"I", and termination of all of the leases between Seller as lessor and Buyer as
lessee for the Real Property in the form attached hereto as Exhibit "J".
(viii) execution by Seller and delivery to Buyer of a Bill of Sale and
Assignment and Assumption Agreement for Included Personal Property, Executory
Contracts, rights under insurance policies, and licenses and permits, if any, in
the form of Exhibit "K" attached hereto; and
(ix) execution by Seller and delivery to Buyer of such other deeds,
bills of sale, and other instruments of assignment as the Buyer may reasonably
request and as may be
-5-
<PAGE>
necessary to vest Seller's title to all of the Included Assets in the Buyer.
(b) At Closing Buyer shall agree in writing to assume all of the
obligations of Seller under the terms of the Lease Agreements in the form of the
Assignment, Assumption, and Indemnification Agreement (Exhibit "D") and to
indemnify, defend and save Seller harmless from all claims, liabilities, costs
and expenses which may be asserted against Seller or which Seller may incur or
suffer after settlement arising out of or with respect to the Leaseholds, Lease
Agreements, the Real Property, or the Included Personal Property or any other of
the Included Assets and pertaining to periods of time or events both before and
after settlement, all in the form of Exhibit "D" (Lease Agreements) or Exhibit
"L" (Real Property) attached hereto.
(c) At Closing Buyer shall deliver the Purchase Price to Seller in the
manner described in Section 3.
(d) At Closing, Seller shall deliver to Buyer such satisfactions
and/or releases of mortgages and security interests from the various lenders
holding liens and/or encumbrances on any of the Real Property, Leaseholds,
Included Personal Property and any other Included Assets, such that Buyer will
receive title to the Included Assets free and clear of any liens and
encumbrances.
(e) At Closing all of the "Apportionments" described in Section 10
shall be made, and the Seller and Buyer
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<PAGE>
will enter into a closing statement reflecting all such Apportionments.
(f) At Closing Buyer shall execute such amendments to partnership
agreements, amendments to certificates of limited partnership, assumption
agreements and any other documents necessary to acquire Seller's Partnership
Interests in any of the lessors of any Leasehold.
(g) At Closing Buyer will assume and agree to perform in writing all
of Seller's obligations required to be performed or pertaining to periods of
time subsequent to Closing under the Bill of Sale and Assignment and Assumption
Agreement (Exhibit "K").
6. Consent of Lessors.
------------------
(a) Seller shall use its reasonable efforts to obtain and deliver to
Buyer the consent of the lessors under the Lease Agreements where necessary and
required under any of the Lease Agreements as required under Subsections
5(a)(ii). The Buyer shall cooperate as may be requested by Seller in obtaining
such consents, and shall provide all financial and other information as may
reasonably be requested by Seller and its lessors. The consents shall be
subject to such conditions as the lessors may impose, provided that such
conditions are not substantially in addition to those undertaken by the Buyer
under the Lease Agreement.
(b) In the event that Seller fails to obtain the consent of any lessor
under any of the Lease Agreements, this
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<PAGE>
Agreement shall not terminate but instead Buyer shall purchase all the Included
Assets other than those Leaseholds for which consent has not been obtained. For
any Leasehold for which consent has not been obtained, Buyer may in its sole
discretion:
(i) elect not to purchase such Leasehold, in which event the
Purchase Price shall be reduced or adjusted by the agreed appraised value of
such Leasehold and the sublease for such Leasehold between Seller as sublessor
and Buyer as sublessee shall not be terminated but shall remain in full force
and effect;
(ii) purchase the Leasehold, notwithstanding the failure to obtain
the lessor's consent, in which event no reduction or adjustment shall be made to
the Purchase Price, or
(iii) require the Seller to exercise under the Lease Agreement any
option to purchase the Leasehold property, if any such option has been granted
in the Lease Agreement and is exercisable at the time of Closing, or to exercise
under the Limited Partnership Agreement any option to purchase the balance of
the Partnership Interests in the lessor, if any such option has been granted in
the Limited Partnership Agreement and is exercisable at the time of Closing, in
which event the Purchase Price will be increased by the cost of such
acquisition.
7. Seller's Representations and Warranties. Seller hereby represents
---------------------------------------
and warrants that:
-8-
<PAGE>
(a) Seller is a limited partnership duly organized and validly
existing in good standing under the laws of the Commonwealth of Pennsylvania.
Seller has delivered to Buyer a copy of its limited partnership agreement and
all amendments thereto, and its Certificate of Limited Partnership and all
amendments thereto.
(b) Seller has full power and authority to own and hold the Included
Assets, to carry on its business, and to own and operate its properties, as such
business is now conducted and such properties are now owned, leased or operated,
to make, execute, deliver, and perform this Agreement which has been duly
authorized and approved by all required action of the general and limited
partners and to carry out all actions required of Seller pursuant to the terms
of this Agreement.
(c) This Agreement and the documents to be executed on behalf of
Seller hereunder when executed and delivered will constitute valid and legally
binding obligations of Seller and are enforceable in accordance with their
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or affecting
the enforcement of creditors' rights.
(d) Seller's execution of this Agreement and the documents herein
required and the consummation of the transactions herein contemplated will not
violate any contract, lease, sublease, mortgage, note, security agreement or
other agreement to which Seller is a party or by which it is bound nor
-9-
<PAGE>
violate any order or decree of any court or administrative body to which it may
be subject.
(e) Seller is the tenant under all of the Lease Agreements, Seller
has not received notice from any lessor of any Lease Agreement of a default
under any of the Lease Agreements which default has not been cured as of the
date hereof, and Seller has no knowledge of any condition which exists or event
which has occurred which, with the giving of notice or lapse of time or both,
would constitute a default under any of the Lease Agreements except insofar as
Seller's agreement to enter into the Assignment of Leases with Buyer may be
deemed to be a violation of any covenant not to assign or sublet without the
lessor's consent contained in any of the Lease Agreements.
(f) The copies of the Lease Agreements described in Exhibit "A", and
related documents which have been heretofore delivered to Buyer by Seller, are
true and correct copies of such Lease Agreements and documents, and include all
amendments, if any, to the date hereof.
(g) The Seller is the lawful owner of the Real Property, in fee
simple, and has good and valid title to all other Included Assets, and has full
right to sell, convey, transfer assign and deliver the Real Property and all
other Included Assets, without any restrictions whatsoever.
(h) Except for mortgage and other liens, which secure indebtedness for
borrowed money, and which will be discharged at or prior to Closing, except for
permitted title
-10-
<PAGE>
exceptions on the Real Property described in Section 11(a) below, except for the
restrictions on assignment set forth in certain of the Lease Agreements
described in Section 5(a)(ii), and any liens, security interests and
encumbrances which may arise against Seller in favor of a lessor under a Lease
Agreement, all of the Included Assets are free and clear of any security
interests, liens, claims, charges, options, mortgages, debts, leases,
conditional sales agreements, title retention agreements, encumbrances of any
kind, or restrictions against the transfer or assignment thereof the
("Encumbrances") and there are no filings in any jurisdiction under the Uniform
Commercial Code or with the registry of deeds showing Seller as debtor, which
create or perfect, or purport to create or perfect any Encumbrances in or on any
of the Included Assets.
8. Exclusion of Warranties Not Expressed and Limitation of Seller's
----------------------------------------------------------------
Liability. Buyer has been a sublessee of Seller in all of the Leaseholds, and a
- ---------
lessee of Seller in all of the Real Property. As a result, except for the
warranties expressly set forth in this Agreement, Seller makes no warranties,
express or implied, to Buyer, and Buyer expressly warrants, represents and
acknowledges that:
(a) Buyer has been in possession of and has made a physical
examination of the Leaseholds, the Real Property, the Included Personal
Property, and all of the other Included Assets, and hereby accepts same in "as
is" condition.
-11-
<PAGE>
(b) Neither Seller nor any agent on Seller's behalf has made, and
Seller does not herein make any warranty or representation either express or
implied as to the condition, environmental status or repair of the Leaseholds,
Real Property, Included Personal Property, or other Included Assets, and Buyer
is relying solely upon Buyer's own examination and investigation as to such
condition.
(c) Seller makes no representative or warranty either express or
implied as to any applicable building, zoning, environmental, health or safety
statute or regulation including the Occupational Safety and Health Act of 1970
or any other rule, law, statute or ordinance whatsoever.
(d) Buyer is not relying upon, and Seller has not made and does not
herein make any representation or warranty as to the income or expenses with
respect to the specific operation of the Leaseholds or Real Property as a
document storage warehouse, and in particular Buyer acknowledges that Seller has
not made and shall not be deemed to have made any express or implied
representation or warranty as to the gross receipts or profits heretofore
earned, whether by Seller or any other person, and with respect to all such
matters Buyer is relying solely on its own investigation.
(e) Seller makes no representation or warranty that the transactions
contemplated by this Agreement are within or outside of the purview of the any
Bulk Sales Statute, in effect in any state where any Included Assets are
located, and
-12-
<PAGE>
Buyer hereby releases Seller from all claims which Buyer has or may have against
Seller for failure to comply with the provisions thereof.
(f) Seller's liability for any representation or breach of warranty
shall be limited to actual damages sustained by Buyer and shall not include loss
of profits, loss of bargain, or consequential or other special damages.
9. Representations and Warranties of Buyer. In addition to Buyer's
---------------------------------------
warranties and representations contained in other portions of this Agreement,
Buyer hereby represents and warrants that:
(a) Buyer is a corporation duly organized and validly existing in good
standing under the laws of the State of New York.
(b) Buyer has full power and right to make, execute, deliver, and
perform this Agreement which has been duly authorized and approved by all
required action of its board of directors and shareholders and to carry out all
actions required of Buyer pursuant to this Agreement.
(c) This Agreement and the documents to be executed on behalf of Buyer
hereunder constitute valid and legally binding obligations of Buyer and are
enforceable in accordance with their terms, except to the extent enforceability
may be limited to bankruptcy, insolvency, reorganization, moratorium and similar
laws relating to or affecting enforcement of creditor's rights.
-13-
<PAGE>
(d) The Buyer's execution of this Agreement, and the documents herein
required and the consummation of the transactions herein contemplated will not
violate any contract lease, sublease, mortgage, note, security agreement, or
other agreement to which Buyer is a party or by which it is bound nor violate
any order or decree of any court or administrative body to which it may be
subject.
10. Apportionments.
--------------
(a) All rent payable with respect to the Lease Agreements and all
other items payable as additional rent or otherwise under the terms of the Lease
Agreements (including sales tax) shall be apportioned pro rata between Buyer and
Seller on a per diem basis as of the date of Closing. If any real estate taxes
have been the responsibility of Seller, such taxes shall be apportioned as of
the date of Closing according to the tax years as provided in the Lease
Agreement. Seller shall obtain, as close to Settlement as possible, readings of
all electric, water and gas meters within the Leasehold and shall pay to the
public utility companies all charges for usage prior to the date of Closing, if
such is the responsibility of Seller. All sums payable by Buyer or Seller shall
be paid at the Closing.
(b) With respect to the Real Property, all real estate taxes, water
and sewer rent (if any), and utilities shall be calculated as levied and pro-
rated between Seller and Buyer as of the date of Closing. All real estate
transfer taxes shall be divided equally between Seller and Buyer for the Real
Property in
-14-
<PAGE>
Pennsylvania, and will be paid by the Buyer or Seller in accordance with the
customary practice for each of the other jurisdictions in which they are
located.
(c) All rent under any Personal Property Leases, any personal property
taxes, and any expense items otherwise prepaid by Seller on any Included Assets
shall be apportioned and paid or adjusted between Seller and Buyer as of the
date of closing.
11. Title to Real Property
----------------------
(a) The Real Property is to be conveyed at Closing to Buyer either by
General Warranty Deed or Special Warranty Deed, as selected by Buyer, subject
to:
(i) all taxes and assessments not yet due and payable;
(ii) all facts which would be disclosed by an accurate survey of
the Real Property;
(iii) municipal, county and state ordinances, statutes, rules
and regulations, zoning, planning, subdivision and environmental regulations and
ordinances;
(iv) rights, public and private, together with flooding and
drainage rights, if any in and to all streams, rivers or water courses,
crossing, bounding or affecting the Real Property; and
(v) all other restrictions, easements and matters of record or
easements visible on the ground; otherwise title to the Real Property will be
good and marketable and such
-15-
<PAGE>
as will be insured by any reputable title insurance company at its regular
rates.
(b) Seller will not affirmatively create a defect in title subsequent
to the date of this Agreement. If a defect is created Buyer may waive same or
require Seller to remove the defect prior to closing.
(c) With respect to any or all parcels of Real Property, Buyer may
elect to secure at Buyer's expense a title insurance commitment from a reputable
title company, pursuant to which the title company shall agree to issue to Buyer
at Buyer's expense, an owner's title insurance policy on the now current ALTA
standard form policy, subject to conditions in the commitment. In the event the
Seller is unable to give good, marketable and insurable title to any particular
parcel which comprises the Real Property, Buyer shall have the option of taking
such title as Seller can give without abatement of the Purchase Price, or of not
purchasing the particular Real Property with the defect in title.
12. Municipal Notices. Seller represents and warrants that as of the
-----------------
date hereof, Seller has received no written notice which heretofore has not been
complied with, from any municipal or other governmental authority, requiring or
calling attention to the need for any work, repairs, construction or
installations on, about or in connection with the Leaseholds, Real Property or
any other Included Assets, or notifying Seller of any violation in connection
with the Leaseholds, Real Property or other
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<PAGE>
Included Assets. In the event that any such notice is hereafter received by
either Seller or Buyer, the recipient shall promptly deliver a copy of such
notice to the other party hereto. Buyer shall, at Buyer's expense, promptly
comply with the requirements of any and all such notices hereafter issued,
including but not limited to the payment of any fines, interest or penalties
which result from Buyer's violations relating to its use and operation of the
Leasehold, Real Property or other Included Assets and shall indemnify, defend,
exonerate and hold Seller harmless therefrom.
13. Tender. With respect to the Real Property, formal tender of an
------
executed deed and purchase money is hereby waived.
14. Risk of Loss; Insurance. Seller shall maintain or shall cause
-----------------------
Buyer in its capacity as lessee of any Real Property, or sublessee of any
Leasehold, to maintain adequate insurance of the kinds, covering such risks, and
in such amounts and with such deductibles and exclusions as are consistent with
prudent business practice and prior experience. Subject to the rights of any
lessor as provided in any Lease Agreement and any mortgagee of any of the Real
Property, Seller and Buyer shall cooperate to use the proceeds of any such
insurance to repair or replace any Leasehold building and Improvements, or any
building and improvements on any Real Property as expeditiously as is possible
consistent with prudent business practices. The occurrence of any casualty will
not excuse performance under this Agreement.
-17-
<PAGE>
15. Conditions Precedent to Buyer's Obligation. The obligation of
------------------------------------------
the Buyer to consummate the Closing shall be subject to the satisfaction at or
prior to Closing of each of the following conditions:
(a) The representations and warranties of the Seller pursuant to this
Agreement shall be true and correct as of the Closing with the same effect as
though made or given at Closing;
(b) Seller shall have performed and complied with all of its
obligations under this Agreement to be performed or complied with at or prior to
Closing;
(c) The Included Assets shall not have been, and shall not be
threatened to be, adversely affected in any way as a result of fire, disaster or
accident except for losses fully covered by Seller's insurance;
(d) Except as provided in Section 6(b) of this Agreement, Seller shall
have obtained all necessary consents of lessors under the Lease Agreements and
any other third party whose consent is required in order for the transactions
under this Agreement at no expense to Buyer in form and substance satisfactory
to the Buyer;
(e) No restraining order or injunction shall prevent any of the
transactions contemplated by this Agreement, and no action, suit or proceeding
shall be pending before any court, administrative body or arbitration panel
which seeks to restrain or enjoin or seeks damages or other relief in connection
-18-
<PAGE>
with this Agreement or consummation of the transactions contemplated hereby;
(f) All proceedings in connection with the transactions contemplated
by this Agreement and all certificates and documents delivered to the Buyer in
connection with the transactions contemplated by this Agreement shall be
satisfactory in all respects to Buyer, and Buyer shall have received the
originals or certified or other copies of all such records and documents as
Buyer may reasonably request.
16. Conditions Precedent to Seller's Obligation. The obligation of
-------------------------------------------
the Seller to consummate the Closing shall be subject to the satisfaction at or
prior to Closing of each of the following conditions:
(a) The representations and warranties of the Buyer pursuant to this
Agreement shall be true and correct as of Closing with the same effect as though
made or given at Closing;
(b) Buyer shall have performed and complied with all of its
obligations under this Agreement that are to be performed or complied with on or
prior to Closing;
(c) All proceedings in connection with the transactions contemplated
by this Agreement and all certificates and documents delivered to the Seller in
connection with the transactions contemplated by this Agreement shall be
satisfactory in all respects to Buyer, and Buyer shall have received the
originals or certified or other copies of all such records and documents as
Buyer may reasonably request.
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<PAGE>
17. Enforcement. Seller and Buyer shall have the right at all times
-----------
to enforce the provisions of this Agreement in strict accordance with the terms
thereof, notwithstanding any conduct or custom on the part of the Seller or
Buyer in refraining from doing so at any time or times. The failure of Seller or
Buyer at any time or times to enforce its rights under such provisions strictly
in accordance with the same, shall not be construed as having created a custom
in any way or manner contrary to the specific provisions of this Agreement or as
having in any way or manner modified or waived the same. All rights and remedies
of the Seller and Buyer, which include the right for injunctive or other
equitable relief, are cumulative and concurrent and the exercise of one right or
remedy shall not be deemed a waiver or release of any other right or remedy.
18. Time Made of the Essence. Time, whenever specified herein for
------------------------
performance by Seller or Buyer of any of their respective obligations hereunder,
is hereby made and declared to be of the essence of this Agreement.
19. Survival of Representatives and Warranties. The representations
------------------------------------------
and warranties of the Seller and Buyer respectively made in this Agreement, or
otherwise made in connection with the transactions contemplated hereby, shall
survive Closing and consummation of the transactions contemplated hereby.
20. Brokers. Seller and Buyer represent and warrant to each other
-------
that neither has dealt with any broker, finder or
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<PAGE>
other intermediary with respect to this transaction. Seller and Buyer hereby
agree to indemnify, defend and hold each other harmless from all claims of any
and all brokers, finders or those asserting to have acted in similar capacity on
behalf of the other party.
21. Agreement Not To Be Recorded. Neither this Agreement, nor any
----------------------------
memorandum thereof, nor any assignment thereof (if permitted) shall be filed of
record in any office or place of public record, and if Buyer shall fail to
comply with the terms hereby by recording or attempting to record the same, it
shall not operate to bind or cloud the title to any of the Included Assets.
Seller shall, nevertheless, have the right forthwith to institute appropriate
legal proceedings to have the same removed from record. If Buyer or any agent or
other person acting for Buyer should cause or permit this Agreement, a
memorandum thereof, or assignment thereof, or a copy thereof, to be filed in an
office or place of public record, Seller may, at its option and in addition to
Seller's other rights and remedies, treat such act as a default of this
Agreement on the part of Buyer. However, the filing of this Agreement or any
memorandum thereof, or any assignment thereof, or of copies of the same, in any
suit or other legal proceeding in which such documents are relevant or material
shall not be deemed to be a violation of this paragraph.
22. Notices. All notices, demands or other communications which are
-------
required or are permitted to be given hereunder shall be in writing and shall be
delivered by Federal Express or
-21-
<PAGE>
similar guaranteed overnight carrier, or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed:
(a) If to Seller:
Pierce Family Partnership, Ltd.
631 Park Avenue
King of Prussia, PA 19406
(b) If to Buyer:
Pierce Leahy Corp.
631 Park Avenue
King of Prussia, PA 19406
or to such other address as either party shall designate by notice in accordance
with the provisions of this paragraph. The same shall be deemed given upon three
(3) days after the earlier of the date of mailing or upon the receipt thereof by
the addressee, as evidenced by the certified mail return receipt postmark, or
upon delivery if delivered by Federal Express, or similar carrier.
23. Assignability, Successors and Assigns. Neither this Agreement
-------------------------------------
nor any of Seller's or Buyer's rights hereunder may be assigned, either
voluntarily or by operation of law by Seller or Buyer without the prior written
consent of the other party hereto, which consent the other party may withhold in
its absolute and sole discretion and regardless of whether such refusal would
violate any undertaking of good faith or reasonableness which might be implied
in transactions of this type. Notwithstanding any assignment of this Agreement
or of any
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<PAGE>
of Buyer's rights hereunder, Buyer shall continue to be fully obligated for the
performance of all of Buyer's obligations hereunder and under the other
documents executed pursuant hereto, and upon request and prior to the effective
date of any such assignment, shall deliver an assumption in form approved by
Seller's counsel of all of Buyer's obligations executed by the authorized
assignee, together with such further security therefore as Seller may require.
Subject as provided above, this Agreement shall extend to and bind all inure to
the benefit of the successors and assigns of Seller and of Buyer.
24. Whole Agreement - Alteration or Amendment. The whole agreement
-----------------------------------------
between the parties relative to the sale of the Included Assets is contained
herein and other documents and instruments to be executed and delivered pursuant
to the terms hereof, and the parties are not bound by any agreements,
understandings, conditions, warranties or representations otherwise than as are
expressly set forth and stipulated herein. No change, alteration, amendment,
modification or waiver of any of the terms or provisions hereof shall be valid
unless the same be in writing and signed by the parties.
25. Further Assurances. From time to time, at the request of the
------------------
Buyer and without further consideration, the Seller shall execute and deliver
such other instruments of conveyance and transfer and take such other actions as
the Buyer may require more effectively to convey any other Included Assets to
Buyer. Seller and Buyer shall also execute and deliver to the
-23-
<PAGE>
other party such other instruments as may reasonably be required in connection
with the performance of this Agreement and each shall take such further actions
to convey out the transactions contemplated by this Agreement.
26. Governing Law. This Agreement and the rights and obligations of
-------------
the parties with respect thereto shall be construed in accordance with the laws
of the state of Pennsylvania applicable to contracts made and to be performed
therein, without giving effect to the principles of conflict of laws.
27. Cross-Default. A default by Seller or Buyer under this Agreement
-------------
or any other document or instrument executed by Seller or Buyer pursuant to this
Agreement, shall be a default under all of the aforesaid.
28. No-Set-Off. All payments due under this Agreement, or any other
----------
document or instrument executed by Buyer pursuant to this Agreement shall be
made without right of set-off or deduction for any reason whatsoever.
29. Severability. No provision of this Agreement which may be deemed
------------
unenforceable shall in any way invalidate any other provision hereof, all of
which shall remain in full force and effect.
30. Captions and Headings. The captions or headings of the
---------------------
paragraphs hereof are for convenience only and shall not control or affect the
meaning or construction of any of the terms or provisions of this Agreement.
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<PAGE>
31. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
32. Waiver of Conflict of Interests. Each of Seller and Buyer has
-------------------------------
requested and is utilizing the professional legal services of Cozen and O'Connor
in connection with this Agreement and Closing. Cozen and O'Connor has
previously acted as counsel for each of Seller and Buyer. Each of Seller and
Buyer have discussed with each other and Cozen and O'Connor that Seller and
Buyer are substantially aligned in interest as to method and manner in which
this transaction has been structured, that while there may be some difference of
interest between Seller and Buyer, they do not believe the interests to be
material, that each of the general and limited partners in Seller are also
shareholders in Buyer, and they believe this transaction as structured to be
advantageous to all of them in their capacities as individuals and entities.
Seller and Buyer acknowledge that Cozen and O'Connor has fully explained to each
of them that they each have conflicting rights with respect to each other, that
they can and should consider retaining separate legal representation because of
the resulting conflict of interest, that not every possible conflict between
Seller and Buyer can ever be anticipated. Nevertheless both Seller and Buyer
have determined individually and jointly to use the professional services of
Cozen and O'Connor, and with such full disclosure and
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<PAGE>
knowledge, Seller and Buyer hereby consent to joint representation and waive any
conflict of interest and waive all rights that either of them has to seek
separate counsel from the one being used by the other.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
WITNESS: PIERCE FAMILY PARTNERSHIP, LTD.
BY: /s/ J. Peter Pierce
- -------------------------- -------------------------------
General Partner Seller
LIMITED PARTNERS:
/s/ Kathryn Cox
- -------------------------- --------------------------------
Kathryn Cox
/s/ Leo W. Pierce, Jr.
- -------------------------- --------------------------------
Leo W. Pierce, Jr.
/s/ Michael Pierce
- -------------------------- --------------------------------
Michael Pierce
/s/ Constance P. Buckley
- -------------------------- --------------------------------
Constance P. Buckley
[SIGNATURES CONTINUED ON NEXT PAGE]
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<PAGE>
[SIGNATURES FROM PRIOR PAGE]
/s/ Mary E. Pierce
- -------------------------- --------------------------------
Mary E. Pierce
/s/ Barbara P. Quinn
- -------------------------- --------------------------------
Barbara P. Quinn
ATTEST: PIERCE LEAHY CORP.
BY: /s/ J. Peter Pierce
- -------------------------- --------------------------------
President Buyer
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<PAGE>
Exhibit 10.8
PURCHASE AND SALE AGREEMENT
800 CARPENTER'S CROSSING, FOLCROFT, PENNSYLVANIA AND
2000 HENDERSON ROAD, SHARON HILL, PENNSYLVANIA
THIS AGREEMENT IS MADE AND EFFECTIVE AS OF THE 31st day of July, 1996
by and between PIERCE REAL ESTATE COMPANY, a Pennsylvania general partnership
("Seller") and PIERCE LEAHY CORP., a New York corporation ("Buyer").
RECITALS
--------
A. Seller is the installment sale purchaser and equitable owner of
real property, building and improvements more particularly described on Exhibit
"A" attached hereto, commonly known as at 800 Carpenter's Crossing, Folcroft,
Pennsylvania ("Carpenter's Crossing Premises") pursuant to an Agreement of Sale
dated March 12, 1980 ("Installment Sale Agreement") with the Delaware County
Industrial Development Authority ("DCIDA"), a Memorandum of which is dated March
12, 1980, and recorded with the Delaware County Recorder of Deeds in Deed Book
2734, page 811. Buyer is the lessee, and Seller is the lessor, of the
Carpenter's Crossing Premises pursuant to a Lease Agreement dated March 5, 1980,
and an Amendment to Lease Agreement dated February 27, 1995 ("Carpenter's
Crossing Lease Agreement"). Buyer desires to purchase from Seller, and Seller
desires to sell and assign to Buyer all of Seller's right, title and interest in
and to the Seller's right to acquire the Carpenter's Crossing Premises pursuant
to the Installment Sale Agreement, and to
-1-
<PAGE>
contemporaneously terminate the Carpenter's Crossing Lease Agreement.
B. Seller is the owner of real property, building and improvements
more particularly described on Exhibit "B" attached hereto), commonly known as
2000 Henderson Road, Sharon Hill, Pennsylvania ("Sharon Hill Premises"). Buyer
is the lessee, and Seller is the lessor, of the Sharon Hill Premises pursuant to
a Lease Agreement dated April 10, 1984 and a Lease Modification Agreement dated
October 25, 1993 ("Sharon Hill Lease Agreement"). Buyer desires to purchase and
Seller desires to sell and assign to Buyer all of its right, title and interest
in and to the Sharon Hill Premises and to contemporaneously terminate the Sharon
Hill Lease Agreement.
C. The Carpenter's Crossing Premises and the Sharon Hill Premises are
sometimes together defined as the "Real Property".
NOW THEREFORE, for and in consideration of the covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Agreement of Purchase and Sale. Seller agrees to assign and sell
------------------------------
as applicable, and Buyer agrees to purchase, all of Seller's rights, title and
interest in and to the Carpenter's Crossing Premises under the Installment Sale
Agreement, and the Sharon Hill Premises, together with any and all buildings,
structures and improvements thereon, any and all rights and privileges
pertaining thereto or to any of such
-2-
<PAGE>
buildings, structures and improvements and, to the extent constituting real
property, all fixtures, machinery, installations, equipment and other property
attached thereto and all licenses, permits, documents and records pertaining
thereto.
2. Purchase Price. The Purchase Price for the Real Property,
--------------
which Buyer hereby agrees to pay to Seller is Four Million One hundred Thousand
---------------------------------
Dollars ($4,100,00.00) for the Sharon Hill premises and One Million Four Hundred
- ------- ------------------------
Thousand Dollars ($1,400,000.00) for the Carpenter's Crossing Premises, and
- --------------------------------
shall be paid by bank treasurer's or cashier's check of a member bank of the
Federal Reserve System or by wire transfer to the order of Seller at Closing.
3. Closing. Closing shall occur on July 31, 1996, at the offices of
-------
Cozen and O'Connor, 1900 Market Street, Philadelphia, PA. 19103 at 9:30 a.m. or
at such other time and place as Seller and Buyer may agree. All of the exhibits
and schedules to this Agreement shall be attached hereto and executed at Closing
by the Buyer and Seller.
4. Transaction at Closing.
----------------------
(a) Possession of the Carpenter's Crossing Premises and Sharon
Hill Premises shall be given by Seller to Buyer at Closing by:
i) assignment by Seller to Buyer of Seller's right under
the Installment Sale Agreement to take title to the Carpenter's Crossing
Premises in the form attached hereto as Exhibit "C", Seller's notice to DCIDA of
such assignment,
-3-
<PAGE>
Seller's prepayment of the unpaid balance due under the Installment Sale
Agreement and cancellation of the Note and satisfaction of the mortgage and
other security and delivery of the deed from DCIDA to Buyer to the Carpenter's
Crossing Premises.
ii) execution by Seller and delivery to Buyer of a general
or special warranty deed for the Sharon Hill Premises as Buyer may elect;
iii) termination of all of the Lease Agreements between
Seller as lessor and Buyer as lessee for the Real Property in the form attached
hereto as Exhibit "D".
iv) execution by Seller and delivery to Buyer of a Bill of
Sale and Assignment and Assumption Agreement for the personal property and
executory contracts, if any, rights under insurance policies, and licenses and
permits, if any, in the form of Exhibit "E" attached hereto;
v) satisfaction of the liens, other than the Permitted
Title Exceptions described in Section 9(a), encumbering any of the Real
Property; and
vi) execution by Seller and delivery to Buyer of such other
deeds, bills of sale, assignment of rights under insurance policies, and other
instruments of assignment as the Buyer may reasonably request and as may be
necessary to vest in the Buyer Seller's title to all of the Real Property.
(b) At Closing Buyer shall agree to indemnify, defend and save
Seller harmless from all claims, liabilities,
-4-
<PAGE>
costs and expenses which may be asserted against Seller or which Seller may
incur or suffer after settlement arising out of or with respect to the Real
Property pertaining to periods of time or events before or after settlement.
(c) At Closing Buyer shall deliver the Purchase Price to Seller in
the manner described in Section 2.
(d) At Closing, Seller shall deliver to Buyer such satisfactions
and/or releases of mortgages and security interests from the various lenders
holding liens and/or encumbrances on any of the Real Property, such that Buyer
will receive title to the Real Property free and clear of any liens and
encumbrances other than the Permitted Title Exceptions (as defined in Section
9(a) below).
(e) At Closing all of the "Apportionments" described in Section 8
shall be made, and the Seller and Buyer will enter into a closing statement
reflecting all such Apportionments.
(f) At Closing, Seller shall sign and deliver a certification in
compliance with the Foreign Interest in Real Property Transfer Act.
5. Seller's Representations and Warranties. Seller hereby repre-
---------------------------------------
sents and warrants that:
(a) Seller is a general partnership formed under the laws of the
Commonwealth of Pennsylvania. Seller has delivered to Buyer a copy of its
partnership agreement and all amendments thereto.
-5-
<PAGE>
(b) Seller has full power and authority to own and hold the Real
Property, to carry on its business, and to own and operate its properties, as
such business is now conducted and such properties are now owned, leased or
operated, to make, execute, deliver, and perform this Agreement which has been
duly authorized and approved by all required action of the partners and to carry
out all actions required of Seller pursuant to the terms of this Agreement.
(c) This Agreement and the documents to be executed on behalf of
Seller hereunder when executed and delivered will constitute valid and legally
binding obligations of Seller and are enforceable in accordance with their
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or affecting
the enforcement of creditors' rights.
(d) Seller's execution of this Agreement and the documents herein
required and the consummation of the transactions herein contemplated will not
violate any contract, lease, sublease, mortgage, note, security agreement or
other agreement to which Seller is a party or by which it is bound nor violate
any order or decree of any court or administrative body to which it may be
subject, and has full right to sell, convey, transfer, assign and deliver its
interests thereunder, in fee simple, without any restrictions whatsoever.
(e) Seller is the lawful owner of the Sharon Hill Premises, in fee
simple, and has full right to sell, convey,
-6-
<PAGE>
transfer assign and deliver the Sharon Hill Premises, without any restrictions
whatsoever.
(f) Seller is the equitable owner of the Carpenter's Crossing
Premises pursuant to the Installment Sale Agreement and has full right to assign
and deliver its interest thereunder, without any restrictions whatsoever.
(g) Except for mortgage and other liens, which secure indebtedness
for borrowed money, and which will be discharged at or prior to Closing, except
for Permitted Title Exceptions on the Real Property described in Section 9(a)
below, each of the Sharon Hill Premises and Carpenter's Crossing Premises are
free and clear of any security interests, liens, claims, charges, options,
mortgages, debts, leases, conditional sales agreements, title retention
agreements, encumbrances of any kind, or restrictions against the transfer or
assignment thereof the ("Encumbrances") and there are no filings in any
jurisdiction under the Uniform Commercial Code or with the registry of deeds
showing Seller as debtor, which create or perfect, or purport to create or
perfect any Encumbrances in or on any of the Real Property.
6. Exclusion of Warranties Not Expressed and Limitation of Seller's
----------------------------------------------------------------
Liability. Buyer has been a lessee of Seller in all of the Real Property. As a
- ---------
result, except for the warranties expressly set forth in this Agreement, Seller
makes no warranties, express or implied, to Buyer, and Buyer expressly warrants,
represents and acknowledges that:
-7-
<PAGE>
(a) Buyer has been in possession of and has made a physical
examination of the Real Property and hereby accepts same in "as is" condition.
(b) Neither Seller nor any agent on Seller's behalf has made, and
Seller does not herein make any warranty or representation either express or
implied as to the condition, environmental status or repair of the Real
Property, and Buyer is relying solely upon Buyer's own examination and
investigation as to such condition.
(c) Seller makes no representative or warranty either express or
implied as to any applicable building, zoning, environmental, health or safety
statute or regulation including the Occupational Safety and Health Act of 1970
or any other rule, law, statute or ordinance whatsoever.
(d) Buyer is not relying upon, and Seller has not made and does
not herein make any representation or warranty as to the income or expenses with
respect to the specific operation of the Real Property as a document storage
warehouse, and in particular Buyer acknowledges that Seller has not made and
shall not be deemed to have made any express or implied representation or
warranty as to the gross receipts or profits heretofore earned, whether by
Seller or any other person, and with respect to all such matters Buyer is
relying solely on its own investigation.
(e) Seller's liability for any representation or breach of
warranty shall be limited to actual damages sustained
-8-
<PAGE>
by Buyer and shall not include loss of profits, loss of bargain, or
consequential or other special damages.
7. Representations and Warranties of Buyer. In addition to Buyer's
---------------------------------------
warranties and representations contained in other portions of this Agreement,
Buyer hereby represents and warrants that:
(a) Buyer is a corporation duly organized and validly existing in
good standing under the laws of the State of New York.
(b) Buyer has full power and right to make, execute, deliver, and
perform this Agreement which has been duly authorized and approved by all
required action of its board of directors and shareholders and to carry out all
actions required of Buyer pursuant to this Agreement.
(c) This Agreement and the documents to be executed on behalf of
Buyer hereunder constitute valid and legally binding obligations of Buyer and
are enforceable in accordance with their terms, except to the extent
enforceability may be limited to bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting enforcement of creditor's
rights.
(d) The Buyer's execution of this Agreement, and the documents
herein required and the consummation of the transactions herein contemplated
will not violate any contract lease, sublease, mortgage, note, security
agreement, or other agreement to which Buyer is a party or by which it is bound
nor
-9-
<PAGE>
violate any order or decree of any court or administrative body to which it may
be subject.
8. Apportionments.
--------------
(a) All items payable as additional rent or otherwise under the
terms of the Lease Agreements (including sales tax) shall be apportioned pro
rata between Buyer and Seller on a per diem basis as of the date of Closing, and
all real estate taxes shall be apportioned as of the date of Closing according
to the tax years as provided in the Lease Agreements, if any such taxes or other
items are the responsibility of Seller.
(b) All real estate transfer taxes shall be divided equally
between Seller and Buyer.
(c) All rent under any Personal Property Leases, any personal
property taxes, and any expense items otherwise prepaid by Seller on any Real
Property shall be apportioned and paid or adjusted between Seller and Buyer as
of the date of closing.
9. Title to Real Property
----------------------
(a) The Real Property is to be conveyed at Closing to Buyer either
by General Warranty Deed or Special Warranty Deed, as selected by Buyer, subject
to the Permitted Title Exceptions, defined as the following:
i) all taxes and assessments not yet due and payable;
-10-
<PAGE>
ii) all facts which would be disclosed by an accurate survey
of the Real Property;
iii) municipal, county and state ordinances, statutes, rules
and regulations, zoning, planning, subdivision and environmental regulations and
ordinances;
iv) rights, public and private, together with flooding and
drainage rights, if any in and to all streams, rivers or water courses,
crossing, bounding or affecting the Real Property; and
v) all other restrictions, easements and matters of record
or easements visible on the ground; otherwise title to the Real Property will be
good and marketable and such as will be insured by any reputable title insurance
company at its regular rates.
(b) Seller will not affirmatively create a defect in title
subsequent to the date of this Agreement. If a defect is created Buyer may waive
same or require Seller to remove the defect prior to closing.
(c) With respect to any or all parcels of Real Property, Buyer may
elect to secure at Buyer's expense a title insurance commitment from a reputable
title company, pursuant to which the title company shall agree to issue to Buyer
at Buyer's expense, an owner's title insurance policy on the now current ALTA
standard form policy, subject to conditions in the commitment. In the event the
Seller is unable to give good and marketable, and insurable title to any
particular parcel which
-11-
<PAGE>
comprises the Real Property, Buyer shall have the option of taking such title as
Seller can give without abatement of the Purchase Price, or of not purchasing
the particular Real Property with the defect in title.
10. Municipal Notices. Seller represents and warrants that as of the
-----------------
date hereof, Seller has received no written notice which heretofore has not been
complied with, from any municipal or other governmental authority, requiring or
calling attention to the need for any work, repairs, construction or
installations on, about or in connection with the Real Property or any other
Real Property, or notifying Seller of any violation in connection with the Real
Property or other Real Property. In the event that any such notice is hereafter
received by either Seller or Buyer, the recipient shall promptly deliver a copy
of such notice to the other party hereto. Buyer shall, at Buyer's expense,
promptly comply with the requirements of any and all such notices hereafter
issued, including but not limited to the payment of any fines, interest or
penalties which result from Buyer's violations relating to its use and operation
of the Real Property or other Real Property and shall indemnify, defend,
exonerate and hold Seller harmless therefrom.
11. Tender. With respect to the Real Property, formal tender of an
------
executed deed and purchase money is hereby waived.
12. Risk of Loss; Insurance. Seller shall maintain or shall cause
-----------------------
Buyer in its capacity as lessee of any Real Property to maintain adequate
insurance of the kinds, covering such risks,
-12-
<PAGE>
and in such amounts and with such deductibles and exclusions as are consistent
with prudent business practice and prior experience. Subject to the rights of
any mortgagee of any of the Real Property, Seller and Buyer shall cooperate to
use the proceeds of any such insurance to repair or replace any building and
improvements on any Real Property as expeditiously as is possible consistent
with prudent business practices. The occurrence of any casualty will not excuse
performance under this Agreement.
13. Conditions Precedent to Buyer's Obligation. The obligation of
------------------------------------------
the Buyer to consummate the Closing shall be subject to the satisfaction at or
prior to Closing of each of the following conditions:
(a) The representations and warranties of the Seller pursuant to
this Agreement shall be true and correct as of the Closing with the same effect
as though made or given at Closing;
(b) Seller shall have performed and complied with all of its
obligations under this Agreement to be performed or complied with at or prior to
Closing;
(c) The Real Property shall not have been, and shall not be
threatened to be, adversely affected in any way as a result of fire, disaster or
accident except for losses fully covered by Seller's insurance;
(d) Seller shall have obtained all necessary consents of any third
party;
-13-
<PAGE>
(e) No restraining order or injunction shall prevent any of the
transactions contemplated by this Agreement, and no action, suit or proceeding
shall be pending before any court, administrative body or arbitration panel
which seeks to restrain or enjoin or seeks damages or other relief in connection
with this Agreement or consummation of the transactions contemplated hereby;
(f) All proceedings in connection with the transactions
contemplated by this Agreement and all certificates and documents delivered to
the Buyer in connection with the transactions contemplated by this Agreement
shall be satisfactory in all respects to Buyer, and Buyer shall have received
the originals or certified or other copies of all such records and documents as
Buyer may reasonably request.
(g) The contemporaneous closing of an Agreement of Sale between
Buyer and Pierce Family Partnership, Ltd. of even date herewith.
14. Conditions Precedent to Seller's Obligation. The obligation of
-------------------------------------------
the Seller to consummate the Closing shall be subject to the satisfaction at or
prior to Closing of each of the following conditions:
(a) The representations and warranties of the Buyer pursuant to
this Agreement shall be true and correct as of Closing with the same effect as
though made or given at Closing;
-14-
<PAGE>
(b) Buyer shall have performed and complied with all of its
obligations under this Agreement that are to be performed or complied with on or
prior to Closing;
(c) All proceedings in connection with the transactions
contemplated by this Agreement and all certificates and documents delivered to
the Seller in connection with the transactions contemplated by this Agreement
shall be satisfactory in all respects to Buyer, and Buyer shall have received
the originals or certified or other copies of all such records and documents as
Buyer may reasonably request.
15. Survival of Representatives and Warranties. The representations
------------------------------------------
and warranties of the Seller and Buyer respectively made in this Agreement, or
otherwise made in connection with the transactions contemplated hereby, shall
survive Closing and consummation of the transactions contemplated hereby.
16. Brokers. Seller and Buyer represent and warrant to each other
-------
that neither has dealt with any broker, finder or other intermediary with
respect to this transaction. Seller and Buyer hereby agree to indemnify, defend
and hold each other harmless from all claims of any and all brokers, finders or
those asserting to have acted in similar capacity on behalf of the other party.
17. Agreement Not To Be Recorded. Neither this Agreement, nor any
----------------------------
memorandum thereof, nor any assignment thereof (if permitted) shall be filed of
record in any office or place of
-15-
<PAGE>
public record, and if Buyer shall fail to comply with the terms hereby by
recording or attempting to record the same, it shall not operate to bind or
cloud the title to any of the Real Property. Seller shall, nevertheless, have
the right forthwith to institute appropriate legal proceedings to have the same
removed from record. If Buyer or any agent or other person acting for Buyer
should cause or permit this Agreement, a memorandum thereof, or assignment
thereof, or a copy thereof, to be filed in an office or place of public record,
Seller may, at its option and in addition to Seller's other rights and remedies,
treat such act as a default of this Agreement on the part of Buyer. However, the
filing of this Agreement or any memorandum thereof, or any assignment thereof,
or of copies of the same, in any suit or other legal proceeding in which such
documents are relevant or material shall not be deemed to be a violation of this
paragraph.
18. Notices. All notices, demands or other communications which are
-------
required or are permitted to be given hereunder shall be in writing and shall be
delivered by Federal Express or similar guaranteed overnight carrier, or mailed
by United States registered or certified mail, return receipt requested, postage
prepaid, addressed:
(a) If to Seller:
Pierce Real Estate Company
631 Park Avenue
King of Prussia, PA 19406
(b) If to Buyer:
Pierce Leahy Corp.
631 Park Avenue
-16-
<PAGE>
King of Prussia, PA 19406
or to such other address as either party shall designate by notice in accordance
with the provisions of this paragraph. The same shall be deemed given upon three
(3) days after the earlier of the date of mailing or upon the receipt thereof by
the addressee, as evidenced by the certified mail return receipt postmark, or
upon delivery if delivered by Federal Express, or similar carrier.
19. Assignability, Successors and Assigns. Neither this Agreement
-------------------------------------
nor any of Seller's or Buyer's rights hereunder may be assigned, either
voluntarily or by operation of law by Seller or Buyer without the prior written
consent of the other party hereto, which consent the other party may withhold in
its absolute and sole discretion and regardless of whether such refusal would
violate any undertaking of good faith or reasonableness which might be implied
in transactions of this type. Notwithstanding any assignment of this Agreement
or of any of Buyer's rights hereunder, Buyer shall continue to be fully
obligated for the performance of all of Buyer's obligations hereunder and under
the other documents executed pursuant hereto, and upon request and prior to the
effective date of any such assignment, shall deliver an assumption in form
approved by Seller's counsel of all of Buyer's obligations executed by the
authorized assignee, together with such further security therefore as Seller may
require. Subject as provided above, this
-17-
<PAGE>
Agreement shall extend to and bind all inure to the benefit of the successors
and assigns of Seller and of Buyer.
20. Whole Agreement - Alteration or Amendment. The whole agreement
-----------------------------------------
between the parties relative to the sale of the Real Property is contained
herein and other documents and instruments to be executed and delivered pursuant
to the terms hereof, and the parties are not bound by any agreements,
understandings, conditions, warranties or representations otherwise than as are
expressly set forth and stipulated herein. No change, alteration, amendment,
modification or waiver of any of the terms or provisions hereof shall be valid
unless the same be in writing and signed by the parties.
21. Further Assurances. From time to time, at the request of the
------------------
Buyer and without further consideration, the Seller shall execute and deliver
such other instruments of conveyance and transfer and take such other actions as
the Buyer may require more effectively to convey any of the Real Property to
Buyer. Seller and Buyer shall also execute and deliver to the other party such
other instruments as may reasonably be required in connection with the
performance of this Agreement and each shall take such further actions to convey
out the transactions contemplated by this Agreement.
22. Governing Law. This Agreement and the rights and obligations of
-------------
the parties with respect thereto shall be construed in accordance with the laws
of the Commonwealth of Pennsylvania applicable to contracts made and to be
performed
-18-
<PAGE>
therein, without giving effect to the principles of conflict of laws.
23. No-Set-Off. All payments due under this Agreement, or any other
----------
document or instrument executed by Buyer pursuant to this Agreement shall be
made without right of set-off or deduction for any reason whatsoever.
24. Severability. No provision of this Agreement which may be deemed
------------
unenforceable shall in any way invalidate any other provision hereof, all of
which shall remain in full force and effect.
25. Captions and Headings. The captions or headings of the
---------------------
paragraphs hereof are for convenience only and shall not control or affect the
meaning or construction of any of the terms or provisions of this Agreement.
26. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
27. Waiver of Conflict of Interests. Each of Seller and Buyer has
-------------------------------
requested and is utilizing the professional legal services of Cozen and O'Connor
in connection with this Agreement and Closing. Cozen and O'Connor has
previously acted as counsel for each of Seller and Buyer. Each of Seller and
Buyer have discussed with each other and Cozen and O'Connor that Seller and
Buyer are substantially aligned in interest as to method and manner in which
this transaction has been structured, that while
-19-
<PAGE>
there may be some difference of interest between Seller and Buyer, they do not
believe the interests to be material, and they believe this transaction as
structured to be advantageous to all of them in their capacities as individuals
and entities. Seller and Buyer acknowledge that Cozen and O'Connor has fully
explained to each of them that they each have conflicting rights with respect to
each other, that they can and should consider retaining separate legal
representation because of the resulting conflict of interest, that not every
possible conflict between Seller and Buyer can ever be anticipated.
Nevertheless both Seller and Buyer have determined individually and jointly to
use the professional services of Cozen and O'Connor, and with such full
disclosure and knowledge, Seller and Buyer hereby consent to joint
representation and waive any conflict of interest and waive all rights that
either of them has to seek separate counsel from the one being used by the
other.
IN WITNESS WHEREOF, the parties have executed this
-20-
<PAGE>
Agreement the day and year first above written.
WITNESS: PIERCE REAL ESTATE COMPANY, Seller
BY: /s/ Leo W. Pierce, Jr.
- --------------------------- ----------------------------------
LEO W. PIERCE, JR.
By: /s/ J. Peter Pierce
- --------------------------- ----------------------------------
J. PETER PIERCE, Partner
Its Duly Authorized
General Partners
ATTEST: PIERCE LEAHY CORP.
BY: /s/ J. Peter Pierce
- --------------------------- ----------------------------------
President Buyer
-21-
<PAGE>
EXHIBIT 21
----------
Subsidiaries
------------
PLC Command I, L.P., a Pennsylvania limited partnership
PLC Command II, L.P., a Pennsylvania limited partnership
Pierce Leahy Command Company, a Nova Scotia company
<PAGE>
ARTHUR ANDERSEN LLP Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
October 2, 1996
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to the Registration Statement of
Pierce Leahy Corp. on Form S-4 of our report dated August 14, 1995 on the
financial statements of Securities Archives, Inc. appearing in the Prospectus,
which is part of this Registration Statement, and to the reference to us under
the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Dallas, Texas
October 2, 1996
<PAGE>
Exhibit 23.4
September 30, 1996
TO:
Pierce Leahy Corp. CIBC Wood Gundy Securities Corp.
631 Park Avenue 1325 Avenue of the Americas, 22nd Floor
King of Prussia, PA 19406 New York, NY 10019
Certain subsidiaries of Cushman & Wakefield, Inc. identified below ("C&W")
hereby consent to the reference to the appraisal reports described below in the
Amendment No. 1 to Form S-4 Registration Statement. An authorized representative
of C&W has approved the text of the reference.
Appraisal reports to be referenced:
Appraisals as of June 12, 1996 of property described as follows: 64 Leone Lane,
Orange County, New York issued by Cushman & Wakefield of New Jersey, Inc.
This agreement shall inure to the benefit of Pierce Leahy Corp., CIBC Wood Gundy
Securities Corp., their successors and assigns, and be binding on C&W and its
successor and assigns.
Very truly yours,
Cushman & Wakefield of New Jersey, Inc.
<PAGE>
Exhibit 23.5
September 30, 1996
TO:
Pierce Leahy Corp. CIBC Wood Gundy Securities Corp.
631 Park Avenue 1325 Avenue of the Americas, 22nd Floor
King of Prussia, PA 19406 New York, NY 10019
Certain subsidiaries of Cushman & Wakefield, Inc. identified below ("C&W")
hereby consent to the reference to the appraisal reports described below in the
Amendment No. 1 to Form S-4 Registration Statement. An authorized representative
of C&W has approved the text of the reference.
Appraisal reports to be referenced:
Appraisals as of June 6, 1996 of property described as follows: 3881 Old Gordon
Road, N.W., Atlanta, Georgia, issued by Cushman & Wakefield of Georgia, Inc.
This agreement shall inure to the benefit of Pierce Leahy Corp., CIBC Wood Gundy
Securities Corp., their successors and assigns, and be binding on C&W and its
successor and assigns.
Very truly yours,
Cushman & Wakefield of Georgia, Inc.
<PAGE>
Exhibit 23.6
September 30, 1996
TO:
Pierce Leahy Corp. CIBC Wood Gundy Securities Corp.
631 Park Avenue 1325 Avenue of the Americas, 22nd Floor
King of Prussia, PA 19406 New York, NY 10019
Certain subsidiaries of Cushman & Wakefield, Inc. identified below ("C&W")
hereby consent to the reference to the appraisal reports described below in the
Amendment No. 1 to Form S-4 Registration Statement. An authorized representative
of C&W has approved the text of the reference.
Appraisal reports to be referenced:
Appraisals as of May 31, 1996 of property described as follows: 800 Carpenters
Crossing, Folcroft West Industrial Park, Delaware County, PA; Curtis Park
Condominium Unit #203, Delaware County, PA; 2000 Henderson Drive, Folcroft East
Industrial Park, Delaware County, issued by Cushman & Wakefield of Pennsylvania,
Inc.
This agreement shall inure to the benefit of Pierce Leahy Corp., CIBC Wood Gundy
Securities Corp., their successors and assigns, and be binding on C&W and its
successor and assigns.
Very truly yours,
Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
Exhibit 99.1
================================================================================
Box 1 DESCRIPTION OF ORIGINAL NOTES
- --------------------------------------------------------------------------------
(1) (2) (3) (4)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORM OF
LETTER OF TRANSMITTAL
To Tender for Exchange
11 1/8% Senior Subordinated Notes due 2006
of
Pierce Leahy Corp.
Pursuant to the Prospectus dated _____________, 1996
================================================================================
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1996 (THE "EXPIRATION DATE"), UNLESS THE
EXCHANGE OFFER IS EXTENDED, IN WHICH CASE THE TERM "EXPIRATION DATE" SHALL
MEAN THE LATEST DATE AND TIME TO WHICH THE EXCHANGE OFFER IS EXTENDED. TENDERS
MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
================================================================================
The Exchange Agent is:
United States Trust Company of New York
By Facsimile: By Overnight Courier:
(212) 420-6152 United States Trust Company of New York
(For Eligible Institutions Only) 770 Broadway, 13th Floor
New York, NY 10003
Confirm by Telephone: Attention: Corporate Trust Services
(800) 548-6565 Window
By Hand: By Mail:
United States Trust Company of New York (insured or registered recommended)
111 Broadway, Lower Level United States Trust Company of New York
New York, NY 10006 P.O. Box 843
Attention: Corporate Trust Peter Cooper Station
New York, NY 10276
Attention: Corporate Trust
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned acknowledges receipt of the Prospectus dated ____________,
1996 (the "Prospectus"), of Pierce Leahy Corp., a New York corporation (the
"Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which
together with the Prospectus constitutes the Company's offer (the "Exchange
Offer") to exchange $1,000 principal amount of its 11 1/8% Senior Subordinated
Notes due 2006 (the "Exchange Notes") for each $1,000 principal amount of its
outstanding 11 1/8% Senior Subordinated Notes due 2006 (the "Original Notes").
Recipients of the Prospectus should read the requirements described in such
Prospectus with respect to eligibility to participate in the Exchange Offer.
Capitalized terms used but not defined herein have the meaning given to them in
the Prospectus.
<PAGE>
The undersigned hereby tenders the Original Notes described in the box
entitled "Description of Original Notes" below pursuant to the terms and
conditions described in the Prospectus and this Letter of Transmittal. The
undersigned is the registered owner of all the Original Notes and the
undersigned represents that it has received from each beneficial owner of
Original Notes ("Beneficial Owners") a duly completed and executed form of
"Instruction to Registered Holder from Beneficial Owner" accompanying this
Letter of Transmittal, instructing the undersigned to take the action described
in this Letter of Transmittal.
This Letter of Transmittal is to be used by a holder of Original Notes (i)
if certificates representing Original Notes are to be forwarded herewith, (ii)
if delivery of Original Notes is to be made by book-entry transfer to the
Exchange Agent's account at The Depository Trust Company ("DTC"), pursuant to
the procedures set forth in the section of the Prospectus entitled "The Exchange
Offer--Procedures for Tendering," or (iii) if a tender is made pursuant to the
guaranteed delivery procedures in the section of the Prospectus entitled "The
Exchange Offer--Guaranteed Delivery Procedures."
The undersigned hereby represents and warrants that the information
received from the beneficial owners is accurately reflected in the boxes
entitled "Beneficial Owner(s)--Purchaser Status" and "Beneficial Owner(s)--
Residence."
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder of Original Notes promptly and
instruct such registered holder of Original Notes to tender on behalf of the
beneficial owner. If such beneficial owner wishes to tender on its own behalf,
such beneficial owner must, prior to completing and executing this Letter of
Transmittal and delivering its Original Notes, either make appropriate
arrangements to register ownership of the Original Notes in such beneficial
owner's name or obtain a properly completed assignment from the registered
holder of Original Notes. The transfer of record ownership may take considerable
time.
In order to properly complete this Letter of Transmittal, a holder of
Original Notes must (i) complete the box entitled "Description of Original
Notes," (ii) complete the boxes entitled "Beneficial Owner(s)--Purchaser Status"
and "Beneficial Owner(s)--Residence," (iii) if appropriate, check and complete
the boxes relating to book-entry transfer, guaranteed delivery, Special Issuance
Instructions and Special Delivery Instructions, (iv) sign the Letter of
Transmittal by completing the box entitled "Sign Here" and (v) complete the
Substitute Form W-9. Each holder of Original Notes should carefully read the
detailed instructions below prior to completing the Letter of Transmittal.
Holders of Original Notes who desire to tender their Original Notes for
exchange and (i) whose Original Notes are not immediately available, (ii) who
cannot deliver their Original Notes and all other documents required hereby to
the Exchange Agent on or prior to the Expiration Date or (iii) who are unable to
complete the procedure for book-entry transfer on a timely basis, must tender
the Original Notes pursuant to the guaranteed delivery procedures set forth in
the section of the Prospectus entitled "The Exchange Offer--Guaranteed Delivery
Procedures." See Instruction 2.
Holders of Original Notes who wish to tender their Original Notes for
exchange must complete columns (1) through (3) in Box 1 below entitled
"Description of Original Notes," complete the applicable boxes below Box 1 and
sign Box 6 below entitled "Sign Here." If only columns (1) through (3) of Box 1
are completed, such holder of Original Notes will have tendered for exchange all
Original Notes listed in column (3) of Box 1. If the holder of Original Notes
wishes to tender for exchange less than all of such Original Notes, column (4)
of Box 1 must be completed in full. In such case, please refer to Instruction 5.
<PAGE>
================================================================================
Box 1 DESCRIPTION OF ORIGINAL NOTES
- --------------------------------------------------------------------------------
(1) (2) (3) (4)
Original Note Aggregate Principal
Name(s) and Address(es) of Number(s) Principal Amount
Registered Holder(s) of (Attach signed Amount Tendered For
Original Note(s), exactly Additional Represented by Exchange
as name(s) appear(s) on List if Certificate(s)1 (must
Original Note necessary) be in
Certificate(s) integral
(Please fill in, if blank) multiples of
$1,000)2
- --------------------------------------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
================================================================================
/1/ Unless otherwise indicated in the column "Principal Amount Tendered For
Exchange," any tendering Holder of Original Notes will be deemed to have
tendered the entire aggregate principal amount represented by the column
labelled "Aggregate Principal Amount Represented by Certificate(s)."
/2/ The minimum permitted tender is $1,000 in principal amount of Original
Notes, and all tenders must be integral multiples of $1,000 principal
amount of Original Notes.
[_] CHECK HERE IF TENDERED ORIGINAL NOTES ARE ENCLOSED HEREWITH.
[_] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER
DEFINED) ONLY):
Name of Tendering Institution:
----------------------------------
Account Number:
----------------------------------
Transaction Code Number:
----------------------------------
<PAGE>
[_] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Registered Holder of Original Note(s):
--------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------
Window Ticket Number (if available):
--------------------
Name of Institution which Guaranteed Deliver:
--------------------
Account Number (if delivered by book-entry transfer):
--------------------
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
-------------------------
Address:
-------------------------
-------------------------
<PAGE>
================================================================================
Box 2
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 1, 6, 7 and 8)
To be completed ONLY (i) if the Exchange Notes issued in exchange for Original
Notes, certificates for Original Notes in a principal amount not exchanged for
Exchange Notes, or Original Notes (if any) not tendered for exchange, are to be
issued in the name of someone other than the undersigned or (ii) if Original
Notes tendered by book-entry transfer which are not exchanged are to be returned
by credit to an account maintained at DTC.
Issue to:
Name
---------------------------------------------------------------------------
(Please Print)
Address
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security No.)
Credit Original Notes not exchanged and delivered by book-entry transfer
to DTC account set forth below:
- --------------------------------------------------------------------------------
(Account Number)
Box 3
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 6, 7 and 8)
To be completed ONLY if the Exchange Notes issued in exchange for Original
Notes, certificates for Original notes in a principal amount not exchanged for
Exchange Notes, or Original Notes (if any) not tendered for exchange, are to be
mailed or delivered (i) to someone other than the undersigned or (ii) to the
undersigned at an address other than the address shown below the undersigned's
signature.
Mail or delivered to:
Name
-------------------------------------------------------------------------
(Please Print)
Address
-----------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(Include Zip Code)
-------------------------------------------------------------------------------
(Tax Identification or Social Security No.)
================================================================================
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Box 4 BENEFICIAL OWNER(S) - RESIDENCE
- ------------------------------------------------------------------------------------------------------------------------------------
State of Domicile/Principal Place of Business of Each Principal Amount of Original Notes
Beneficial Owner of Original Notes Held for Account of Beneficial Owner(s)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Box 5 BENEFICIAL OWNER(S) - PURCHASER STATUS
- ------------------------------------------------------------------------------------------------------------------------------------
The beneficial owner of each of the Original Notes described herein is (check the box that applies):
<C> <S>
[_] A "Qualified Institutional Buyer" (as defined in Rule 144A under the Securities Act of 1933 (the "Securities Act"))
[_] An "Institutional Accredited Investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)
[_] A non "U.S. person" (as defined in Regulation S of the Securities Act) that purchased the Original Notes outside the United
States in accordance with Rule 904 under the Securities Act
[_] Other (describe)
------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
<PAGE>
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Pursuant to the offer by Pierce Leahy Corp., a New York corporation
(the "Company"), upon the terms and subject to the conditions set forth in the
Prospectus dated _________________, 1996 (the "Prospectus") and this Letter of
Transmittal (the "Letter of Transmittal"), which together with the Prospectus
constitutes the Company's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 11 1/8% Senior Subordinated Notes due 2006 (the
"Exchange Notes") for each $1,000 principal amount of its outstanding 11 1/8%
Senior Subordinated Notes due 2006 (the "Original Notes"), the undersigned
hereby tenders to the Company for exchange the Original Notes indicated above.
By executing this Letter of Transmittal and subject to and effective
upon acceptance for exchange of the Original Notes tendered for exchange
herewith, the undersigned will have irrevocably sold, assigned, transferred and
exchanged, to the Company, all right, title and interest in, to and under all of
the Original Notes tendered for exchange hereby, and hereby will have appointed
the Exchange Agent as the true and lawful agent and attorney-in-fact (with full
knowledge that the Exchange Agent also acts as agent of the Company) of such
holder of Original Notes with respect to such Original Notes, with full power of
substitution to (i) deliver certificates representing such Original Notes, or
transfer ownership of such Original Notes on the account books maintained by DTC
(together, in any such case, with all accompanying evidences of transfer and
authenticity), to the Company, (ii) present and deliver such Original Notes for
transfer on the books of the Company and (iii) receive all benefits and
otherwise exercise all rights and incidents of beneficial ownership with respect
to such Original Notes, all in accordance with the terms of the Exchange Offer.
The power of attorney granted in this paragraph shall be deemed to be
irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that (i) the
undersigned is the owner, (ii) has a net long position within the meaning of
Rule 14e-4 under the Securities Exchange Act as amended ("Rule 14e-4") equal to
or greater than the principal amount of Original Notes tendered hereby, (iii)
the tender of such Original Notes complies with Rule 14e-4 (to the extent that
Rule 14e-4 is applicable to such exchange), (iv) the undersigned has full power
and authority to tender, exchange, assign and transfer the Original Notes and
(v) that when such Original Notes are accepted for exchange by the Company, the
Company will acquire good and marketable title thereto, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claims. The undersigned will, upon receipt, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Original
Notes tendered for exchange hereby.
The undersigned hereby further represents to the Company that (i) the
Exchange Notes to be acquired by the undersigned in exchange for the Original
Notes tendered hereby and any beneficial owner(s) of such Original Notes in
connection with the Exchange Offer will be acquired by the undersigned and such
beneficial owner(s) in the ordinary course of business of the undersigned, (ii)
the undersigned (if not a broker-dealer referred to in the last sentence of this
paragraph) are not participating and do not intend to participate in the
distribution of the Exchange Notes, (iii) the undersigned have no arrangement or
understanding with any person to participate in the distribution of the Exchange
Notes, (iv) the undersigned and each beneficial owner acknowledge and agree that
any person participating in the Exchange Offer for the purpose of distributing
the Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on the
position of the staff of the Commission set forth in certain no-action letters,
(v) the undersigned and each beneficial owner understand that a secondary resale
transaction described in clause (iv) above should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the
Commission and (vi) neither the undersigned
<PAGE>
nor any beneficial owner is an "affiliate" of the Company, as defined under Rule
405 under the Securities Act. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Original Notes that
were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes received in respect of such Original Notes pursuant to the
Exchange Offer; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For purposes of the Exchange Offer, the Company will be deemed to have
accepted for exchange, and to have exchanged, validly tendered Original Notes,
if, as and when the Company gives oral or written notice thereof to the Exchange
Agent. Tenders of Original Notes for exchange may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange
Offer--Withdrawal of Tenders" in the Prospectus. Any Original Notes tendered by
the undersigned and not accepted for exchange will be returned to the
undersigned at the address set forth above unless otherwise indicated in Box 3
above entitled "Special Delivery Instructions" as promptly as practicable after
the Expiration Date.
The undersigned acknowledges that the Company's acceptance of Original
Notes validly tendered for exchange pursuant to any one of the procedures
described in the section of the Prospectus entitled "The Exchange Offer" and in
the instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions," please return any Original Notes not tendered for exchange in the
name(s) of the undersigned. Similarly, unless otherwise indicated in Box 3 above
entitled "Special Delivery Instructions," please mail any certificates for
Original Notes not tendered or exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s).
In the event that both Boxes 2 and 3, "Special Issuance Instructions"
and "Special Delivery Instructions," are completed, please issue the
certificates representing the Exchange Notes issued in exchange for the Original
Notes accepted for exchange in the name(s) of, and return any Original Notes not
tendered for exchange or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Original Notes from the name of the holder of Original Note(s) thereof if
the Company does not accept for exchange any of the Original Notes so tendered
for exchange or if such transfer would not be in compliance with any transfer
restrictions applicable to such Original Note(s).
<PAGE>
In order to validly tender Original Notes for exchange, holders of
Original Notes must complete, execute, and deliver this Letter of Transmittal.
Except as stated in the Prospectus, all authority herein conferred or
agreed to be conferred shall survive the death, incapacity, or dissolution of
the undersigned, and any obligation of the undersigned hereunder shall be
binding upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as otherwise stated in the Prospectus, this tender for
exchange of Original Notes is irrevocable.
================================================================================
Box 6 SIGN HERE
- --------------------------------------------------------------------------------
(Signature(s) of Owner(s))
Date: , 1996
Must be signed by the registered holder(s) of Original Notes exactly as
name(s) appear(s) on certificate(s) representing the Original Notes or on a
security position listing or by person(s) authorized to become registered
Original Note holder(s) by certificates and documents transmitted herewith. If
signature is by trustees, executors, administrators, guardians, attorneys-in-
fact, officers of corporations or other acting in a fiduciary or representative
capacity, please provide the following information. (See Instruction 6).
Name(s):
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Capacity (full title):
----------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
================================================================================
<PAGE>
================================================================================
Principal place of business (if different from address listed above):
-----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No. ( )
-----------------------------------------------
Tax Identification or Social Security Nos.:
-------------------------------------
Please complete Substitute Form W-9
GUARANTEE OF SIGNATURE(S)
(Signature(s) must be guaranteed if required by Instruction 1)
Authorized Signature:
-----------------------------------------------------------
Dated:
--------------------------------------------------------------------------
Name and Title:
-----------------------------------------------------------------
(Please Print)
Name of Firm:
-------------------------------------------------------------------
================================================================================
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by an institution
which is (1) a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc., (2) a commercial bank or
trust company having an office or correspondent in the Unites States. or (3) an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act which is a member of one of the following recognized
Signature Guarantee Programs (an "Eligible Institution"):
a. The Securities Transfer Agents Medallion Program (STAMP)
b. The New York Stock Exchange Medallion Signature Program (MSP)
c. The Stock Exchange Medallion Program (SEMP)
Signatures on this Letter of Transmittal need not be guaranteed (i) if this
Letter of Transmittal is signed by the registered holder(s) of the Original
Notes tendered herewith and such registered holder(s) have not completed the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) if such Original Notes are
tendered for the account of an Eligible Institution. IN ALL OTHER CASES, ALL
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
2. Delivery of this Letter of Transmittal and Original Notes;
Guaranteed Delivery Procedures. This Letter of Transmittal is to be completed by
holders of Original Notes (i) if certificates are to be forwarded herewith or
(ii) if tenders are to be made pursuant to the procedures for tender by book-
entry transfer or guaranteed delivery set forth in the section of the Prospectus
entitled "The Exchange Offer." Certificates for all physically tendered Original
Notes or any confirmation of a book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth on the cover of this Letter of Transmittal prior to 5:00 p.m.,
New York City time, on the Expiration Date. Holders of Original Notes who elect
to tender Original Notes and (i) whose Original Notes are not immediately
available or (ii) who cannot deliver the Original Notes or other required
documents to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date, must tender their Original Notes according to the guaranteed
delivery procedures set forth in the Prospectus. Holders may have such tender
effected if: (a) such tender is made by or through an Eligible Institution; and
(b) prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange
Agent has received from such Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery, setting forth the name and address of
the holder of such Original Notes, the certificate numbers(s) of such Original
Notes and the principal amount of Original Notes tendered for exchange, stating
that tender is being made thereby and guaranteeing that, within five New York
Stock Exchange trading days after the Expiration Date, the certificate(s)
representing such Original Notes (or a Book-Entry Confirmation), in proper form
for transfer, and any other documents required by this Letter of Transmittal,
will be deposited by such Eligible Institution with the Exchange Agent; and (c)
a properly executed Letter of Transmittal (or a facsimile hereof), as well as
the certificate(s) for all tendered Original Notes in proper form for transfer
or a Book-Entry Confirmation, together with any other documents required by this
Letter of Transmittal, are received by the Exchange Agent within five New York
Stock Exchange trading days after the Expiration Date.
<PAGE>
THE METHOD OF DELIVERY OF ORIGINAL NOTES, THIS LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
RISK OF THE HOLDER. EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT.
INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR
HAND DELIVERY SERVICE, PROPERLY INSURED. IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. NEITHER THIS
LETTER OF TRANSMITTAL NOR ANY ORIGINAL NOTES SHOULD BE SENT TO THE COMPANY.
No alternative, conditional or contingent tenders will be accepted.
All tendering holders of Original Notes, by execution of this Letter of
Transmittal (or facsimile hereof, if applicable), waive any right to receive
notice of the acceptance of their Original Notes for exchange.
3. Inadequate Space. If the space provided in the box entitled
"Description of Original Notes" above is inadequate, the certificate numbers and
principal amounts of the Original Notes being tendered should be listed on a
separate signed schedule affixed hereto.
4. Withdrawals. A tender of Original Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date by delivery
of written or facsimile notice of withdrawal to the Exchange Agent at the
address set forth on the cover of this Letter of Transmittal. To be effective, a
notice of withdrawal of Original Notes must (i) specify the name of the person
who tendered the Original Notes to be withdrawn (the "Depositor"), (ii) identify
the Original Notes to be withdrawn (including the certificate number or numbers
and aggregate principal amount of such Original Notes), and (iii) be signed by
the holder of Original Notes in the same manner as the original signature on the
Letter of Transmittal by which such Original Notes were tendered (including any
required signature guarantees). Any Original Notes withdrawn will thereafter be
deemed not validly tendered for purposes of the Exchange Offer and no Exchange
Notes will be issued with respect thereto unless the Original Notes so withdrawn
are validly retendered. Properly withdrawn Original Notes may be retendered by
following one of the procedures described in the section of the Prospectus
entitled "The Exchange Offer--Procedures for Tendering" at any time prior to
5:00 p.m., New York City time, on the Expiration Date.
5. Partial Tenders. Tenders of Original Notes will be accepted only
in integral multiples of $1,000 principal amount. If a tender for exchange is to
be made with respect to less than the entire principal amount of any Original
Notes, fill in the principal amount of Original Notes which are tendered for
exchange in column (4) of the box entitled "Description of Original Notes," as
more fully described in the footnotes thereto. In case of a partial tender for
exchange, a new certificate, in fully registered form, for the remainder of the
principal amount of the Original Notes, will be sent to the holders of Original
Notes unless otherwise indicated in the appropriate box on this Letter of
Transmittal as promptly as practicable after the expiration or termination of
the Exchange Offer.
6. Signatures on this Letter of Transmittal, Assignment and Endorsements.
(a) The signature(s) of the holder of Original Notes on this Letter of
Transmittal must correspond with the name(s) as written on the face of the
Original Notes without alternation, enlargement or any change whatsoever.
(b) If tendered Original Notes are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
<PAGE>
(c) If any tendered Original Notes are registered in different names
on several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter of Transmittal and any necessary or required
documents as there are different registrations or certificates.
(d) When this Letter of Transmittal is signed by the holder of the
Original Notes listed and transmitted hereby, no endorsements of Original Notes
or assignments are required. If, however, Original Notes not tendered or not
accepted, are to be issued or returned in the name of a person other than the
holder of Original Notes, then the Original Notes transmitted hereby must be
endorsed or accompanied by a properly executed assignment in a form satisfactory
to the Company, in either case signed exactly as the name(s) of the holder of
Original Notes appear(s) on the Original Notes. Signatures on such Original
Notes or assignments must be guaranteed by an Eligible Institution (unless
signed by an Eligible Institution).
(e) If this Letter of Transmittal or Original Notes or assignments are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Company of their authority so to act must be submitted with
this Letter of Transmittal.
(f) If this Letter of Transmittal is signed by a person other than the
registered holder of Original Notes listed, the Original Notes must be endorsed
or accompanied by a properly executed assignment, in either case signed by such
registered holder exactly as the name(s) of the registered holder of Original
Notes appear(s) on the certificates. Signatures on such Original Notes or
assignments must be guaranteed by an Eligible Institution (unless signed by an
Eligible Institution).
7. Transfer Taxes. Except as set forth in this Instruction 7, the
Company will pay all transfer taxes, if any, applicable to the transfer and
exchange of Original Notes pursuant to the Exchange Offer. If, however, issuance
of Exchange Notes is to be made to, or Original Notes not tendered for exchange
are to be issued or returned in the name of, any person other than the holder of
Original Notes, and satisfactory evidence of payment of such taxes or exemptions
from taxes therefrom is not submitted with this Letter of Transmittal, the
amount of any transfer taxes payable on account of the transfer to such person
will be imposed on and payable by the holder of Original Notes tendering
Original Notes for exchange prior to the issuance of the Exchange Notes or the
return of Original Notes in another name.
8. Special Issuance and Delivery Instructions. If the Exchange Notes
are to be issued, or if any Original Notes not tendered for exchange are to be
issued or sent to someone other than the holder of Original Notes or to an
address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Holders of Original Notes tendering Original
Notes by book-entry transfer may request that Original Notes not accepted be
credited to such account maintained at DTC as such holder of Original Notes may
designate.
9. Irregularities. All questions as to the validity, form, eligibility
(including time of receipt), compliance with conditions, acceptance and
withdrawal of tendered Original Notes will be determined by the Company in its
sole discretion, which determination will be final and binding. The Company
reserves the absolute right to reject any and all Original Notes not properly
tendered or any Original Notes the Company's acceptance of which would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
right to waive any defects, irregularities or conditions of tender as to
particular Notes. The Company's interpretation of the terms and conditions of
the Exchange Offer (including the instructions in the Letter of Transmittal)
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Original Notes must be cured within
such time as the Company shall determine. Although the Company intends to notify
holders of defects or irregularities with respect to tenders of Original Notes,
neither the Company, the Exchange Agent nor any other person shall incur any
liability for failure to give such notification. Tenders of Original Notes will
not be deemed to have been made until such defects or irregularities have
<PAGE>
been cured or waived. Any Original Notes received by the Exchange Agent that are
not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned by the Exchange Agent to the tendering
holders, unless otherwise provided in this Letter of Transmittal, as soon as
practicable following the Expiration Date.
10. Waiver of Conditions. The Company reserves the absolute right to
waive, amend or modify certain of the specified conditions as described under
"The Exchange Offer--Certain Conditions to the Exchange Offer" in the Prospectus
in the case of any Original Notes tendered (except as otherwise provided in the
Prospectus).
11. Mutilated, Lost, Stolen or Destroyed Original Notes. Any tendering
Holder whose Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address listed below for further instructions:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, NY 10003
(800) 548-6565
12. Requests for Information or Additional Copies. Requests for
information or for additional copies of the Prospectus and this Letter of
Transmittal may be directed to the Exchange Agent at the address or telephone
number set forth on the cover of this Letter of Transmittal.
IMPORTANT: This Letter of Transmittal (or a facsimile thereof, if applicable)
together with certificates, or confirmation of book-entry or the Notice of
Guaranteed Delivery, and all other required documents must be received by the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
<PAGE>
IMPORTANT TAX INFORMATION
Under current federal income tax law, a holder of Original Notes whose
tendered Original Notes are accepted for exchange may be subject to backup
withholding unless the holder provides the Company (as payor), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Original
Notes is awaiting a TIN) and that (A) the holder of Original Notes has not been
notified by the Internal Revenue Service that he or she is subject to backup
withholding as a result of a failure to report all interest or dividends or (B)
the Internal Revenue Service has notified the holder of Original Notes that he
or she is no longer subject to backup withholding; or (ii) an adequate basis for
exemption from backup withholding. If such holder of Original Notes is an
individual, the TIN is such holder's social security number. If the Exchange
Agent is not provided with the correct taxpayer identification number, the
holder of Original Notes may be subject to certain penalties imposed by the
Internal Revenue Service.
Certain holders of Original Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. Exempt holders of Original Notes should
indicate their exempt status on Substitute Form W-9. A foreign individual may
qualify as an exempt recipient by submitting to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (which the Exchange Agent will
provide upon request) signed under penalty of perjury, attesting to the holder's
exempt status. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "Guidelines") for additional
instructions.
If backup withholding applies, the Company is required to withhold 31%
of any payment made to the holder of Original Notes or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
The holder of Original Notes is required to give the Exchange Agent
the TIN (e.g., social security number or employer identification number) of the
record owner of the Original Notes. If the Original Notes are held in more than
one name or are not held in the name of the actual owner, consult the enclosed
Guidelines for additional guidance regarding which number to report.
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF
11 1/8% SENIOR SUBORDINATED NOTES DUE 2006 OF PIERCE LEAHY CORP.
The undersigned hereby acknowledges receipt of the Prospectus dated
______________, 1996 (the "Prospectus") of Pierce Leahy Corp., a New York
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder, as to the action to be
taken by you relating to the Exchange Offer with respect to the 11 1/8% Senior
Subordinated Notes due 2006 (the "Original Notes") held by you for the account
of the undersigned.
The aggregate face amount of the Original Notes held by you for the account
of the undersigned is (fill in amount):
<PAGE>
$ of the Original Notes.
With respect to the Exchange Offer, the undersigned hereby instructs you (check
appropriate box):
[_] To TENDER the following Original Notes held by you for the account of
the undersigned (insert principal amount of Original Notes to be tendered, if
any):
$ of the Original Notes.
[_] NOT to TENDER any Original Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Original Notes held by
you for the account of the undersigned, it is understood that you are authorized
(a) to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner of the Original Notes, including but not limited to the
representations that (i) the undersigned's principal residence is in the state
of (fill in state) , (ii) the undersigned is acquiring the
Exchange Notes in the ordinary course of business of the undersigned, (iii) the
undersigned is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of Exchange Notes, (iv) the undersigned acknowledges that any person
participating in the Exchange Offer for the purpose of distributing the Exchange
Notes must comply with the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended, in connection with any resale
transaction of the Exchange Notes acquired by such person and cannot rely on the
position of the Staff of the Securities and Exchange Commission set forth in
certain no-action letters (See the section of the Prospectus entitled "The
Exchange Offer--Purposes and Effects of the Exchange Offer"), (v) the
undersigned understands that a secondary resale transaction described in clause
(iv) above should be covered by an effective registration statement containing
the selling securityholder information required by Item 507 or Item 508, if
applicable, of Regulation S-K of the Commission, (vi) the undersigned is not an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company,
(vii) if the undersigned is not a broker-dealer, that it is not engaged in, and
does not intend to engage in, a distribution of Exchange Notes and (viii) if the
undersigned is a broker-dealer that will receive Exchange Notes for its own
account in exchange for Original Notes that were acquired as a result of market-
making activities or other trading activities, it acknowledges that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes received in respect of such
Original Notes pursuant to the Exchange Offer; however, by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act; (b) to agree, on
behalf of the undersigned, as set forth in the Letter of Transmittal; and (c) to
take such other action as necessary under the Prospectus or the Letter of
Transmittal to effect the valid tender of Original Notes.
<PAGE>
The purchaser status of the undersigned is (check the box that applies):
[_] A "Qualified Institutional Buyer" (as defined in Rule 144A under Securities
Act)
[_] An "Institutional Accredited Investor" (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act)
[_] A non "U.S." person" (as defined in Regulation S of the Securities Act)
that purchased the Original Notes outside the United States in accordance
with Rule 904 under the Securities Act
[_] Other (describe)
-----------------------------------------------------------
___________________________________________________________________________
================================================================================
Box 7
SIGN HERE
Name of Beneficial Owner(s):
----------------------------------------------------
Signature(s):
-------------------------------------------------------------------
Name(s) (please print):
---------------------------------------------------------
Address:
------------------------------------------------------------------------
Principal place of business (if different from address listed above):
-----------
Telephone Number(s):
------------------------------------------------------------
Taxpayer Identification or Social Security Number(s):
---------------------------
Date:
---------------------------------------------------------------------------
================================================================================
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================================
PAYER'S NAME:
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Part 1- PLEASE PROVIDE YOUR TIN
SUBSITUTE IN THE BOX AT RIGHT AND CERTIFY -----------------------------
BY SIGNING AND DATING BELOW Social Security Number
Form W-9
OR
Department of the Treasury
Internal Revenue Service -----------------------------
Employer Identification Number
-----------------------------------------------------------------------------------------
Payer's Request for Taxpayer Part 2--Certification Under Penalties of Part 3--
Identification Number (TIN) Perjury, I certify that:
(1) The number shown on this form is my Awaiting TIN [_]
current taxpayer identification number
(or I am waiting for a number to be issued
to me) and
(2) I am not subject to backup withholding
either because I have not been notified by
the Internal Revenue Service (the "IRS")
that I am subject to backup withholdings
as a result of a failure to report all
interest or dividends, or the IRS has
notified me that I am no longer subject
to backup withholding.
-----------------------------------------------------------------------------------------
Certificate instructions-You must cross out item (2) in Part 2 above if you have been
notified by the IRS that you are subject to backup withholding because of under
reporting interest or dividends on your tax return. However, if after being
notified by the IRS that you are subject to backup withholding you receive another
notification from the IRS stating that you are no longer subject to backup
withholding, do not cross out item (2).
SIGNATURE DATE
----------------------------------- -------------------------------------
NAME
---------------------------------------------------------------------------------
ADDRESS
------------------------------------------------------------------------------
CITY STATE ZIP CODE
----------------------------------- ----------------- --------------
=============================================================================================================================
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR
<PAGE>
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTION FORM
W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECK THE BOX IN PART 3 OF SUBSTITUTION FORM W-9
================================================================================
PAYOR'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver such an application in the near future. I understand that if I do not
provide a taxpayer identification number with sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I provide such
a number.
- -------------------------------------------- -----------------------------
Signature Date
================================================================================
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payer-
Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-
0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e. 00-0000000. The table below will help determine the number to give
the payer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Give the
Give the EMPLOYER
SOCIAL SECURITY IDENTIFICATION
For this type of account number of For this type of account number of:
- ------------------------------------------------------------------------------------------------------------------------------------
1. An individual's account The individual 9. A valid trust, estate, or pension The legal entity (Do not
trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title)/5/
2. Two or more individuals The actual owner of the 10. Corporate account The corporation
(joint account) account or, if combined
funds, any one of the
individuals/1/
3. Husband and wife (joint The actual owner of the 11. Association, club, religious, The organization
account) account or, if joint, charitable, educational or
funds, either person./1/ other tax-exempt organization
account
4. Custodian account of a The minor/2/ 12. Partnership account The partnership
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the minor 13. A broker or registered nominee The broker or nominee
account) is the only contributor,
the minor/1/
6. Account in the name of The ward, minor, or 14. Account with the Department of The public entity
guardian or committee for incompetent person/3/ Agriculture in the name of a
a designated ward, minor, public entity (such as a State
or incompetent person or local government, school
district, or prison)that receives
agricultural program payments
7.a. The usual revocable The grantor-trustee/1/
savings trust account
(grantor is also trustee)
b. So-called trust account that
is not a legal or valid The actual owner/2/
trust under State law
8. Sole proprietorship account The owner/4/
</TABLE>
- --------------------------
1 List first and circle the name of the person whose number you furnish.
2 Circle the minor's name and furnish the minor's social security
number.
3 Circle the ward's, minor's or incompetent person's name and furnish
such person's social security number.
4 You must show your individual name, but you may also enter your
business or "doing business as" name. You may use your social security
number or employer identification number.
5 List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number
will be considered to be that of the first name listed.
<PAGE>
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and apply
for a number.
Payees Exempt from Backup Witholding
Payees specifically exempted from backup witholding on ALL payments include the
following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section
1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include
the following:
. Payments of interest on obligations issued by individuals.
Note: You may be subject to backup witholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to one payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Substitute Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM IN PART
II, SIGN AND DATE THE FORM, AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
Privacy Act Notice. - Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number. -If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not a willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments. -If you fail
to include any portion of an includible payment for interests, dividends, or
patronage dividends in gross income and such failure is due to negligence, a
penalty of 20% is imposed on any portion of an under-payment attributable to
that failure.
(3) Civil Penalty for False Information With Respect to Withholding. -If you
make a false statement with no reasonable basis which results or no imposition
of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information. Falsifying certifications
or affirmations may subject you to criminal penalties including fines and
or/imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
Exhibit 99.2
FORM OF
NOTICE OF GUARANTEED DELIVERY
for
Tender of all Outstanding
11 1/8% Senior Subordinated Notes due 2006
in Exchange for
New 11 1/8% Senior Subordinated Notes due 2006
of
PIERCE LEAHY CORP
Registered holders of outstanding 11 1/8% Senior Subordinated Notes due
2006 (the "Original Notes") who wish to tender their Notes in exchange for a
like principal amount of new 11 1/8% Senior Subordinated Notes due 2006 (the
"Exchange Notes") and whose Original Notes are not immediately available or who
cannot deliver their Original Notes and Letter of Transmittal (and any other
documents required by the Letter of Transmittal) to United States Trust Company
of New York (the "Exchange Agent") prior to the Expiration Date, may use this
Notice of Guaranteed Delivery or one substantially equivalent hereto. This
Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight delivery) or mail to the Exchange Agent. See "The Exchange
Offer-Procedures for Tendering" and "The Exchange Offer-Guaranteed Delivery
Procedures" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
UNITED STATES TRUST COMPANY OF NEW YORK
By Hand: By Mail:
United States Trust Company of New York (insured or registered recommended)
111 Broadway-Lower Level United States Trust Company of New York
New York, New York 10006 P.O. Box 843
Attention: Corporate Trust Peter Cooper Station
New York, New York 10276
Attention: Corporate Trust
By Overnight Express:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Attention: Corporate Trust Services Window
By Facsimile:
(212) 420-6152
(For Eligible Institutions Only)
By Telephone:
(800) 548-6565
Delivery of this Notice of Guaranteed Delivery to an address other than
as set forth above or transmission of instructions via a facsimile transmission
to a number other than as set forth above will not constitute a valid delivery.
<PAGE>
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signature.
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Original Notes
indicated below, upon the terms and subject to the conditions contained in the
Prospectus dated _______, 1996 of Pierce Leahy Corp. (the "Prospectus"), receipt
of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
Name and address of registered
holder as it appears on the
11 1/8% Senior Subordinated Notes Certificate Number(s) Principal Amount
due 2006 ("Notes") of Notes of Notes
(Please Print) Tendered Tendered
- --------------------------------- --------------------- ----------------
- --------------------------------- --------------------- ----------------
- --------------------------------- --------------------- ----------------
- --------------------------------- --------------------- ----------------
- --------------------------------- --------------------- ----------------
2
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, hereby guarantees to deliver to
the Exchange Agent at one of its addresses set forth above, the certificates
representing the Original Notes, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal within five New York Stock Exchange, Inc. trading days after the
date of execution of this Notice of Guaranteed Delivery.
Name of Firm:
--------------------------------- -------------------------------
(Authorized Signature)
Address: Title:
--------------------------------------- --------------------------
Name:
- ----------------------------------------------- --------------------------
(Zip Code) (Please type or print)
Area Code and Telephone Number: Date:
--------------------------
- -----------------------------------------------
NOTE: DO NOT SEND NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. NOTES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
