<PAGE>
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------
PIERCE LEAHY CORP.
(exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
4226 23-2588479
New York ------------------------ -------------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to be Registered Offering Aggregate Amount of
Securities to be Registered/(1)/ Price Per Security(1) Offering Price(1) Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11-1/8% Senior Subordinated
Notes due 2006.................... $200,000,000 100% $200,000,000 $68,966
====================================================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457 solely for the purposes of calculating the
registration fee.
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.
================================================================================
<PAGE>
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 August 12, 1996
PROSPECTUS
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
---------------------
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." 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 March 31, 1996, after giving effect to the
offering of the Original Notes and the application of the net proceeds therefrom
and the Transactions (as defined herein), the Company and its Canadian
subsidiary would have had no Senior Indebtedness outstanding.
See "Risk Factors" commencing on page 18 for a discussion of certain
factors that should be considered by holders of the Notes.
---------------------
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.
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 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 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."
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.
<PAGE>
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 in all respects 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.
3
<PAGE>
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 acquisition described under "Business--Acquisition History and
Growth Strategy."
The Company
Pierce Leahy is the largest archive records management company in North
America, as measured by its 34 million cubic feet of records currently under
management. The Company operates a total of 105 records management facilities of
which 93 are in the United States, serving 44 local markets, including the 15
largest U.S. markets. In addition, the Company operates 12 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. The Company's pro forma revenues and EBITDA (as defined
herein) for the year ended December 31, 1995 were $121.6 million and $34.7
million, respectively.
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.
From 1991 to 1995, Pierce Leahy's revenues and EBITDA grew at compound
annual growth rates of 14.4% 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 EBITDA as a percentage of total
revenues which equalled 28.5% as compared to 24.8% on an actual basis.
4
<PAGE>
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.
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 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.
5
<PAGE>
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.
6
<PAGE>
. 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
dlocation 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 18
acquisitions, totaling approximately 7.7 million cubic feet of records at the
time of acquisition. From July 1994 through December 31, 1995, approximately $45
million (including purchase price, capital expenditures and related integration
costs) was invested in eight acquisitions, which produced an incremental $10.6
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.
7
<PAGE>
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 (collectively referred to as the "Transactions") to
(i) repay its existing credit facility and enter into the Credit Facility (as
defined herein), (ii) consummate the purchase of a pending acquisition,
(iii) purchase certain real estate interests in properties currently leased or
subleased by the Company from entities affiliated with the Pierce family and
(iv) redeem 100 shares of Class A Common Stock (as defined herein) from Leo W.
Pierce, Sr. 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.
8
<PAGE>
<TABLE>
<CAPTION>
The Exchange Offer
<S> <C>
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 delivered, for the benefit of the holders of the Original
Notes, an Exchange Offer Registration Rights Agreement dated July 23, 1996 (the
"Registration Rights Agreement"), which is filed as an exhibit to the
Registration 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 registration 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 Exchange Notes are collectively
referred to herein 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 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 Offer. See "The Exchange Offer."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered for exchange.
Based on an interpretation by the staff of the Securities 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 Original Notes may be offered for resale, resold
and otherwise 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
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
405 under the Securities Act) of the Company), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the holder is acquiring the Exchange Notes in the ordinary course of its
business and is not participating, 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 activities or other trading activities, must
acknowledge 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 Purchase Agreement dated as of July 17, 1996 by and
between the Company and the Initial Purchaser (the "Purchase Agreement").
Pursuant to the Purchase Agreement, the Company and the Initial Purchaser
entered into a Registration Rights Agreement dated as of July 23, 1996 (the
"Registration Rights Agreement") 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 entitled 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 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 July 23, 1996. Holders whose Original Notes are
accepted for exchange will be deemed to have waived the right to receive any
interest 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 principal amount of
Original Notes being tendered for exchange. The Company reserves the right to
terminate
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
or amend the Exchange Offer at any time prior to the Expiration Date upon the
occurrence of any such conditions.
Procedures for Tendering
Original Notes.................................... Each holder of Original Notes wishing to accept the Exchange Offer must
complete, sign and date the Letter of Transmittal, or a facsimile thereof, in
accordance 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 exchange 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 of such Original Notes to the Exchange Agent's account at The
Depository Trust Company ("DTC" or the "Depository") is delivered in a timely
fashion. By executing the Letter of Transmittal, each holder will represent to
the Company that, among other things, the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of
the person 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 defined 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 acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. See
"The Exchange Offer -- Procedures for Tendering" and "Plan of Distribution."
Special Procedures for
Beneficial Owners................................. 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 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 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 immediately available or who cannot deliver their
Original Notes, the Letter of Transmittal or any other documents required by
the Letter of Transmittal to the Exchange
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
Agent prior to the Expiration Date, must tender their Original Notes according
to the guaranteed 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 conditions 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
earliest practicable date following the Expiration Date. See "The Exchange
Offer --Terms of the Exchange Offer."
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 considerations 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 pursuant to the terms of this Exchange Offer, the
Company will have fulfilled one of the covenants contained in the Registration
Rights Agreement and, accordingly, 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 under 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
"Indenture"), except for any rights under the Indenture or the Registration
Rights Agreement, which by their terms terminate or cease to have further
effectiveness 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 Original Notes will continue to be subject to the restrictions on
transfer provided for in the Original Notes and in the Indenture. To the extent
that Original Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered Original Notes could be adversely affected.
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
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 Securities 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 holders 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 entitled to the benefits of, the
Indenture. See "Description of the Notes" for further information and for
definitions of certain capitalized terms used below.
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 Dates............................ Interest will be payable semiannually on each January 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 Company
and senior in right of payment to all subordinated indebtedness of the Company.
As of March 31, 1996, after giving effect to the offering of the Original Notes
and the Transactions, the Company and its Canadian subsidiary would have had no
Senior Indebtedness outstanding.
Guarantees by Future Subsidiaries................. The Notes will be unconditionally guaranteed, on an unsecured senior
subordinated basis, as to the payment of principal, premium, if any, and
interest, jointly and severally (the "Guarantees"), by all future direct and
indirect domestic Restricted Subsidiaries of the Company having either assets
or shareholders' equity in excess of $5,000 (the "Guarantors"). Any such
Guarantees will be subordinated to all Senior Indebtedness of the respective
Guarantors. No Guarantees will be effective on the date of issuance of the
Notes. The Notes will be secured by a subordinated pledge of a portion of the
capital stock of the Company's Canadian subsidiary. See "Description of the
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
Notes--Certain Covenants--Limitation on Creation of Subsidiaries."
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 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 a redemption 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 principal amount of Notes 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.
Change of Control................................. In the event of a Change of Control, the Company will be required to make an
offer to purchase all outstanding Notes at a price equal to 101% of the
principal 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 assurance that the Company will have sufficient funds or will be
contractually permitted by outstanding Senior 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
Restricted Subsidiaries (as defined herein) to: (i) incur additional
Indebtedness; (ii) pay dividends and make distributions; (iii) issue stock of
subsidiaries; (iv) make certain investments; (v) repurchase stock; (vi) create
liens; (vii) enter into transactions 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 Permitted Tax
Distributions (as defined herein) as a result of the Company's status as a
Subchapter S corporation. See "Description of the Notes--Certain Covenants."
</TABLE>
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.
14
<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 three months ended March 31,
1996 and summary historical statement of operations data for the three months
ended March 31, 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
three months ended March 31, 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, 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, as if
they had occurred on March 31, 1996. The Transactions 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 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.
15
<PAGE>
Summary Historical and Pro Forma Financial Data
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
---------------------------------------------------------------- ----------------------------------
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 $ 75,143 $ 12,732 $ 16,969 $ 18,358
Service and storage
material sales.......... 22,437 25,202 31,266 35,513 39,895 46,452 9,490 12,730 13,529
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total revenues ........... 55,632 62,835 73,388 82,636 95,396 121,595 22,222 29,699 31,887
Cost of sales, excluding
depreciation and
amortization .......... 37,145 39,702 45,391 49,402 55,616 67,292 13,118 17,406 17,759
Selling, general and
administrative .......... 6,693 9,012 11,977 15,882 16,148 19,596 4,026 4,856 5,324
Depreciation and
amortization ............ 5,783 5,734 6,888 8,436 8,163 10,959 1,990 2,572 2,939
Consulting payments to
related parties (b) ..... -- -- -- 500 500 500 125 125 125
-------- -------- -------- -------- -------- -------- -------- -------- -------
Operating income ....... 6,011 8,387 9,132 8,416 14,969 23,248 2,963 4,740 5,740
Interest expense ......... 6,677 6,388 6,160 7,216 9,622 23,686 1,928 2,846 5,921
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary loss ....... (666) 1,999 2,972 1,200 5,347 (438) 1,035 1,894 (181)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Extraordinary loss(c) .... -- -- 9,174 5,991 3,279 3,279 -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income (loss).......... $ (666) $ 1,999 $ (6,202) $ (4,791) $ 2,068 $ (3,717) $ 1,035 $ 1,894 $ (181)
======== ======== ======== ======== ======== ======== ======== ======== ========
Other Data:
EBITDA(d) ................ $ 11,794 $ 14,121 $ 16,020 $ 17,352 $23,632 $ 34,707 $ 5,078 $ 7,437 $ 8,804
EBITDA margin ............ 21.2% 22.5% 21.8% 21.0% 24.8% 28.5% 22.9% 25.0% 27.6%
Capital expenditures(e) .. $ 3,521 $ 5,565 $ 5,827 $ 6,352 $16,288 -- $ 1,535 $ 3,553 --
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 31,088 33,279
Ratio of EBITDA to
interest expense (f) ..... -- -- -- -- -- 1.52x -- -- 1.54x
Ratio of total debt to
EBITDA .................. -- -- -- -- -- 5.78x -- -- --
Ratio of net debt to
EBITDA .................. -- -- -- -- -- 4.98x -- -- --
Ratio of earnings to fixed
charges(g) .............. -- 1.21x 1.30x 1.11x 1.37x -- 1.34x 1.45x --
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of March 31, 1996
------------------------------------------------------- --------------------------
Pro Forma
1991 1992 1993 1994 1995 Actual As Adjusted(h)
-------- -------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.. $ 332 $ 461 $ 528 $ 358 $ 722 $ 474 $ 27,949
Working capital (deficit).. (10,402) (11,656) (9,143) (5,202) (8,139) (6,595) 22,201
Total assets .............. 59,726 65,869 74,621 79,746 131,328 138,628 201,973
Total debt (including
redeemable warrants)...... 52,695 55,027 69,736 77,683 120,071 127,261 200,727
Net debt (net of cash
balance) ................ 52,363 54,566 69,208 77,325 119,349 126,787 172,778
Shareholders' deficit...... (11,006) (9,028) (14,508) (19,341) (18,201) (17,867) (29,237)
</TABLE>
(see footnotes on the following page)
16
<PAGE>
Notes to Summary Historical and Pro Forma Financial Data
(a) Gives effect to (i) acquisitions completed in 1995 and 1996 year to
date, (ii) the redemption of certain warrants and (iii) the offering
of the Original Notes, the Transactions and the application of the
net proceeds from the sale of the 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 expects to
incur non-recurring charges of approximately $5.3 million in the
quarter in which the offering of the Original Notes is 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 will occur in the quarter
in which the debt is repaid ($2.0 million assuming the debt is repaid
in the third quarter), 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) "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 generally accepted accounting principles ("GAAP").
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 criteria 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.
(e) 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 maintenance
capital expenditures.
(f) Excludes non-cash amortization of deferred financing fees of $0.9
million and $0.2 million in pro forma 1995 and the three months ended
March 31, 1996, respectively.
(g) The earnings for the year ended December 31, 1991 and the pro forma
year ended December 31, 1995 and the three months ended March 31,
1996 were inadequate to cover fixed charges by $0.7 million, $0.4
million and $0.2 million, respectively.
(h) Gives effect to the following, as if they each had occurred as of
March 31, 1996: (i) the acquisitions completed after March 31, 1996;
(ii) the redemption of certain warrants; and (iii) the offering of
the Original Notes, the Transactions and the application of the net
proceeds from the sale of the Notes. See "Use of Proceeds" and "Pro
Forma Financial Data."
17
<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 $200.7 million
of pro forma debt as of March 31, 1996 after giving effect to the
Transactions and the offering of the Original Notes. Moreover, as of
March 31, 1996, the Company had pro forma shareholders' deficit of $29.2
million after giving effect to the Transactions 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 Notes. In addition, the Company may not make any principal
or interest payments in respect of the Notes if any payment default
exists with
18
<PAGE>
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, the Company will incur 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 acquisition or other future acquisitions, if completed, will
be successful. See "Business--Acquisition History and Growth Strategy."
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
actions taken by the lenders under the Credit Facility, the Company could
be prohibited from making any payments on the Notes. In addition,
19
<PAGE>
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. The
20
<PAGE>
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. 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 6.8 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.
21
<PAGE>
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 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. See "Description of the Notes --
Registration Rights."
Consequences of Failure to Exchange 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.
Original Notes that are not tendered or are tendered but 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. In addition, 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
22
<PAGE>
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." 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 Offer."
23
<PAGE>
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 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
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
24
<PAGE>
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.
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-
25
<PAGE>
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 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
26
<PAGE>
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 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,
27
<PAGE>
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 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.
28
<PAGE>
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), 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.
29
<PAGE>
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 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
30
<PAGE>
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.
31
<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> <C>
By Hand: By Overnight Courier:
United States Trust Company United States Trust
of New York Company
111 Broadway, Lower Level of New York
New York, NY 10005 770 Broadway, 13th
Attention: Corporate Trust Floor
New York, NY 10003
By Mail: Attention: Corporate
(insured or registered Trust
recommended) Services Window
United States Trust Company
of New York
P.O. Box 843
Peter Cooper Station
New York, NY 10276
Attention: Corporate Trust
Facsimile Transmission:
(212) 420-6152
(For Eligible
Institutions Only)
Confirm by Telephone:
(800) 548-6565
</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
32
<PAGE>
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.
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.
33
<PAGE>
THE COMPANY
Pierce Leahy is the largest archive records management company in
North America, as measured by its 34 million cubic feet of records
currently under management in 105 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 (collectively referred
to as the "Transactions"):
(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
34
<PAGE>
Company. The total purchase price for all of the above transactions (the
"Real Estate Transactions") was $14.8 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").
35
<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 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 for general corporate
purposes, including acquisitions. The anticipated sources and uses of
funds from the sale of the Original Notes are set forth below (dollars in
thousands).
<TABLE>
<CAPTION>
<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........... 22,128 (a)
Real Estate Transactions..................................... 14,841
Stock Redemption............................................. 1,450
Pending acquisition.......................................... 3,500
General corporate purposes................................... 25,593
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.
36
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i)
as of March 31, 1996 and (ii) as adjusted to give effect to the sale of
the Original Notes, the Transactions, the redemption of certain warrants
and the accrual of a pension obligation for Leo W. Pierce, Sr. as if they
had occurred as of March 31, 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 March 31, 1996
------------------------
Actual As Adjusted
------ -----------
<S> <C> <C> <C> <C> <C>
Cash on hand................................ $ 474 $ 27,949
======== ========
Existing Credit Facility -- U.S. (a)........ $102,575 $ --
Existing Credit Facility -- Canadian(a)..... 21,334 --
Credit Facility -- U.S. .................... -- --
Credit Facility -- Canadian................. -- --
Original Notes ............................. -- 200,000
Redeemable warrants......................... 2,625 --
Other indebtedness.......................... 727 727
-------- -------
Total debt.............................. 127,261 200,727
Shareholders' deficit....................... (17,867) (29,237)
-------- --------
Total capitalization................... $109,394 $171,490
======== ========
- --------------
</TABLE>
(a) Does not include approximately $21.4 million of additional U.S.
borrowings and $0.8 million of additional Canadian borrowings since
March 31, 1996.
37
<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 March 31, 1995 and 1996,
and for the three 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 three
months ended March 31, 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 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 and the
offering of the Original Notes, as if they had occurred on March 31,
1996. The Transactions 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 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.
38
<PAGE>
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS,
BALANCE SHEET AND OTHER DATA
(dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------
Pro Forma
1991 1992 1993 1994 1995 1995(a)
---------- ------------- --------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues
Storage.................................. $ 33,195 $ 37,633 $ 42,122 $ 47,123 $55,501 $ 75,143
Service and storage material sales....... 22,437 25,202 31,266 35,513 39,895 46,452
-------- -------- -------- -------- ------- --------
Total revenues......................... 55,632 62,835 73,388 82,636 95,396 121,595
Cost of sales, excluding depreciation and
amortization............................ 37,145 39,702 45,391 49,402 55,616 67,292
Selling, general and administrative............. 6,693 9,012 11,977 15,882 16,148 19,596
Depreciation and amortization................... 5,783 5,734 6,888 8,436 8,163 10,959
Consulting payments to related parties (b)..... -- -- -- 500 500 500
-------- -------- -------- -------- ------- --------
Operating income........................ 6,011 8,387 9,132 8,416 14,969 23,248
Interest expense................................ 6,677 6,388 6,160 7,216 9,622 23,686
-------- -------- -------- -------- ------- --------
Income (loss) before extraordinary loss. (666) 1,999 2,972 1,200 5,347 (438)
Extraordinary loss(c)........................... -- -- 9,174 5,991 3,279 3,279
-------- -------- -------- -------- ------- --------
Net income (loss)....................... $ (666) $ 1,999 $ (6,202) $ (4,791) $ 2,068 $ (3,717)
======== ======== ======== ======== ======= ========
Other Data:
EBITDA(d)....................................... $ 11,794 $ 14,121 $ 16,020 $ 17,352 $23,632 $ 34,707
EBITDA margin................................... 21.2% 22.5% 21.8% 21.0% 24.8% 28.5%
Capital expenditures(e)......................... $ 3,521 $ 5,565 $ 5,827 $ 6,352 $16,288 --
Cubic feet of storage under management
at end of period (000s)................. 13,858 16,248 19,025 22,160 29,523 32,264
Ratio of EBITDA to interest expense (f)......... -- -- -- -- -- 1.52x
Ratio of total debt to EBITDA................... -- -- -- -- -- 5.78x
Ratio of net debt to EBITDA..................... -- -- -- -- -- 4.98x
Ratio of earnings to fixed charges(g)........... -- 1.21x 1.30x 1.11x 1.37x --
</TABLE>
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
---------------------------------------------
Pro Forma
1995 1996 1996(a)
-------- -------- -----------
<S> <C> <C> <C>
Statement of Operations Data:
Revenues
Storage...................................... $ 12,732 $ 16,969 $ 18,358
Service and storage material sales........... 9,490 12,730 13,529
-------- -------- -------
Total revenues............................ 22,222 29,699 31,887
Cost of sales, excluding depreciation and
amortization................................. 13,118 17,406 17,759
Selling, general and administrative............. 4,026 4,856 5,324
Depreciation and amortization................... 1,990 2,572 2,939
Consulting payments to related parties (b)...... 125 125 125
-------- -------- -------
Operating income........................ 2,963 4,740 5,740
Interest expense................................ 1,928 2,846 5,921
-------- -------- -------
Income (loss) before extraordinary loss..... 1,035 1,894 (181)
Extraordinary loss(c)........................... -- -- --
-------- -------- -------
Net income (loss)....................... $ 1,035 $ 1,894 $ (181)
======== ======== =======
Other Data:
EBITDA(d)....................................... $ 5,078 $ 7,437 $ 8,804
EBITDA margin................................... 22.9% 25.0% 27.6%
Capital expenditures(e)......................... $ 1,535 $ 3,553 --
Cubic feet of storage under management
at end of period (000s)...................... 23,549 31,088 33,279
Ratio of EBITDA to interest expense (f)......... -- -- 1.54x
Ratio of total debt to EBITDA................... -- -- --
Ratio of net debt to EBITDA..................... -- -- --
Ratio of earnings to fixed charges(g)........... 1.34x 1.45x --
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents....................... $ 332 $ 461 $ 528 $ 358 $ 722
Working capital (deficit)....................... (10,402) (11,656) (9,143) (5,202) (8,139)
Total assets.................................... 59,726 65,869 74,621 79,746 131,328
Total debt (including redeemable warrants)...... 52,695 55,027 69,736 77,683 120,071
Net debt (net of cash balance).................. 52,363 54,566 69,208 77,325 119,349
Shareholders' deficit........................... (11,006) (9,028) (14,508) (19,341) (18,201)
</TABLE>
<TABLE>
<CAPTION>
As of March 31, 1996
----------------------------
Pro Forma
Actual As Adjusted(h)
-------- ----------------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents....................... $ 474 $ 27,949
Working capital (deficit)....................... (6,595) 22,201
Total assets.................................... 138,628 201,973
Total debt (including redeemable warrants)...... 127,261 200,727
Net debt (net of cash balance).................. 126,787 172,778
Shareholders' deficit........................... (17,867) (29,237)
</TABLE>
(see footnotes on the following page)
39
<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, (ii) the redemption of certain warrants and (iii) the offering
of the Original Notes, the Transactions, and the application of the
net proceeds from the sale of the 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 expects to
incur non-recurring charges of approximately $5.3 million in the
quarter in which the offering of the Original Notes is 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 will occur in the quarter
in which the debt is repaid ($2.0 million assuming the debt is repaid
in the third quarter), 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) "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. 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 criteria 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.
(e) 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 maintenance
capital expenditures.
(f) Excludes non-cash amortization of deferred financing fees of $0.9
million and $0.2 million in pro forma 1995 and the three months ended
March 31, 1996, respectively.
(g) The earnings for the year ended December 31, 1991 and the pro forma
year ended December 31, 1995 and the three months ended March 31,
1996 were inadequate to cover fixed charges by $0.7 million, $0.4
million and $0.2 million, respectively.
(h) Gives effect to the following, as if they each had occurred as of
March 31, 1996: (i) the acquisitions completed after March 31, 1996;
(ii) the redemption of certain warrants; and (iii) the offering of
the Original Notes, the Transactions and the application of the net
proceeds from the sale of the Notes. See "Use of Proceeds" and "Pro
Forma Financial Data."
40
<PAGE>
PRO FORMA FINANCIAL DATA
The pro forma condensed consolidated balance sheet as of March 31,
1996 gives effect to, among other things, the Transactions, as if they
occurred on March 31, 1996. The unaudited pro forma condensed
consolidated statement of operations and other data for the year ended
December 31, 1995 and the three months ended March 31, 1996 give effect
to, among other things, the Transactions, as if they occurred on January
1, 1995. The Transactions 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.
41
<PAGE>
PIERCE LEAHY CORP.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Completed Redemption Offering and Pro Forma
and Pending of Pro Other As
Actual Acquisition(a) Warrants(b) Forma Transactions(c) Adjusted
--------- -------------- ------------- --------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................... $ 474 $ 850 $ -- $ 1,324 $ 26,625 $ 27,949
Accounts receivable.................... 15,724 500 -- 16,224 -- 16,224
Inventories............................ 654 50 -- 704 -- 704
Prepaid expenses and other............. 1,612 150 -- 1,762 -- 1,762
-------- -------- -------- -------- -------- --------
Total current assets................ 18,464 1,550 -- 20,014 26,625 46,639
PROPERTY AND EQUIPMENT, net............... 77,110 9,225 -- 86,335 7,008 93,343
OTHER ASSETS, primarily intangibles....... 43,054 12,025 -- 55,079 6,912 61,991
-------- -------- -------- -------- -------- --------
$138,628 $ 22,800 $ -- $161,428 $ 40,545 $201,973
======== ======== ======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt and
noncompete obligations................ $ 2,175 $ -- $ -- $ 2,175 $ (1,870) $ 305
Accounts payable..................... 4,682 100 -- 4,782 -- 4,782
Accrued expenses..................... 8,980 650 -- 9,630 499 10,129
Deferred revenues.................... 9,222 -- -- 9,222 -- 9,222
-------- -------- -------- -------- -------- --------
Total current liabilities......... 25,059 750 -- 25,809 (1,371) 24,438
LONG-TERM DEBT AND
NONCOMPETE OBLIGATIONS................... 122,461 22,050 2,625 147,136 53,286 200,422
DEFERRED RENT............................. 2,856 -- -- 2,856 -- 2,856
DEFERRED INCOME TAXES..................... 3,494 -- -- 3,494 -- 3,494
REDEEMABLE WARRANTS....................... 2,625 -- (2,625) -- -- --
SHAREHOLDERS' DEFICIT..................... (17,867) -- -- (17,867) (11,370) (29,237)
-------- -------- -------- -------- -------- --------
$138,628 $ 22,800 $ -- $161,428 $ 40,545 $201,973
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
42
<PAGE>
PIERCE LEAHY CORP.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(dollars in thousands)
(a) Represents the balance sheets for the businesses acquired by the
Company after March 31, 1996 (File Box, Inc. and Security Archives,
Inc.) and the pending acquisition (see "Business--Acquisition History
and Growth Strategy"), after application of the purchase method of
accounting. Expected total purchase price is $22,050, including
transaction costs.
(b) Represents the redemption of warrants issued in connection with a
prior financing.
(c) Reflects the sale of $200,000 of Original Notes and the use of the
proceeds to repay existing indebtedness of $123,909, the acquisitions
closed after March 31, 1996 for $18,550, the pending acquisition for
$3,500, the redemption of warrants for $2,625, estimated transaction
costs and expenses of $8,500, the Stock Redemption for $1,450, and
the Real Estate Transactions for $14,841, resulting in net cash
available for operations of $26,625. Since the Real Estate
Transactions involve 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. The debt
refinancing will result in the write-off of unamortized deferred
financing costs in the period in which the repayment occurs ($2,107
as of March 31, 1996, estimated to be $1,986 if the repayment occurs
in the third quarter). In addition, payments to the Pierce Family
Partnerships of $2,764 for certain leases and $499 for an accrual of
a pension obligation due to Leo W. Pierce, Sr. will be charged to
expense.
43
<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 $ 26,199 $ -- $121,595 $ -- $121,595
-------- -------- -------- -------- -------- --------
OPERATING EXPENSES:
Cost of sales, excluding
depreciation and amortization.. 55,616 15,248 (1,556) (b) 69,308 (2,016) (f) 67,292
Selling, general and
administrative................. 16,148 6,848 (3,400) (c) 19,596 -- 19,596
Depreciation and amortization... 8,163 1,906 634 (d) 10,703 256 (f) 10,959
Consulting payments to related
parties........................ 500 -- -- 500 -- 500
-------- -------- -------- -------- -------- --------
Total operating expenses..... 80,427 24,002 (4,322) 100,107 (1,760) 98,347
-------- -------- -------- -------- -------- --------
Operating income............. 14,969 2,197 4,322 21,488 1,760 23,248
INTEREST EXPENSE.................. 9,622 454 3,681 (e) 13,757 9,929 (g) 23,686
-------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary loss.......... 5,347 1,743 641 7,731 (8,169) (438)
EXTRAORDINARY LOSS................ 3,279 -- -- 3,279 -- 3,279
-------- -------- -------- -------- -------- --------
NET INCOME (LOSS)................. $ 2,068 $ 1,743 $ 641 $ 4,452 $(8,169) $ (3,717)
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
44
<PAGE>
PIERCE LEAHY CORP.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 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................................ $29,699 $ 2,188 $ -- $31,887 $ -- $31,887
------- ------- -------- ------- ------- -------
OPERATING EXPENSES:
Cost of sales, excluding depreciation
and amortization...................... 17,406 991 (133) (b) 18,264 (505)(f) 17,759
Selling, general and administrative.... 4,856 683 (215) (c) 5,324 -- 5,324
Depreciation and amortization.......... 2,572 197 106 (d) 2,875 64 (f) 2,939
Consulting payments to related
parties............................... 125 -- -- 125 -- 125
------- ------- ------- ------- ------- -------
Total operating expenses............ 24,959 1,871 (242) 26,588 (441) 26,147
------- ------- ------- ------- ------- -------
Operating income.................... 4,740 317 242 5,299 441 5,740
INTEREST EXPENSE........................ 2,846 6 582 (e) 3,434 2,487 (g) 5,921
------- ------- ------- ------- ------- -------
Income (loss) before
extraordinary loss................. 1,894 311 (340) 1,865 (2,046) (181)
EXTRAORDINARY LOSS...................... -- -- -- -- -- --
------- ------- ------- ------- ------- -------
NET INCOME (LOSS)....................... $ 1,894 $ 311 $(340) $ 1,865 $(2,046) $ (181)
======= ======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
45
<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 acquisition.
See "Business--Acquisition and Growth Strategy."
(b) Pro forma adjustments have been made to reduce cost of sales by
$1,556 in 1995 and $133 for the three months ended March 31, 1996, to
eliminate specific expenses that would not have been incurred had the
completed and 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 three months ended March 31, 1996 have been made to reduce
selling, general and administrative expenses by $3,400 and $215,
respectively, to eliminate specific expenses that would not have been
incurred had the completed and 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 and 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.
(e) Represents interest expense on debt incurred to finance the completed
and pending acquisitions of $3,681 in 1995, using an effective annual
interest rate of 9.33%, and $582 for the three months ended March 31,
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 $505 for the three months ended March 31, 1996 has been
eliminated based on these proposed transactions. Depreciation expense
of $256 in 1995 and $64 for the three months ended March 31, 1996 has
been recorded based on the depreciated cost of the buildings and
improvements to be acquired ($6,382 at the assumed purchase date),
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 quarter in which the Real Estate
Transactions are 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, at 11/1//8%, and amortization of deferred debt
issuance costs, which costs are expected to be approximately $8,500,
offset by the elimination 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 $1,986 in
the statements of operations in the quarter in which the repayment
occurs 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.
46
<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 34 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 18 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 three-month period ended March 31, 1996:
47
<PAGE>
Net Additions of Cubic Feet of Storage by Category
(cubic feet in thousands)
Year Ended December 31,
-----------------------
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
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) 371(b)
New Customer Accounts(c)....... 376 995 1,494 1,038 2,018 644
Acquisitions................... __ 294 117 440 4,623 550
------ ------ ------ ------ ------ ------
Total........................... 1,326 2,390 2,777 3,135 7,363 1,565
% 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 Management:
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 31,088
</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.
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.
48
<PAGE>
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%.
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 Feed Under Management Per Employee(b).. 18,702 19,961 23,033 24,405 24,521 25,525
EBITDA Per Employee(c)....................... $15,916 $18,174 $19,537 $20,014 $22,379 $27,458
Number of Employees at End of Period......... 741 814 826 908 1,204 1,264
</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
acquisition. 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 acquisition, 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 1996 acquisitions,
the pending acquisition, the offering of the Original Notes, the
Transactions and the application of the net proceeds from the sale of
the 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.
------------------------
*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.
49
<PAGE>
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 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 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.
50
<PAGE>
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 one-time charges in 1996 from the
write-off of deferred financing costs in connection with the repayment of
the existing indebtedness in the quarter in which such indebtedness is
repaid ($2.0 million assuming the indebtedness is repaid in the third
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>
Three Months
Years Ended December 31, Ended March 31,
------------------------ ---------------
1993 1994 1995 1995 1996
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues:
Storage.............................. 57.4% 57.0% 58.2% 57.3% 57.1%
Service and storage material sales... 42.6% 43.0% 41.8% 42.7% 42.9%
------ ------ ------ ----- -----
Total revenues.................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales, excluding depreciation
and amortization....................... 61.9% 59.8% 58.3% 59.0% 58.6%
Selling, general and administrative..... 16.3% 19.2% 16.9% 18.1% 16.4%
Depreciation and amortization........... 9.4% 10.2% 8.6% 9.0% 8.7%
Consulting payments to related
parties................................ 0% 0.6% 0.5% 0.6% 0.4%
------ ------ ------ ----- -----
Operating income..................... 12.4% 10.2% 15.7% 13.3% 15.9%
Interest expense........................ 8.4% 8.7% 10.1% 8.7% 9.6%
------ ------ ------ ----- -----
Income (loss) before extraordinary
loss................................ 4.0% 1.5% 5.6% 4.6% 6.3%
Extraordinary loss...................... 12.5% 7.2% 3.4% 0% 0%
------ ------ ------ ----- -----
Net income (loss).................... (8.5%) (5.7%) 2.2% 4.6% 6.3%
====== ====== ====== ===== =====
EBITDA............................... 21.8% 21.0% 24.8% 22.9% 25.0%
====== ====== ====== ===== =====
</TABLE>
51
<PAGE>
Three Months Ended March 31, 1996 Compared to Three Months Ended March
31, 1995
Storage revenues increased from $12.7 million in the three months
ended March 31, 1995 to $17.0 million in the three months ended March 31,
1996, an increase of $4.3 million or 33.9%. Service and storage material
sales revenues increased from $9.5 million in the three months ended
March 31, 1995 to $12.7 million in the three months ended March 31, 1996,
an increase of $3.2 million or 33.7%.
Total revenues increased from $22.2 million in the three months ended
March 31, 1995 to $29.7 million in the three months ended March 31, 1996,
an increase of $7.5 million or 33.8%. Six acquisitions completed from
February 1995 to March 1996 accounted for $5.4 million or 72.0% 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
32.9% for the first three months of 1996 as compared to the first three
months of 1995, from approximately 22.8 million cubic feet to
approximately 30.3 million cubic feet.
Cost of sales (excluding depreciation and amortization) increased from
$13.1 million in the three months ended March 31, 1995 to $17.4 million
in the three months ended March 31, 1996, an increase of $4.3 million or
32.8%, but decreased slightly as a percentage of total revenues from
59.0% in 1995 to 58.6% in 1996. The $4.3 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 $4.0
million in the three months ended March 31, 1995 to $4.9 million in the
three months ended March 31, 1996, an increase of $0.9 million or 22.5%,
but decreased as a percentage of total revenues from 18.1% in 1995 to
16.4% in 1996. The $0.9 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 $5.1
million in the three months ended March 31, 1995 to $7.4 million in the
three months ended March 31, 1996, an increase of $2.3 million or 45.1%,
and increased as a percentage of total revenues from 22.9% in 1995 to
25.0% in 1996.
Depreciation and amortization expenses increased from $2.0 million in
the three months ended March 31, 1995 to $2.6 million in the three months
ended March 31, 1996, an increase of $0.6 million or 30.0%, but decreased
as a percentage of total revenues from 9.0% in 1995 to 8.6% 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 $1.9 million in the three months ended
March 31, 1995 to $2.8 million in the three months ended March 31, 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 may increase significantly as a result
of the higher interest rate on the Notes offered hereby and additional
indebtedness the Company may incur to finance possible future growth.
As a result of the foregoing factors, net income increased from $1.0
million in the three months ended March 31, 1995 to $1.9 million in the
three months ended March 31, 1996, an increase of $0.9 million or 90%,
and increased as a percentage of total revenues from 4.6% in 1995 to 6.3%
in 1996.
52
<PAGE>
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%.
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 $6.6 million (or 51.6%) 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.
53
<PAGE>
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%.
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.
54
<PAGE>
Capital Investments
For 1993, 1994 and 1995 and the three months ended March 31, 1996,
capital expenditures were $5.8 million, $6.4 million, $16.3 million and
$3.6 million, respectively, and client acquisition costs were $2.8
million, $1.9 million, $2.9 million and $1.1 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 has entered into an agreement to purchase a facility
in Montreal for approximately Cdn $5.15 million (approximately U.S. $3.8
million). The Canadian subsidiary is expected to finance the purchase
through a combination of mortgage financing and borrowings under the
Canadian portion of the Credit Facility.
Excluding the Transactions, the Company expects capital expenditures
for 1996 will approximate $25.0 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 $4.0
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 quarter 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 $68.4 million in acquisitions. The
Company has historically financed its acquisitions with borrowings under
its credit agreements and with cash flows from existing operating
activities.
Sources of Funds
Net cash provided by operating activities totaled $8.0 million, $11.0
million, $17.5 million and $2.5 million for 1993, 1994 and 1995 and the
three months ended March 31, 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 $5.6 million for 1993, 1994 and 1995 and
the three months ended March 31, 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 __, 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. See
55
<PAGE>
"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 borrowings under the Credit Facility and the net
proceeds from the sale of the Original Notes will be adequate for its
operations and the execution of its near-term acquisition strategy.
However, there can be no assurance that the Company will not require
additional sources of financing or that the terms acceptable for any
future financing, if required, would be favorable to the Company.
56
<PAGE>
BUSINESS
General
Pierce Leahy is the largest archive records management company in
North America, as measured by its 34 million cubic feet of records
currently under management. The Company operates a total of 105 records
management facilities of which 93 are in the United States, serving 44
local markets, including the 15 largest U.S. markets. In addition, the
Company operates 12 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.
57
<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.
58
<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 four months
of 1996, the Company entered into 14 contracts, each to manage initially
at least 10,000 cubic feet of records, including four 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.
59
<PAGE>
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 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 18
acquisitions, totaling approximately 7.7 million cubic feet of records at the
time of acquisition. From July 1994 through December 31, 1995, approximately $45
million (including purchase price, capital expenditures and related integration
costs) was invested in eight acquisitions, which produced an incremental $10.6
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 Long Island April 1992
Management
Arcus Data New York July 1992
File Away Baltimore/Washington, D.C. July 1992
Taylor Document Richmond August 1992
Data Management of Nashville April 1993
Tennessee
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 Miami May 1995
Services
Curtis Archives Seattle August 1995
Command Records Service Canada** October 1995
AMK Documents Phoenix October 1995
Brambles (Ottawa Ottawa March 1996
Division)
The File Cabinet Atlanta March 1996
File Box Austin April 1996
Security Archives Dallas May 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 has signed an agreement to purchase a records management company
in the San Diego area for approximately $3.5 million.
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.
60
<PAGE>
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.
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 (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
61
<PAGE>
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.
. 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.
62
<PAGE>
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 50
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 2,400 new customer accounts comprising over
six million cubic feet of new records.
The Company's sales and marketing department is divided into four regions:
Northeast; South; West; and Canada. The Company's Vice President, Sales and
Marketing directs four regional sales managers who are each responsible for one
of the regions. Each regional sales manager has at least four years experience
with the Company. 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 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.
63
<PAGE>
Facilities
The Company operates a total of 105 records management facilities of which 93
are in the United States, serving 44 local markets, including the 15 largest
U.S. markets, and 12 facilities in Canada serving five major markets. Of the 6.8
million square feet of floor space in the Company's records storage facilities,
approximately 40% and 60% 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
Arizona....................................... 3
California.................................... 7
Connecticut................................... 7
Florida....................................... 7
Georgia....................................... 4
Illinois...................................... 3
Maryland...................................... 2
Massachusetts................................. 7
Michigan...................................... 1
New Jersey.................................... 11
New York...................................... 4
North Carolina................................ 4
Pennsylvania.................................. 8
Tennessee..................................... 2
Texas......................................... 15
Virginia...................................... 3
Washington.................................... 5
---
Total U.S................................. 93
---
Canada
Calgary....................................... 2
Montreal...................................... 3
Ottawa........................................ 2
Toronto....................................... 4
Vancouver..................................... 1
---
Total Canada.............................. 12
---
Total..................................... 105
===
</TABLE>
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.
64
<PAGE>
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 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 March 31, 1996, the Company had 1,204 employees, including 166
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
65
<PAGE>
10, 1995 through August 11, 1998.
The Company has not received any written notice from any governmental
authority or third party asserting, and is not otherwise aware of, any
material noncompliance, liability or claim under environmental laws
applicable to the Company other than as described above. No assurance can
be given that there are no environmental conditions for which the Company
may be liable in the future or that future regulatory action, or
compliance with future environmental laws, will not require the Company
to incur costs that could have a material adverse effect on the Company's
financial condition or results of operations.
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.
66
<PAGE>
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..................... 77 Chairman of the Board
J. Peter Pierce....................... 50 President, Chief Executive Officer and Director
Douglas B. Huntley.................... 36 Vice President, Chief Financial Officer and Director
Joseph A. Nezi........................ 49 Vice President, Sales and Marketing
David Marsh........................... 48 Vice President, Chief Information Officer
Ross M. Engelman...................... 32 Vice President, Operations--South
J. Michael Gold....................... 37 Vice President, Operations--Northeast
Christopher J. Williams............... 37 Vice President, Operations--West
Leo W. Pierce, Jr..................... 51 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..................... 46 Vice President, Treasurer
Lisa G. Goldschmidt................... 28 General Counsel
Alan B. Campell....................... 45 Director
Delbert S. Conner..................... 66 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.
67
<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, N.A. Mr. Campell holds a B.A. degree from Brown University and an M.A.
from the University of Southern California.
68
<PAGE>
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.
69
<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 Executive
Officer
Ross M. Engelman....................... 130,422 65,000 -- 85 4,938(b)
Vice President,
Operations--South
J. Michael Gold........................ 129,905 65,000 -- 85 3,416(c)
Vice President,
Operations--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,
Operations--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.
70
<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
Number of % of Total Value at
Securities Options Assumed Annual
Underlying Granted to Exercise Rates of Stock
Options Employees in Price Expiration Price Appreciation
Name Granted (a) 1995 (Share) Date For Option Term(b)
---- ----------- ------------ --------- ---------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
5% 10%
-------- --------
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. 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.
<TABLE>
<CAPTION>
Aggregated Option Exercises in 1995 and
Option Values at December 31, 1995
Number of Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1995(a) December 31, 1995(b)
-------------------------- --------------------------
Shares
Name Acquired on Value
---- 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. Williams............... -- -- -- 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.
71
<PAGE>
Compensation Committee Interlocks and Insider Participation
Alan B. Campell, a member of the Compensation Committee of the Board of
Directors, 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 earned investment banking fees $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.
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
72
<PAGE>
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.
CERTAIN TRANSACTIONS
The Company leases six facilities from the Pierce Family Partnerships and
subleases 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 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 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, 1996, 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 May 1996, the Company repaid a note in the amount of $80,000 to the
Company's Chairman, Leo W. Pierce, Sr., which was entered into in December 1993.
As part of the Transactions, the Company intends to redeem 100 shares of Class A
Common Stock from Mr. Pierce for an aggregate price of $1.45 million. 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.
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 June 30, 1996.
73
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of August 1, 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.
74
<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.
75
<PAGE>
DESCRIPTION OF CREDIT FACILITY
As of August , 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 $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 in its entirety 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, 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: minimum permitted fixed charge
coverage ratio; maximum ratio of Total Net Debt to EBITDA; maximum ratio of Net
Senior Debt to EBITDA; minimum ratio of EBITDA to Total Cash Interest Expense;
and limitations on aggregate capital expenditures and acquisitions (as defined
in the Credit Facility).
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.
76
<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 in its entirety 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 Restricted Subsidiary which guarantees payment of the Notes
pursuant to the covenant described under "Limitation on Creation of
Subsidiaries" (the "Guarantors").
The Notes will not be guaranteed by the Company's Canadian subsidiary.
However, the Notes are secured by a subordinated pledge of a portion of the
capital stock of such Subsidiary.
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.
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
77
<PAGE>
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 of the 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.
78
<PAGE>
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, arrangement, 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 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 and Consolidations") (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 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 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
79
<PAGE>
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 would
constitute 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. Except as
otherwise specified, all of the covenants described below will appear in the
Indenture.
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 the Company's total Indebtedness 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 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
80
<PAGE>
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 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
81
<PAGE>
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 the covenant "Limitation on Restricted
Payments" 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 "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
82
<PAGE>
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 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
83
<PAGE>
$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 Additional Indebtedness" or
"--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 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.
84
<PAGE>
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.
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 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 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;
85
<PAGE>
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. Failure by the Company to make a Change of Control
Offer when required by the Indenture constitutes a default under the
Indenture and, if not cured within 60 days after notice, constitutes an
Event of Default.
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 obligations under the Indenture shall remain in full force and
effect; (ii) immediately before and immediately after
86
<PAGE>
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 covenant described under "Limitation on Certain Asset Sales," 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
87
<PAGE>
Indenture;
(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 considers 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 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 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
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 shall have failed to institute such proceeding within 60
days. However, such limitations do not apply to a suit instituted on such
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,
88
<PAGE>
of money and/or U.S. Government Obligations which through the payment of
principal and 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, 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. It is sufficient if such consent approves
the substance of the proposed amendment.
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 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.
89
<PAGE>
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 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 million 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
90
<PAGE>
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 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
91
<PAGE>
in such Asset Sale, and (ii) promissory notes and other non-cash
consideration received by the Company or any Restricted Subsidiary from
such Asset Sale or other disposition upon the liquidation or conversion
of such notes or non-cash consideration into cash.
"Attributable Indebtedness" 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.
92
<PAGE>
"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 million
in aggregate principal amount (or accredit 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
the terms of
93
<PAGE>
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--Limitations 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 the 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," "incurable," 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 that, in the case of any
94
<PAGE>
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 (a) in the case of any sale of Capital Stock by
the Company, the aggregate net proceeds received by the Company, after
payment of expenses, commissions and the like incurred in connection
therewith, whether such proceeds are in cash or in property (valued at
the fair market value thereof, as determined in good faith by the board
of directors, at the time of receipt), (b) in the case of any exchange,
exercise, conversion or surrender of outstanding securities of any kind
for or into shares of Capital Stock of the Company which is not
Disqualified 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
95
<PAGE>
exchange, exercise, conversion or surrender, less any and all payments
made to the holders, e.g., on account of fractional shares and less all
expenses incurred by the Company in connection therewith) and (c) in the
case of any issuance of any Indebtedness by the Company or any Restricted
Subsidiary, the aggregate net cash proceeds received by such Person after
payment of expenses, commissions, underwriting discounts and the like
incurred in connection therewith.
"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 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 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 million 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 amount not to exceed Cdn
$30.3 million;
(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 million
in principal amount outstanding at any time; and
96
<PAGE>
(ix) Refinancing Indebtedness.
"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', warehouseman'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
97
<PAGE>
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) any extensions, substitutions, replacements or renewals of any of
the foregoing, (ix) Liens for taxes, assessments or governmental charges
that are being contested in good faith by appropriate proceedings, (x)
Liens securing Capital Lease Obligations permitted to be incurred under
clause (v) of the definition of "Permitted Indebtedness,"n provided that
such Lien does not extend to any property other than that subject to the
underlying lease, (xi) Liens securing Designated Senior Indebtedness,
(xii) easements or minor defects or irregularities in title and other
similar charges or encumbrances on property not interfering in any
material respect with the Company's or any Restricted Subsidiaries' use
of such property, (xiii) Liens existing on the date of the Indenture and
(xiv) pledges or deposits made in the ordinary course of business in
connection with (a) leases, performance bonds and similar bonds, (b)
workers' compensation, unemployment insurance and other social security
legislation or (c) 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 million in the aggregate.
"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
98
<PAGE>
average life to maturity at the time such Refinancing Indebtedness is
incurred that is equal to or greater than the weighted average life to
maturity of the portion of the Indebtedness being refunded, refinanced or
extended that is scheduled to mature on or prior to the maturity date of
the Notes, (iv) such Refinancing Indebtedness is in an aggregate
principal amount that is equal to or less than the sum of (a) the
aggregate principal amount then 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 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 L.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
99
<PAGE>
Indebtedness of the Company owed to lenders under or in respect of the
Credit Facility, (b) all obligations of the Company with respect to any
Interest Rate Agreement, (c) all obligations of the Company to reimburse
any bank or other person in respect of amounts paid under letters of
credit, acceptances or other similar instruments, (d) all other
Indebtedness of the Company which does not provide that it is to rank
pari passu with or subordinate to the Notes and (e) all deferrals,
renewals, extensions, replacements, refundings, refinancings and
restructurings of, and amendments, modifications and supplements to, any
of the Senior Indebtedness described above. Notwithstanding anything to
the contrary in the foregoing, Senior Indebtedness will not include (i)
Indebtedness of the Company to any of its Subsidiaries, (ii) Indebtedness
represented by the Notes, (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 (a) any Subsidiary of an Unrestricted
Subsidiary and (b) 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
100
<PAGE>
was deposited on the date of the closing of the sale of the Original
Notes, and the Exchange Global 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.
101
<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.
102
<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.
103
<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
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.
104
<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
------------------ MARCH 31,
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS:
Cash......................................... $ 358 $ 722 $ 474
Accounts receivable, net of allowance for
doubtful accounts of $554, $487, and $592... 11,513 14,182 15,724
Inventories.................................. 333 762 654
Prepaid expenses and other................... 554 1,025 1,612
-------- -------- --------
Total current assets....................... 12,758 16,691 18,464
-------- -------- --------
PROPERTY AND EQUIPMENT......................... 79,129 109,755 113,743
Less--Accumulated depreciation and
amortization................................ (31,003) (35,328) (36,633)
-------- -------- --------
Net property and equipment................. 48,126 74,427 77,110
-------- -------- --------
OTHER ASSETS:
Intangible assets, net....................... 17,834 38,621 41,615
Other........................................ 1,028 1,589 1,439
-------- -------- --------
Total other assets......................... 18,862 40,210 43,054
-------- -------- --------
$ 79,746 $131,328 $138,628
======== ======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' DEFICIT
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt............ $ 2,144 $ 1,478 $ 1,975
Current portion of noncompete obligations.... 70 200 200
Accounts payable............................. 4,848 4,641 4,682
Accrued expenses............................. 3,871 9,533 8,980
Deferred revenues............................ 7,027 8,978 9,222
-------- -------- --------
Total current liabilities.................. 17,960 24,830 25,059
LONG-TERM DEBT................................. 75,294 116,812 121,994
NONCOMPETE OBLIGATIONS......................... -- 517 467
DEFERRED RENT.................................. 2,558 2,814 2,856
DEFERRED INCOME TAXES.......................... 3,100 3,492 3,494
COMMITMENTS AND CONTINGENCIES (Note 9)
REDEEMABLE WARRANTS............................ 175 1,064 2,625
SHAREHOLDERS' DEFICIT.......................... (19,341) (18,201) (17,867)
-------- -------- --------
$ 79,746 $131,328 $138,628
======== ======== ========
</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 THREE MONTHS
DECEMBER 31 ENDED MARCH 31
--------------------------- ---------------------
1993 1994 1995 1995 1996
-------- -------- ------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Storage................... $ 42,122 $ 47,123 $55,501 $ 12,732 $ 16,969
Service and storage
material sales........... 31,266 35,513 39,895 9,490 12,730
-------- -------- ------- ---------- ----------
Total revenues.......... 73,388 82,636 95,396 22,222 29,699
-------- -------- ------- ---------- ----------
OPERATING EXPENSES:
Cost of sales, excluding
depreciation and
amortization............. 45,391 49,402 55,616 13,118 17,406
Selling, general and
administrative........... 11,977 15,882 16,148 4,026 4,856
Depreciation and
amortization............. 6,888 8,436 8,163 1,990 2,572
Consulting payments to
related parties.......... -- 500 500 125 125
-------- -------- ------- ---------- ----------
Total operating
expenses............... 64,256 74,220 80,427 19,259 24,959
-------- -------- ------- ---------- ----------
Operating income........ 9,132 8,416 14,969 2,963 4,740
-------- -------- ------- ---------- ----------
INTEREST EXPENSE............ 6,160 7,216 9,622 1,928 2,846
-------- -------- ------- ---------- ----------
Income before
extraordinary item..... 2,972 1,200 5,347 1,035 1,894
EXTRAORDINARY ITEM--Loss on
early extinguishment of
debt....................... 9,174 5,991 3,279 -- --
-------- -------- ------- ---------- ----------
NET INCOME (LOSS)........... $ (6,202) $ (4,791) $ 2,068 $ 1,035 $ 1,894
======== ======== ======= ========== ==========
</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
shareholders................ -- -- -- (24) (24)
------ ------ ---- --------- ---------
BALANCE, DECEMBER 31, 1993..... -- -- 24 (14,532) (14,508)
Accretion of redeemable
warrants.................... -- -- -- (16) (16)
Net loss..................... -- -- -- (4,791) (4,791)
Distributions to
shareholders................ -- -- -- (26) (26)
------ ------ ---- --------- ---------
BALANCE, DECEMBER 31, 1994..... -- -- 24 (19,365) (19,341)
Accretion of redeemable
warrants.................... -- -- -- (889) (889)
Net income................... -- -- -- 2,068 2,068
Distributions to
shareholders................ -- -- -- (39) (39)
------ ------ ---- --------- ---------
BALANCE, DECEMBER 31, 1995..... -- -- 24 (18,225) (18,201)
Accretion of redeemable
warrants (unaudited)........ -- -- -- (1,560) (1,560)
Net income (unaudited)....... -- -- -- 1,894 1,894
------ ------ ---- --------- ---------
BALANCE, MARCH 31, 1996
(unaudited)................... $ -- $ -- $ 24 $ (17,891) $ (17,867)
====== ====== ==== ========= =========
</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 THREE
MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31 MARCH 31
---------------------------------- ----------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)....... $ (6,202) $ (4,791) $ 2,068 $ 1,035 $ 1,894
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities--
Extraordinary item...... 9,174 5,991 3,279 -- --
Depreciation and
amortization........... 6,888 8,434 8,163 1,990 2,421
Amortization of
deferred financing
costs.................. 836 1,068 533 142 111
Imputed interest on
long-term debt and
noncompete
obligation............. 647 231 -- -- --
Change in deferred
rent................... (104) 50 29 (16) 43
Foreign currency
adjustment of long-
term debt.............. -- -- -- -- 79
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) 104 (1,402)
Inventories........... (5) (46) (347) (178) 107
Prepaid expenses...... 173 (91) 57 (212) (580)
Other assets.......... (504) 255 (536) (190) 162
Increase (decrease)
in--
Accounts payable...... 96 1,763 (978) (1,690) 39
Accrued expenses...... (702) (170) 4,693 1,950 (628)
Deferred revenues..... 393 367 921 744 244
---------- ---------- ---------- ------- -------
Net cash provided by
operating
activities............ 8,019 11,000 17,522 3,679 2,490
---------- ---------- ---------- ------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures.... (5,827) (6,352) (16,288) (1,535) (3,553)
Client acquisition
expenditures........... (2,840) (1,905) (2,934) (348) (1,108)
Payments for businesses
acquired, net of cash
acquired............... (1,500) (4,663) (29,456) (4,000) (2,865)
Increase in intangible
assets................. (47) (943) (2,484) (752) (763)
Payments on noncompete
agreements............. (3,570) (70) (153) -- (50)
---------- ---------- ---------- ------- -------
Net cash used in
investing
activities............ (13,784) (13,933) (51,315) (6,635) (8,339)
---------- ---------- ---------- ------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net borrowings
(payments) on revolving
line of credit......... 5,200 (7,700) (900) (400) 4,236
Proceeds from issuance
of long-term debt...... 60,084 76,850 128,420 4,100 1,700
Payments on long-term
debt................... (41,257) (61,121) (90,937) (537) (335)
Payments on capital
lease obligations...... (2,113) (74) (21) -- --
Prepayment penalties and
cancellation of
warrants............... (10,715) (1,781) -- -- --
Payment of debt
financing costs........ (5,343) (3,385) (2,366) -- --
Distributions to
shareholders........... (24) (26) (39) -- --
---------- ---------- ---------- ------- -------
Net cash provided by
financing
activities............ 5,832 2,763 34,157 3,163 5,601
---------- ---------- ---------- ------- -------
NET INCREASE (DECREASE)
IN CASH................. 67 (170) 364 207 (248)
CASH, BEGINNING OF
PERIOD.................. 461 528 358 358 722
---------- ---------- ---------- ------- -------
CASH, END OF PERIOD...... $ 528 $ 358 $ 722 $ 565 $ 474
========== ========== ========== ======= =======
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid for interest.. $ 5,610 $ 6,738 $ 8,356 $ 1,018 $ 3,594
========== ========== ========== ======= =======
</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 MARCH 31, 1996 AND FOR THE THREE MONTHS ENDED MARCH 31,
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 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.
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 March 31, 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
------------------ MARCH 31,
LIFE 1994 1995 1996
----------- -------- -------- ---------
<S> <C> <C> <C> <C>
Land............................. -- $ 3,594 $ 4,780 $ 4,753
Buildings and improvements....... 10-40 years 23,397 35,758 35,686
Warehouse equipment (primarily
shelving)....................... 12-20 years 39,485 53,943 56,347
Data processing equipment and
software........................ 7 years 9,051 10,684 11,698
Furniture and fixtures........... 7 years 2,515 2,970 3,221
Transportation equipment......... 5 years 1,087 1,620 2,038
-------- -------- --------
79,129 109,755 113,743
Less--Accumulated depreciation
and amortization................ (31,003) (35,328) (36,633)
-------- -------- --------
Net property and equipment..... $ 48,126 $ 74,427 $ 77,110
======== ======== ========
</TABLE>
Depreciation expense was $4,036, $5,066, $4,325, $1,004, and $1,305 for the
years ended December 31, 1993, 1994, and 1995 and for the three months ended
March 31, 1995 and 1996, respectively.
4. INTANGIBLE ASSETS:
<TABLE>
<CAPTION>
DECEMBER 31
------------------ MARCH 31,
1994 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Goodwill.................................. $ 9,194 $ 25,857 $ 27,255
Client acquisition costs.................. 5,549 8,680 9,788
Noncompete agreements..................... 6,180 6,980 7,420
Customer lists............................ 4,220 4,720 4,720
Deferred financing costs.................. 3,409 2,248 2,245
Other intangible assets................... 224 4,679 5,957
-------- -------- --------
28,776 53,164 57,385
Less--Accumulated amortization............ (10,942) (14,543) (15,770)
-------- -------- --------
Net intangible assets..................... $ 17,834 $ 38,621 $ 41,615
======== ======== ========
</TABLE>
F-9
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------------
ACCUMULATED NET BOOK
LIFE COST AMORTIZATION VALUE
---------- ------- ------------ --------
<S> <C> <C> <C> <C>
Goodwill............................ 30 years $27,255 $ 2,775 $24,480
Client acquisition costs............ 6 years 9,788 3,687 6,101
Noncompete agreements............... 3-7 years 7,420 6,279 1,141
Customer lists...................... 5 years 4,720 2,167 2,553
Deferred financing costs............ 5-8 years 2,245 138 2,107
Other intangible assets............. 3-15 years 5,957 724 5,233
------- ------- -------
$57,385 $15,770 $41,615
======= ======= =======
</TABLE>
Amortization of all intangible assets, other than deferred financing costs
which are charged to interest expense, was $2,852, $3,370, $3,838, $986, and
$1,116, for the years ended December 31, 1993, 1994, and 1995 and the three
months ended March 31, 1995 and 1996, respectively. Amortization of deferred
financing costs was $836, $1,068, $533, $142 and $111 for the years ended
December 31, 1993, 1994, and 1995 and the three months ended March 31, 1995
and 1996, respectively. Capitalized client acquisition costs were $2,840,
$1,905, $2,934, $348, and $1,108, and related amortization expense was $727,
$1,536, $909, $227, and $297 for the years ended December 31, 1993, 1994, and
1995 and for the three months ended March 31, 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 March 31, 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
------------- MARCH 31,
1994 1995 1996
------ ------ ---------
<S> <C> <C> <C>
Accrued salaries and commissions..................... $ 603 $2,190 $2,266
Accrued vacation..................................... 1,723 2,140 2,417
Other................................................ 1,545 5,203 4,297
------ ------ ------
$3,871 $9,533 $8,980
====== ====== ======
</TABLE>
F-10
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
MARCH 31,
1994 1995 1996
------- -------- ---------
<S> <C> <C> <C>
U.S. Revolver, variable interest rate (10.125%
at March 31, 1996)............................ $ -- $ -- $ 3,500
Canadian Revolver, variable interest rate
(9.375% at March 31, 1996).................... -- -- 735
Standby Acquisition Note, variable interest
rate (10.125% at March 31, 1996), payable in
quarterly installments ranging from 4.17% to
11.67% of the outstanding balance beginning
December 1997 through November 2000........... -- -- 1,700
Tranche A term loan, variable interest rate
(8.5% at March 31, 1996), payable in quarterly
installments ranging from $313 to $938
beginning December 1995 through September
2000.......................................... -- 12,188 11,875
Tranche B term loan, variable interest rate
(8.75% at March 31, 1996), payable in
quarterly installments ranging from $425 to
$6,500 beginning March 1998 through September
2002.......................................... -- 47,500 47,500
Tranche C term loan, variable interest rate (9%
at March 31, 1996), payable in quarterly
installments of $9,500 beginning December 2002
through September 2003........................ -- 38,000 38,000
Canadian term loan, variable interest rate
(8.29% at March 31, 1996), payable in
quarterly installments ranging from $138 to
$276 beginning March 1997 through June 2002,
with final payment of $15,624 in September
2002.......................................... -- 20,520 20,599
Borrowings under previous credit agreement
(repaid in October 1995)...................... 76,750 -- --
Other.......................................... 688 82 60
------- -------- --------
77,438 118,290 123,969
Less--Current portion.......................... (2,144) (1,478) (1,975)
------- -------- --------
$75,294 $116,812 $121,994
======= ======== ========
</TABLE>
In October 1995, the Company entered into a credit facility (the "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 Credit Facility to acquire Command Record
Services, Inc., increase its available borrowing capacity for acquisitions,
and pay financing costs of $2,245.
F-11
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the aggregate commitment under the 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 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 amounts outstanding under the U.S. and Canadian revolvers during
the year ended December 31, 1995 and the three month period ended March 31,
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 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 Credit Facility at March 31, 1996. The 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 March
31, 1996 are as follows:
<TABLE>
<S> <C>
1996.............................................................. $ 1,975
1997.............................................................. 4,899
1998.............................................................. 9,926
1999.............................................................. 11,374
2000.............................................................. 12,875
2001 and thereafter............................................... 82,920
--------
$123,969
========
</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 March 31, 1996 approximates fair value.
In connection with entering into credit facilities in 1993 and 1994, the
Company issued warrants to certain the 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 March 31, 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 March 31, 1996, options for 113
shares were vested. The exercise of the options is subject to certain
restrictions.
9. COMMITMENTS AND CONTINGENCIES:
Operating Leases
At March 31, 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.............................................................. $ 20,317
1997.............................................................. 18,379
1998.............................................................. 16,345
1999.............................................................. 14,121
2000.............................................................. 13,009
2001 and thereafter............................................... 34,933
--------
$117,104
========
</TABLE>
Rent expense was approximately $11,052, $12,262, $14,098, $3,277, and $5,919
for the years ended December 31, 1993, 1994, and 1995 and for the three months
ended March 31, 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, $2,050, and $2,210 for the years ended
December 31, 1993, 1994, and 1995 and for the three months ended March 31,
1995 and 1996, respectively. These related party leases require minimum
rentals, subject to escalation, as follows:
<TABLE>
<S> <C>
1996............................................................... $ 8,881
1997............................................................... 8,232
1998............................................................... 7,394
1999............................................................... 6,606
2000............................................................... 6,385
2001 and thereafter................................................ 14,259
-------
$51,757
=======
</TABLE>
Other Matters
The Company has entered into a consulting agreement with a shareholder of
the Company and a consulting/non-compete agreement with the former owner of an
acquired business. These agreements require the following minimum payments:
<TABLE>
<S> <C>
1996................................................................ $ 584
1997................................................................ 280
1998................................................................ 73
1999................................................................ 40
2000................................................................ 40
2001 and thereafter................................................. 150
------
$1,167
======
</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, $148, and $167 for the years ended December 31, 1993,
1994 and 1995 and the three months ended March 31, 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 purchase price of $30,094, including assumption of
debt. During the three months ended March 31, 1996, the Company completed two
acquisitions for an aggregate purchase price of $2,929 and subsequent to that
date, completed two additional acquisitions with an aggregate purchase price
of $18,550. 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 ($17,751 and $988 in 1995 and the three months ended
March 31, 1996, respectively) and is being amortized over the estimated
benefit period of 30 years. In addition, the Company entered into a noncompete
and consulting agreement (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............................ $37,271 $22,005
Liabilities assumed...................................... (7,177) (526)
Cash acquired............................................ (638) (764)
------- -------
Net cash paid.......................................... $29,456 $20,715
======= =======
</TABLE>
Included in the 1996 amounts are $19,000 of fair value of assets acquired,
$450 of liabilities assumed, $700 of cash acquired and $17,850 of net cash
paid on acquisitions that were completed subsequent to March 31, 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 three months
ended March 31, 1996, as though each of the completed acquisitions had
occurred as of January 1, 1995:
<TABLE>
<CAPTION>
THREE
YEAR MONTHS
ENDED ENDED
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
Total revenues...................................... $120,257 $31,582
Net income (loss)................................... (414) 646
</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
operating 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
purchase 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
activities..................... (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
acquired........................... 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 MATURI-
TIES (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 leases 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' EQ-
UITY................................... $ 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 cata-
log......................... 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
PRINCIPLE..................... 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 AC-
TIVITIES:
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 ex-
pense..................... 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 liabil-
ities................... 23,000 -- -- --
----------- ----------- --------- -----------
Net cash provided by
operating activities.. 1,245,372 1,894,286 1,305,308 1,110,944
----------- ----------- --------- -----------
CASH FLOWS FROM INVESTING AC-
TIVITIES:
Purchase of property, plant
and equipment............. (1,193,989) (1,018,150) (660,593) (1,136,433)
Proceeds from sale of prop-
erty...................... 79,771 -- -- --
Purchases of investments... (1,070,373) (58,250) (52,145) --
Proceeds from sale of in-
vestments................. 1,012,178 739,968 20,316 341,264
----------- ----------- --------- -----------
Net cash used in in-
vesting activities.... (1,172,413) (336,432) (692,422) (795,169)
----------- ----------- --------- -----------
CASH FLOWS FROM FINANCING AC-
TIVITIES--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 activi-
ties:
Unrealized loss on in-
vestments............... $ 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 loss was 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
operating 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
information 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
authorized by the Company or any other person. This Prospectus does not
constitute 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 under 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 contained herein is
correct as of any time subsequent to the date hereof.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information...................... 3
Prospectus Summary......................... 4
Risk Factors............................... 18
The Exchange Offer......................... 24
The Company................................ 34
The Transactions........................... 34
Use of Proceeds............................ 36
Capitalization............................. 37
Selected Historical and Pro Forma
Consolidated Statement of Operations,
Balance Sheet and Other Data.............. 38
Pro Forma Financial Data................... 41
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 47
Business................................... 57
Management................................. 67
Certain Transactions....................... 73
Principal Shareholders..................... 74
Description of Credit Facility............. 76
Description of the Notes................... 77
Description of Capital Stock............... 102
Certain Federal Income Tax Considerations.. 103
Plan of Distribution....................... 103
Legal Matters.............................. 104
Experts.................................... 104
Index to Financial Statements.............. F-1
--------
</TABLE>
Until , 1996, (90 days after the date of this Prospectus), all
dealers effecting transactions in the Exchange Notes, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
selling Exchange Notes received in exchange for Original Notes held for their
own account. See "Plan of Distribution."
================================================================================
================================================================================
[LOGO]
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 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
II-1
<PAGE>
reference herein), which provides for indemnification to the maximum
extent authorized by law.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
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 __, 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 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 and the Canadian Security
Agreement between Pierce Leahy Command Company and the Canadian
Administrative Agent
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
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
II-2
<PAGE>
Exhibit
No. Exhibit
------- -------
27 Financial Data Schedule
* 99.1 Form of Letter of Transmittal
* 99.2 Form of Notice of Guaranteed Delivery
---------
* To be filed by amendment.
(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.
II-3
<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 August 9, 1996.
PIERCE LEAHY CORP.
By:/s/J. Peter Pierce
----------------------------------
J. Peter Pierce, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints J. Peter Pierce and Douglas B.
Huntley, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, to sign any and
all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documentation in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
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>
/s/Leo W. Pierce, Sr.
---------------------------------- Chairman of the Board of Directors August 9, 1996
Leo W. Pierce, Sr.
/s/J. Peter Pierce
---------------------------------- President, Chief Executive Officer August 9, 1996
J. Peter Pierce and Director
(Principal Executive Officer)
/s/Douglas B. Huntley
---------------------------------- Vice President, Chief Financial August 9, 1996
Douglas B. Huntley Officer and Director
(Principal Financial and
Accounting Officer)
---------------------------------- Director August , 1996
Leo W. Pierce, Jr.
</TABLE>
[Signatures Continue]
II-4
<PAGE>
[Signatures Continued]
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Michael J. Pierce
---------------------------------- Director August 9, 1996
Michael J. Pierce
/s/Alan B. Campbell
---------------------------------- Director August 9, 1996
Alan B. Campell
/s/Delbert S. Conner
---------------------------------- Director August 9, 1996
Delbert S. Conner
</TABLE>
II-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Pierce Leahy Corp.:
We have audited in accordance with generally accepted auditing standards, the
financial statements for Pierce Leahy Corp. and have issued our report thereon
dated March 4, 1996, which is included in this registration statement. Our
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule of valuation and qualifying accounts
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
March 4, 1996
S-1
<PAGE>
PIERCE LEAHY CORP.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Balance, Charges Deductions Balance,
Beginning to from End of
of Period Expense Reserve Period
--------- ------- ---------- -------
December 31, 1995:
Reserve for doubtful accounts $554 $418 $485 $487
--------- ------- ---------- -------
December 31, 1994:
Reserve for doubtful accounts $513 $180 $139 $554
--------- ------- ---------- -------
December 31, 1993:
Reserve for doubtful accounts $583 $89 $159 $513
--------- ------- ---------- -------
<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 __, 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 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 and the Canadian Security Agreement
between Pierce Leahy Command Company and the Canadian Administrative
Agent.
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
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
- ---------
* To be filed by amendment.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PIERCE LEAHY CORP., as Issuer,
and
UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee
____________________
INDENTURE
Dated as of July 15, 1996
____________________
$200,000,000
11 1/8% Senior Subordinated Notes due 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a)(1) ................................................................ 7.10
(a)(2) ................................................................ 7.10
(a)(3) ................................................................ N.A.
(a)(4) ................................................................ N.A.
(b) ............................................................ 7.08; 13.02
(b)(1) ................................................................ 7.10
(b)(9) ................................................................ 7.10
(c) .................................................................. N.A.
311(a) .................................................................. 7.11
(b) .................................................................. 7.11
(c) .................................................................. N.A.
312(a) .................................................................. 2.05
(b) .................................................................. 13.03
(c) .................................................................. 13.03
313(a) .................................................................. 7.06
(b)(1) ................................................................ 7.06
(b)(2) ................................................................ 7.06
(c) .................................................................. 13.02
(d) .................................................................. 7.06
314(a) ....................................................... 4.02; 4.04; 13.02
(b) ................................................................... 12.02
(c)(1) .................................................. 12.02; 13.04; 13.05
(c)(2) .................................................. 12.02; 13.04; 13.05
(c)(3) ................................................................ N.A.
(d) .................................................................. 12.02
(e) ........................................................... 12.03; 13.05
(f) .................................................................. N.A.
315(a) ............................................................ 7.01; 7.02
(b) ............................................................ 7.05; 13.02
(c) .................................................................. 7.01
(d) ....................................................... 6.05; 7.01; 7.02
(e) .................................................................. 6.11
316(a) (last sentence) ................................................... 13.06
(a)(1)(A) ............................................................. 6.05
(a)(1)(B) ............................................................. 6.04
(a)(2) ................................................................ 8.02
(b) .................................................................. 6.07
(c) .................................................................. 8.04
317(a)(1) ................................................................ 6.08
(a)(2) ................................................................ 6.09
(b) .................................................................. 7.12
318(a) .................................................................. 13.01
</TABLE>
N.A. means Not Applicable
____________________
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
Section 1.01. Definitions...................................... 1
Section 1.02. Other Definitions................................ 23
Section 1.03. Incorporation by Reference of Trust
Indenture Act............................... 24
Section 1.04. Rules of Construction............................ 24
ARTICLE 2
THE NOTES
Section 2.01. Dating; Incorporation of Form in
Indenture................................... 25
Section 2.02. Execution and Authentication..................... 26
Section 2.03. Registrar and Paying Agent....................... 27
Section 2.04. Paying Agent to Hold Money in Trust.............. 27
Section 2.05. Noteholder Lists................................. 28
Section 2.06. Transfer and Exchange............................ 28
Section 2.07. Replacement Notes................................ 29
Section 2.08. Outstanding Notes................................ 29
Section 2.09. Temporary Notes.................................. 30
Section 2.10. Cancellation..................................... 30
Section 2.11. Defaulted Interest............................... 30
Section 2.12. Deposit of Moneys................................ 31
Section 2.13. CUSIP Number..................................... 31
Section 2.14. Book-Entry Provisions for Global Notes........... 31
Section 2.15. Special Transfer Provisions...................... 33
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee............................... 35
Section 3.02. Selection by Trustee of Notes
to Be Redeemed.............................. 35
Section 3.03. Notice of Redemption............................. 36
Section 3.04. Effect of Notice of Redemption................... 36
Section 3.05. Deposit of Redemption Price...................... 37
Section 3.06. Notes Redeemed in Part........................... 37
Section 3.07. Optional Redemption.............................. 37
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE 4
COVENANTS
<S> <C> <C>
Section 4.01. Payment of Notes................................. 38
Section 4.02. SEC Reports...................................... 38
Section 4.03. Waiver of Stay, Extension or Usury Laws.......... 40
Section 4.04. Compliance Certificate........................... 40
Section 4.05. Taxes............................................ 41
Section 4.06. Limitation on Additional Indebtedness............ 41
Section 4.07. Limitation on Preferred Stock of
Restricted Subsidiaries..................... 42
Section 4.08. Limitation on Capital Stock of
Restricted Subsidiaries..................... 42
Section 4.09. Limitation on Restricted Payments................ 42
Section 4.10. Limitation on Certain Asset Sales................ 44
Section 4.11. Limitation on Transactions
with Affiliates............................. 47
Section 4.12. Limitations on Liens............................. 48
Section 4.13. Limitations on Investments....................... 48
Section 4.14. Limitation on Creation of Subsidiaries........... 48
Section 4.15. Limitation on Other Senior
Subordinated Debt........................... 49
Section 4.16. Limitation on Sale and Lease-Back
Transactions................................ 49
Section 4.17. Payments for Consent............................. 49
Section 4.18. Corporate Existence.............................. 49
Section 4.19. Change of Control................................ 50
Section 4.20. Maintenance of Office or Agency.................. 53
Section 4.21. Maintenance of Properties and Insurance.......... 53
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation,
Merger and Sale of Assets................... 54
Section 5.02. Successor Person Substituted..................... 55
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default............................... 55
Section 6.02. Acceleration.................................... 57
Section 6.03. Other Remedies.................................. 58
Section 6.04. Waiver of Past Defaults and
Events of Default........................... 58
Section 6.05. Control by Majority............................. 58
Section 6.06. Limitation on Suits............................. 59
Section 6.07. Rights of Holders to Receive Payment............ 59
Section 6.08. Collection Suit by Trustee...................... 59
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 6.09. Trustee May File Proofs of Claim................ 60
Section 6.10. Priorities...................................... 60
Section 6.11. Undertaking for Costs........................... 61
Section 6.12. Restoration of Rights and Remedies.............. 61
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee............................... 62
Section 7.02. Rights of Trustee............................... 63
Section 7.03. Individual Rights of Trustee.................... 64
Section 7.04. Trustee's Disclaimer............................ 64
Section 7.05. Notice of Defaults.............................. 64
Section 7.06. Reports by Trustee to Holders................... 65
Section 7.07. Compensation and Indemnity...................... 65
Section 7.08. Replacement of Trustee.......................... 66
Section 7.09. Successor Trustee by Consolidation,
Merger or Conversion........................ 67
Section 7.10. Eligibility; Disqualification................... 67
Section 7.11. Preferential Collection of Claims
Against Company............................. 67
Section 7.12. Paying Agents................................... 67
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders....................... 68
Section 8.02. With Consent of Holders.......................... 69
Section 8.03. Compliance with Trust Indenture Act.............. 70
Section 8.04. Revocation and Effect of Consents................ 70
Section 8.05. Notation on or Exchange of Notes................. 71
Section 8.06. Trustee to Sign Amendments, etc.................. 71
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.......................... 72
Section 9.02. Legal Defeasance................................ 72
Section 9.03. Covenant Defeasance............................. 73
Section 9.04. Conditions to Defeasance or Covenant
Defeasance.................................. 73
Section 9.05. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions.............. 75
Section 9.06. Reinstatement................................... 76
Section 9.07. Moneys Held by Paying Agent..................... 76
Section 9.08. Moneys Held by Trustee.......................... 76
</TABLE>
-iii-
<PAGE>
ARTICLE 10
GUARANTEE OF NOTES
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 10.01. Guarantee....................................... 77
Section 10.02. Execution and Delivery of Guarantees............ 78
Section 10.03. Limitation of Guarantee......................... 78
Section 10.04. Release of Guarantor............................ 79
Section 10.05. Guarantee Obligations Subordinated
to Guarantor Senior Indebtedness............ 79
Section 10.06. Payment Over of Proceeds upon
Dissolution, etc., of a Guarantor........... 80
Section 10.07. Suspension of Guarantee Obligations
When Guarantor Senior
Indebtedness in Default..................... 81
Section 10.08. Subrogation to Rights of Holders
of Guarantor Senior Indebtedness............ 84
Section 10.09. Guarantee Subordination Provisions
Solely to Define Relative Rights............ 84
Section 10.10. Application of Certain Article 11
Provisions.................................. 85
ARTICLE 11
SUBORDINATION OF NOTES
<S> <C>
Section 11.01. Notes Subordinate to Senior Indeptedness 85
Section 11.02. Payment Over of Proceeds upon
Dissolution, etc............................ 86
Section 11.03. Suspension of Payment When Senior
Indebtedness in Default..................... 87
Section 11.04. Trustee's Relation to Senior
Indebtedness................................ 89
Section 11.05. Subrogation to Rights of Holders
of Senior Indebtedness...................... 90
Section 11.06. Provisions Solely to Define Relative
Rights...................................... 90
Section 11.07. Trustee to Effectuate Subordination............. 91
Section 11.08. No Waiver of Subordination Provisions........... 92
Section 11.09. Notice to Trustee............................... 92
Section 11.10. Reliance on Judicial Order or
Certificate of Liquidating Agent............ 93
Section 11.11. Rights of Trustee as a Holder of
Senior Indebtedness;
Preservation of Trustee's Rights............ 94
Section 11.12. Article Applicable to Paying Agents............. 94
Section 11.13. No Suspension of Remedies....................... 94
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE 12
SECURITY
<S> <C> <C>
Section 12.01. Pledge Agreement................................ 94
Section 12.02. Certificates and Opinions....................... 95
Section 12.03. Authorization of Actions to Be Taken
by the Collateral Agent Under
the Pledge Agreement........................ 95
Section 12.04. Authorization of Receipt of Funds by
the Trustee Under the Pledge
Agreement................................... 96
Section 12.05. Termination of Security Interest................ 96
ARTICLE 13
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls.................... 96
Section 13.02. Notices......................................... 96
Section 13.03. Communications by Holders with
Other Holders............................... 97
Section 13.04. Certificate and Opinion as to
Conditions Precedent........................ 98
Section 13.05. Statements Required in Certificate
and Opinion................................. 98
Section 13.06. When Treasury Notes Disregarded................. 99
Section 13.07. Rules by Trustee and Agents..................... 99
Section 13.08. Business Days; Legal Holidays................... 99
Section 13.09. Governing Law................................... 99
Section 13.10. No Adverse Interpretation of
Other Agreements........................... 99
Section 13.11. No Recourse Against Others..................... 100
Section 13.12. Successors..................................... 100
Section 13.13. Multiple Counterparts.......................... 100
Section 13.14. Table of Contents, Headings, etc............... 101
Section 13.15. Separability................................... 101
EXHIBITS
--------
Exhibit A. Form of Note.................................... A-1
Exhibit B. Form of Legend for Global Notes................. B-1
Exhibit C. Form of Certificate to Be Delivered in
Connection with Transfers to
Non-QIB Accredited Investors................ C-1
Exhibit D. Form of Certificate to Be Delivered in
Connection with Transfers
Pursuant to Regulation S.................... D-1
Exhibit E. Form of Guarantee............................... E-1
Exhibit F. Form of Pledge and Intercreditor
Agreement................................... F-1
</TABLE>
-v-
<PAGE>
INDENTURE, dated as of July 15, 1996, between PIERCE LEAHY CORP., a
New York corporation, as Issuer (the "Company"), and UNITED STATES TRUST COMPANY
OF NEW YORK, a New York corporation, as Trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's 11% Senior
Subordinated Notes due 2006 (the "Notes").
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
-----------
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from a
Person.
"Acquisition EBITDA" means, without duplication, (i) EBITDA for the
last four fiscal quarters for which financial statements are available at the
date of determination (the "Acquisition EBITDA Period") with respect to a
business or Person which has been acquired by the Company or one of its
Restricted Subsidiaries or which is the subject of a binding acquisition
agreement requiring the calculation of EBITDA for purposes of Section 4.06 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 million 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.
The Trustee may rely on such Officers' Certificate (subject to the provisions of
Section 7.01 of this Indenture). Acquisition EBITDA of a business shall be a
fixed number determined as of the date the calculation of EBITDA for
<PAGE>
-2-
purposes of Section 4.06 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 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.
"Additional Interest" means additional interest on the Notes which the
Company agrees to pay pursuant to Section 4 of the Registration Rights
Agreement.
"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,
<PAGE>
-3-
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise.
"Agent" means any Registrar, Paying Agent, co-registrar or agent for
service of notices and demands.
"Asset Sale" means the sale, transfer or other disposition (other than
to the Company or any of its Restricted Subsidiaries) in any single transaction
or series of related transactions involving assets with a fair market value in
excess of $500,000 of (a) any Capital Stock of or other equity interest in any
Restricted Subsidiary of the Company, (b) all or substantially all of the assets
of the Company or of any Restricted Subsidiary thereof, (c) real property of the
Company or a Restricted Subsidiary or (d) all or substantially all of the assets
of any business property, or part thereof, owned by the Company or any
Restricted Subsidiary thereof, or a division, line of business or comparable
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 Section 5.01 and (iii) transfers or other distributions of assets
which constitute (1) Permitted Investments or (2) Restricted Payments made in
compliance with Section 4.09.
"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
<PAGE>
-4-
benefit liabilities and liabilities related to environmental matters or against
any indemnification obligations associated with the assets sold or disposed of
in such Asset Sale, and (ii) promissory notes and other non-cash consideration
received by the Company or any Restricted Subsidiary from such Asset Sale or
other disposition upon the liquidation or conversion of such notes or non-cash
consideration into cash.
"Attributable Indebtedness" in respect of a Sale and Lease-Back
Transaction means, as of the time of determination, the greater of (i) the fair
value of the property subject to such arrangement (as determined by the Board of
Directors) and (ii) the present value (discounted at a rate of interest implicit
in such transaction) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale and Lease-Back
Transaction (including any period for which such lease has been extended).
"Available Asset Sale Proceeds" means, with respect to any Asset Sale,
the aggregate Asset Sale Proceeds from such Asset Sale that have not been
applied in accordance with clause (iii)(a) or (b) of Section 4.10(a) and which
have not been the basis for an Excess Proceeds Offer in accordance with clause
(iii)(c) of Section 4.10(a).
"Board of Directors" means the board of directors of the Company or a
Guarantor, as appropriate, or any committee authorized to act therefor.
"Board Resolution" means a copy of a resolution certified pursuant to
an Officers' Certificate to have been duly adopted by the Board of Directors of
the Company or a Guarantor, as appropriate, and to be in full force and effect,
and delivered to the Trustee.
"Capital Stock" means, with respect to any Person, any and all shares
or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any 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.
"Change of Control" of the Company will be deemed to have occurred at
such time as (i) any Person (including a Person's
<PAGE>
-5-
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" hereunder.
"Collateral" shall have the meaning assigned thereto in the Pledge
Agreement.
"Collateral Agent" shall have the meaning assigned thereto in the
Pledge Agreement.
"Common Stock" of any Person means all Capital Stock of such Person
that is generally entitled to (i) vote in the election of directors of such
Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the
<PAGE>
-6-
governing body, partners, managers or others that will control the management
and policies of such Person.
"Company" means the party named as such in the first paragraph of this
Indenture until a successor replaces such party pursuant to Article 5 of this
Indenture and thereafter means the successor.
"Company Request" means any written request signed in the name of the
Company by any two of the following: the Chief Executive Officer; the President;
any Vice President; the Chief Financial Officer; the Treasurer; or the Secretary
or any Assistant Secretary (but not both the Secretary and any Assistant
Secretary) of the Company.
"Consolidated Interest Expense" means, with respect to any Person, for
any period, the aggregate amount of interest which, in conformity with GAAP,
would 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
<PAGE>
-7-
this Indenture) shall be excluded to the extent of such restriction or
limitation (provided that if any such restriction or limitation by its terms
takes effect upon the occurrence of a default or event of default, such
exclusion shall become effective only upon the occurrence of such default or
event of default which is continuing), (c)(i) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition and (ii) any net gain (but not loss) resulting from an
Asset Sale by the Person in question or any of its Subsidiaries other than in
the ordinary course of business shall be excluded and (d) extraordinary, unusual
and non-recurring gains and losses shall be excluded.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at 114 West 47th Street, New York, New York 10036.
"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 in writing by means of an Officers' Certificate
the Trustee of any such refunding, replacement, restructuring or refinancing of
the Credit Facility.
"Default" means any event that is, or with the passing of time or
giving of notice or both would be, an Event of Default.
"Depository" means, with respect to the Notes issued in the form of
one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Company, which Person must be a clearing agency
registered under the Exchange Act.
"Designated Senior Indebtedness," as to the Company or any Guarantor,
as the case may be, means any 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
<PAGE>
-8-
discount) outstanding or available under a committed facility and (x) unless
such designation is prohibited by the Credit Facility, which is specifically
designated in the instrument evidencing such Senior Indebtedness as "Designated
Senior Indebtedness" by such Person and (y) as to which the Trustee has been
given written notice by means of an Officers' Certificate of such designation.
"Disqualified Capital Stock" means any Capital Stock of the Company or
a Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is 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 the terms of such Preferred Stock, by agreement or otherwise,
such Restricted Subsidiary or the Company is obligated to pay current dividends
or distributions in cash during the period prior to the maturity date of the
Notes; provided, however, that Preferred Stock of the Company or any Restricted
-------- -------
Subsidiary thereof that is issued with the benefit of provisions requiring a
change of control offer to be made for such Preferred Stock in the event of a
Change of Control of the Company or Restricted Subsidiary, which provisions have
substantially the same effect as the provisions described in Section 4.19, shall
not be deemed to be Disqualified Capital Stock solely by virtue of such
provisions; and provided, further, that Capital Stock owned by the Company or a
-------- -------
Wholly-Owned Restricted Subsidiary shall not constitute Disqualified Capital
Stock.
"EBITDA" means, for any Person, for any period, an amount equal to (a)
the sum of (i) Consolidated Net Income for such period, plus (ii) the provision
for taxes 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 Section
<PAGE>
-9-
4.09 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 the Offering Memorandum (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.
"Guarantee" means, as the context may require, individually, a
guarantee, or collectively, any and all guarantees, of the Obligations of the
Company with respect to the Notes by each Guarantor, if any, pursuant to the
terms of Article 10 hereof, substantially in the form set forth in Exhibit E.
"Guarantor" means each Restricted Subsidiary of the Company that
hereafter becomes a Guarantor pursuant to Section 4.14, and "Guarantors" means
such entities, collectively.
"Guarantor Senior Indebtedness," as to any Guarantor, means the
principal of and premium, if any, and interest (including, without limitation,
interest accruing or that would have accrued but for the filing of a bankruptcy,
reorganization or other insolvency proceeding whether or not such interest
constitutes an allowable claim in such proceeding) on, and any and all other
fees, expense reimbursement obligations, indemnities and other amounts due
pursuant to the terms of all agreements, documents and instruments providing
for, creating, securing or evidencing or otherwise entered into in connection
with, (a) such Guarantor's direct incurrence of any Indebtedness or its
guarantee of all Indebtedness of the Company or any Restricted Subsidiaries, in
each case, owed to lenders under or in respect of the Credit Facility, (b) all
obligations of such Guarantor with respect to any Interest Rate Agreement or any
guarantee thereof, (c) all obligations of such Guarantor to reimburse any bank
or other person in respect of amounts paid under letters of credit, acceptances
or other similar instruments and all obligations of such Guarantor with respect
to guarantees of such reimbursement obligations, (d) all other Indebtedness of
such Guarantor which does not provide that it is to rank pari passu with or
---- -----
subordinate to the Guarantees and (e) all deferrals, renewals, extensions,
replacements, refundings, refinancings and restructurings of, and amendments,
<PAGE>
-10-
modifications and supplements to, any of the Guarantor Senior Indebtedness
described above. Notwithstanding anything to the contrary in the foregoing,
Guarantor Senior Indebtedness will not include (i) Indebtedness of such
Guarantor to any of its Subsidiaries, (ii) Indebtedness represented by the
Guarantees, (iii) any Indebtedness which by the express terms of the agreement
or instrument creating, evidencing or governing the same is junior or
subordinate in right of payment to any item of Guarantor Senior Indebtedness,
(iv) any trade payable arising from the purchase of goods or materials or for
services obtained in the ordinary course of business or (v) Indebtedness (other
than that described in clause (a) above) incurred in violation of this
Indenture.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording (other than previously recorded), as required
pursuant to GAAP or otherwise, of any such Indebtedness or other obligation on
the balance sheet of such Person (and "incurrence," "incurred," "incurrable,"
and "incurring" 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),
<PAGE>
-11-
(iii) guarantees of items of other Persons which would be included within this
definition for such other Persons (whether or not such items would appear upon
the balance sheet of the guarantor), (iv) all obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction (provided that, in the case of any such letters of credit, the items
--------
for which such letters of credit provide credit support are those of other
Persons which would be included within this definition for such other Persons),
(v) in the case of the Company, Disqualified Capital Stock of the Company or any
Restricted Subsidiary thereof, and (vi) obligations of any such 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.
"Indenture" means this Indenture as amended, restated or supplemented
from time to time.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501 (a)(1), (2), (3) or
(7) promulgated under the Securities Act.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Notes.
"Interest Rate Agreement" means, for any Person, any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement designed to
<PAGE>
-12-
protect the party indicated therein against fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance, account
receivable (other than an account receivable arising in the ordinary course of
business or acquired as part of the assets acquired by the Company in connection
with the acquisition of assets which is otherwise permitted by the terms of this
Indenture), loan or capital contribution to (by means of transfers of 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 repurchases or redemptions of securities of any Person by
such Person.
"Issue Date" means the date the Notes are first issued by the Company
and authenticated by the Trustee under this Indenture.
"Lien" means, with respect to any property or assets of any Person,
any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Maturity Date" means July 15, 2006.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP minus Permitted
Tax Distributions with respect to such period, and excluding any foreign
currency translation gains or losses added or deducted, as applicable, in the
computation of Net Income.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by
the Company, the aggregate net proceeds received by the Company, after payment
of expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as
<PAGE>
-13-
determined in good faith by the Board of Directors, at the time of receipt),
(b) in the case of any exchange, exercise, conversion or surrender of
outstanding securities of any kind for or into shares of Capital Stock of the
Company which is not Disqualified Capital Stock, the net book value of such
outstanding securities on the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the holder to the
Company upon such exchange, exercise, conversion or surrender, less any and all
payments made to the holders, e.g., on account of fractional shares and less all
---
expenses incurred by the Company in connection therewith) and (c) in the case of
any issuance of any Indebtedness by the Company or any Restricted Subsidiary,
the aggregate net cash proceeds received by such Person after payment of
expenses, commissions, underwriting discounts and the like incurred in
connection therewith.
"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.
"Non-U.S. Person" means a person who is not a U.S. person, as defined
in Regulation S.
"Notes" means the securities that are issued under this Indenture, as
amended or supplemented from time to time pursuant to this Indenture.
"Obligations" means, with respect to any Indebtedness, any principal,
premium, interest, penalties, fees, indemnifications, reimbursements, damages
and other expenses payable under the documentation governing such Indebtedness.
"Offering" means the offering of the Notes as described in the
Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum dated July 17,
1996 pursuant to which the Notes were offered.
"Officer" means the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer, the Treasurer, the Controller or the
Secretary of the Company or a Guarantor, or any other officer designated by the
Board of Directors, as the case may be.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chief Executive Officer, the President or any Vice
President and the Chief Financial Officer, the Controller or any Treasurer of
such Person that shall comply with applicable provisions of this Indenture.
<PAGE>
-14-
"Opinion of Counsel" means a written opinion from legal counsel which
counsel is reasonably acceptable to the Trustee.
"Payment Default" means any default, whether or not any requirement
for the giving of notice, the lapse of time or both, or any other condition to
such default becoming an Event of Default has occurred, in the payment of
principal of (or premium, if any) or interest on or any other amount payable in
connection with Designated Senior Indebtedness.
"Permitted Holders" means, collectively, Leo W. Pierce, Sr., his
children or other lineal descendants (whether adoptive or biological), the
spouses of any of the foregoing and any probate estate of any such individual
and any trust, so long as one or more of the foregoing individuals is the
principal beneficiary of such trust, and any other partnership, corporation or
other entity all of the partners, shareholders, members or owners of which are
any one or more of the foregoing.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Restricted Subsidiary arising
under or in connection with the Credit Facility in an amount not to exceed
$10 million above the amount that could be borrowed at the time of
determination under the first paragraph of Section 4.06;
(ii) Indebtedness of the Company's Canadian subsidiary (and related
guarantees) under the Credit Facility in an aggregate amount at any one
time outstanding not to exceed Cdn $30.3 million, provided that the Company
--------
shall have paid all principal amounts outstanding under the Second Amended
and Restated Credit Agreement dated as of October 27, 1995 (as modified,
supplemented or amended from time to time) among the Company, Pierce Leahy
Command Company, a Nova Scotia company, the financial institutions a party
thereto from time to time, Banque Paribas, New York Branch, as agent, and
Paribas Bank of Canada, as Canadian Agent, together with accrued and unpaid
interest and all other obligations thereunder;
(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 this Indenture;
(v) Indebtedness of the Company to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Company or another
Restricted Subsidiary;
<PAGE>
-15-
(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.
"Permitted Investments" means, for any Person, Investments made on or
after the date of this Indenture consisting of:
(i) Investments by the Company, or by a Restricted Subsidiary thereof,
in the Company or a Restricted Subsidiary;
(ii) Temporary Cash Investments;
(iii) Investments by the Company, or by a Restricted Subsidiary
thereof, in a Person (or in all or substantially all of the business or
assets of a business or a Person), if as a result of such Investment (a)
such Person becomes a Restricted Subsidiary of the Company, (b) such Person
is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the
Company or a Restricted Subsidiary thereof or (c) such business or assets
are owned by the Company or a Restricted Subsidiary;
(iv) reasonable and customary loans made to employees not to exceed
$500,000 in the aggregate at any one time outstanding, plus any loans which
may be required to be made under the Company's Nonqualified Stock Option
Plan in an amount not to exceed $2,000,000;
(v) an Investment that is made by the Company or a Restricted
Subsidiary thereof in the form of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are issued
by a third party to the Company or Restricted Subsidiary solely as partial
consideration for the consummation of an Asset Sale that is otherwise
permitted by Section 4.10;
<PAGE>
-16-
(vi) accounts receivable of the Company and its Restricted
Subsidiaries generated in the ordinary course of business;
(vii) Investments existing on the Issue Date;
(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 this Indenture,
provided that (a) any such Lien is created solely for the purpose of securing
- --------
Indebtedness representing, or incurred to finance, refinance or refund, the cost
(including sales and excise taxes, installation and delivery charges and other
direct costs of, and other direct expenses paid or charged in connection with,
such purchase or construction) of such Property, (b) the principal amount of the
Indebtedness secured by such Lien does not exceed 100% of such costs, and (c)
such Lien does not extend to or cover any Property other than such item of
Property and any improvements on such item, (vi) statutory liens or landlords',
carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's or
other like Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate
proceedings, (vii) other Liens securing obligations incurred in the ordinary
course of business which obligations do not exceed $1,000,000 in the aggregate
at any one time outstanding, (viii) Liens for taxes, assessments or 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
<PAGE>
-17-
definition of "Permitted Indebtedness," provided that such Lien does not extend
--------
to any property other than that subject to the underlying lease, (x) Liens
securing Designated Senior Indebtedness, (xi) easements or minor defects or
irregularities in title and other similar charges or encumbrances on Property
not interfering in any material respect with the Company's or any Restricted
Subsidiary's use of such Property, (xii) Liens existing on the date of this
Indenture, (xiii) pledges or deposits made in the ordinary course of business
(a) in connection with (1) leases, performance bonds and similar bonds or (2)
workers' compensation, unemployment insurance and other social security
legislation or (b) securing the performance of surety bonds and appeal bonds
required (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).
"Pledge Agreement" means the Pledge and Intercreditor Agreement in the
form attached as Exhibit F, as the same may be amended, supplemented, restated
or modified from time to time.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth on Exhibit A.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such
<PAGE>
-18-
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.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A promulgated under the Securities Act.
"Real Estate Transactions" has the meaning provided therefor in the
Offering Memorandum.
"Redeemable Dividend" means, for any dividend or distribution with
regard to Disqualified Capital Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such Disqualified Capital Stock.
"Redemption Date" when used with respect to any Note to be redeemed
means the date fixed for such redemption pursuant to this Indenture.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances, renews, replaces or extends any Indebtedness of the Company
outstanding on the Issue Date or other Indebtedness permitted to be incurred by
the Company or its Restricted Subsidiaries pursuant to the terms of this
Indenture, whether involving the same or any other lender or creditor or group
of lenders or creditors, but only to the extent that (i) the Refinancing
Indebtedness is subordinated to the Notes to at least the same extent as the
Indebtedness being refunded, refinanced or extended, if at all, (ii) the
Refinancing Indebtedness is scheduled to mature either (a) no earlier than the
Indebtedness being refunded, refinanced or extended, or (b) after the maturity
date of the Notes, (iii) the portion, if any, of the Refinancing Indebtedness
that is scheduled to mature on or prior to the maturity date of the Notes has a
weighted average life to maturity at the time such Refinancing Indebtedness is
incurred that is equal to or greater than the weighted average life to maturity
of the portion of the Indebtedness being refunded, refinanced or extended
<PAGE>
-19-
that is scheduled to mature on or prior to the maturity date of the Notes, (iv)
such Refinancing Indebtedness is in an aggregate principal amount that is equal
to or less than the sum of (a) the aggregate principal amount then 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.
"Registration Rights Agreement" means the Note Registration Rights
Agreement dated as of July 23, 1996 between the Company and CIBC Wood Gundy
Securities Corp.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Restricted Payment" means any of the following: (i) the declaration
or payment of any dividend or any other distribution or payment on Capital Stock
of the Company or any Restricted Subsidiary of the Company or any payment made
to the direct or indirect holders (in their capacities as such) of Capital Stock
of the Company or any Restricted Subsidiary of the Company (other than (x)
dividends or distributions payable solely in Capital Stock (other than
Disqualified Capital Stock) or in options, warrants or other rights to purchase
Capital Stock (other than Disqualified Capital Stock), and (y) in the case of
Restricted Subsidiaries of the Company, dividends or distributions payable to
the Company or to a Wholly-Owned Subsidiary of the Company), (ii) the purchase,
redemption or other acquisition or retirement for value of any Capital Stock of
the Company or any of its Restricted Subsidiaries (other than Capital Stock
owned by the Company or a Wholly-Owned Subsidiary of the Company, excluding
Disqualified Capital Stock), (iii) the purchase, defeasance, repurchase,
redemption or other acquisition or retirement for value, prior to any 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
<PAGE>
-20-
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 Security" has the meaning set forth in Rule 144(a)(3)
promulgated under the Securities Act; provided that the Trustee shall be
--------
entitled to request and conclusively rely upon an Opinion of Counsel with
respect to whether any Note is a Restricted Security.
"Restricted Subsidiary" means a Subsidiary of the Company other than
an Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date. The Board of Directors of the Company may
designate any Unrestricted Subsidiary or any Person that is to become a
Subsidiary as a Restricted Subsidiary if immediately after giving effect to such
action (and treating any Acquired Indebtedness as having been incurred at the
time of such action), the Company could have incurred at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
4.06.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Sale and Lease-Back Transaction" means any arrangement with any
Person providing for the leasing by the Company or any Restricted Subsidiary of
the Company of any real or tangible personal Property, which Property (i) has
been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person in contemplation of such leasing and (ii) would
constitute an Asset Sale if such property had been sold in an outright sale
thereof.
"S&P" means Standard & Poor's Ratings Group and its successors.
"SEC" means the United States Securities and Exchange Commission as
constituted from time to time or any successor performing substantially the same
functions.
"Securities Act" means the Securities Act of 1933, as amended.
<PAGE>
-21-
"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 Company
to reimburse any bank or other person in respect of amounts paid under letters
of credit, acceptances or other similar instruments, (d) all other Indebtedness
of the Company which does not provide that it is to rank pari passu with or
---- -----
subordinate to the Notes and (e) all deferrals, renewals, extensions,
replacements, refundings, refinancings and restructurings of, and amendments,
modifications and supplements to, any of the Senior Indebtedness described
above. Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness will not include (i) Indebtedness of the Company to any of its
Subsidiaries, (ii) Indebtedness represented by the Notes and the Guarantees,
(iii) 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 this Indenture.
"Stock Redemption" has the meaning provided therefor in the Offering
Memorandum.
"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.
<PAGE>
-22-
"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 S&P and A-2 by Moody's, maturing within 365 days of
purchase; (iii) Investments not exceeding 365 days in duration in money market
funds that invest substantially all of such funds' assets in the Investments
described in clauses (i) and (ii) above; (iv) any security maturing not more
than 180 days after the date of acquisition, backed by a stand-by or direct pay
letter of credit issued by a bank meeting the qualifications described in clause
(ii) above; or (v) commercial paper, maturing not more than one year after the
date of acquisition, issued by a corporation (other than an Affiliate or
Subsidiary of the Company) organized and existing under the laws of the United
States of America or any state thereof or the District of Columbia with a
rating, at the time as of which any investment therein is made, of "P-1" by
Moody's or "A-1" by S&P.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
77aaa-77bbbb) as in effect on the date of this Indenture (except as provided in
Section 8.03 hereof).
"Trust Officer" when used with respect to the Trustee, means any
officer or assistant officer of the Trustee assigned to the Corporate Trust
Administration department or similar department performing corporate trust work
of the Trustee or any successor to such department or, in the case of a
successor Trustee, any officer of such successor Trustee performing corporate
trust functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"Unrestricted Subsidiary" means (i) any Subsidiary of an Unrestricted
Subsidiary and (ii) any Subsidiary of the Company which is classified after the
Issue Date as an Unrestricted Subsidiary by a resolution adopted by the Board of
Directors of the Company; provided that a Subsidiary organized or acquired after
--------
the Issue Date may be so classified as an Unrestricted Subsidiary only if such
classification is in compliance with the covenant set forth in Section 4.09
hereof. The Trustee shall be given prompt written
<PAGE>
-23-
notice by the Company of each resolution adopted by the Board of Directors of
the Company under this provision, together with a copy of each such resolution
adopted.
"U.S. Government Obligations" means (i) securities that are direct
obligations of the United States of America for the payment of which its full
faith and credit are pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
--------
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or a specific payment of principal or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary 99% or more
of the outstanding Capital Stock (other than directors' qualifying shares) of
which are owned, directly or indirectly, by the Company.
Section 1.02. Other Definitions.
-----------------
The definitions of the following terms may be found in the sections
indicated as follows:
<TABLE>
<CAPTION>
Term Defined in Section
- ---- ------------------
<S> <C>
"Affiliate Transaction"............................ 4.11
"Agent Members".................................... 2.14
"Bankruptcy Law"................................... 6.01
"Business Day"..................................... 13.08
"Change of Control Offer".......................... 4.19
"Change of Control Payment Date"................... 4.19
"Covenant Defeasance".............................. 9.03
"Custodian"........................................ 6.01
"Event of Default"................................. 6.01
"Excess Proceeds Offer"............................ 4.10
"Exchange Notes"................................... 2.02
"Global Notes"..................................... 2.01
"Guarantee Payment Blockage Date".................. 10.07
</TABLE>
<PAGE>
-24-
<TABLE>
<S> <C>
"Guarantor Representative............................................10.07
"Initial Blockage Period"............................................11.03
"Initial Guarantee Blockage Period"..................................10.07
"Legal Defeasance"................................................... 9.02
"Legal Holiday"......................................................13.08
"Offer Period"....................................................... 4.10
"Offshore Physical Notes"............................................ 2.01
"Paying Agent"....................................................... 2.03
"Payment Blockage Period"............................................11.03
"Physical Notes"..................................................... 2.01
"Private Exchange Notes"............................................. 2.02
"Purchase Date"...................................................... 4.10
"Registrar".......................................................... 2.03
"Reinvestment Date".................................................. 4.10
"Representative".....................................................11.03
"U.S. Physical Notes"................................................ 2.01
</TABLE>
Section 1.03. Incorporation by Reference of Trust
Indenture Act.
-----------------------------------
Whenever this Indenture refers to a provision of the TIA, the portion
of such provision required to be incorporated herein in order for this Indenture
to be qualified under the TIA is incorporated by reference in and made a part of
this Indenture. The following TIA terms used in this Indenture have the
following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture securityholder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor on the indenture securities" means the Company, the
Guarantors or any other obligor on the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined in the TIA by reference to another statute or defined by SEC rule have
the meanings therein assigned to them.
Section 1.04. Rules of Construction.
---------------------
Unless the context otherwise requires:
<PAGE>
-25-
(1) a term has the meaning assigned to it herein, whether defined
expressly or by reference;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) words used herein implying any gender shall apply to every gender;
and
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or
Subdivision, unless expressly stated otherwise.
ARTICLE 2.
THE NOTES
Section 2.01. Dating; Incorporation of Form in Indenture.
------------------------------------------
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A which is incorporated in and made part of
this Indenture. The Notes may have notations, legends or endorsements required
by law, stock exchange rule or usage. The Company may use "CUSIP" numbers in
issuing the Notes. The Company shall approve the form of the Notes. Each Note
shall be dated the date of its authentication.
The Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent Global Notes in registered form,
substantially in the form set forth in Exhibit A ("Global Notes"), deposited
with the Trustee, as custodian for the Depository, duly executed by the Company
and authenticated by the Trustee as hereinafter provided and shall bear the
legend set forth on Exhibit B. The aggregate principal amount of any Global
Note may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depository, as hereinafter
provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of certificated Notes in registered
form set forth in Exhibit A (the "Offshore Physical Notes"). Notes offered and
sold in reliance on
<PAGE>
-26-
any other exemption from registration under the Securities Act other than as
described in the preceding paragraph shall be issued, and Notes offered and sold
in reliance on Rule 144A may be issued, in the form of certificated Notes in
registered form in substantially the form set forth in Exhibit A (the "U.S.
Physical Notes"). The Offshore Physical Notes and the U.S. Physical Notes are
sometimes collectively herein referred to as the "Physical Notes."
Section 2.02. Execution and Authentication.
----------------------------
The Notes shall be executed on behalf of the Company by two Officers
of the Company or an Officer and an Assistant Secretary of the Company. Such
signatures may be either manual or facsimile. The Company's seal shall be
impressed, affixed, imprinted or reproduced on the Notes and may be in facsimile
form.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee authenticates the Note or at anytime thereafter, the
Note shall be valid nevertheless.
A Note shall not be valid until the Trustee manually signs the
certificate of authentication on the Note. Such signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee or an authenticating agent shall authenticate Notes for
original issue in the aggregate principal amount of up to $200,000,000 upon a
Company Request. The aggregate principal amount of Notes outstanding at any
time may not exceed such amount except as provided in Section 2.07 hereof. Upon
receipt of the Company Request and an Officers' Certificate certifying that the
registration statement relating to the exchange offer specified in the
Registration Rights Agreement is effective and that the conditions precedent to
a private exchange thereunder have been met, the Trustee shall authenticate an
additional series of Notes in an aggregate principal amount not to exceed
$200,000,000 for issuance in exchange for all Notes previously issued pursuant
to an exchange offer registered under the Securities Act or pursuant to a
Private Exchange (as defined in the Registration Rights Agreement). Exchange
Notes (as defined in the Registration Rights Agreement) or Private Exchange
Notes (as defined in the Registration Rights Agreement) may have such
distinctive series designations and such changes in the form thereof as are
specified in the Company Request referred to in the preceding sentence. The
Notes shall be issuable only in registered form without coupons and only in
denominations of $1,000 and integral multiples thereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless limited by
<PAGE>
-27-
the terms of such appointment, an authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. Such
authenticating agent shall have the same right as the Trustee in dealing with
the Company or an Affiliate.
Section 2.03. Registrar and Paying Agent.
--------------------------
The Company shall appoint a registrar, which shall maintain an office
or agency where Notes may be presented for registration of transfer or for
exchange ("Registrar"), and a paying agent, which shall maintain an office or
agency located in the Borough of Manhattan, City of New York, State of New York
where Notes may be presented for payment ("Paying Agent") and shall maintain an
office or agency where notices and demands to or upon the Company in respect of
the Notes and this Indenture may be served. The Registrar shall keep a register
of the Notes and of their transfer and exchange. The Company may appoint one or
more co-registrars and one or more additional paying agents. Neither the
Company nor any Affiliate may act as Paying Agent. The Company may change any
Paying Agent, Registrar or co-registrar without notice to any Noteholder.
The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture. The agreement shall
implement the provisions of this Indenture that relate to such Agent. The
Company shall notify the Trustee of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, or agent for service
of notices and demands, or fails to give the foregoing notice, the Trustee shall
act as such and shall be entitled to appropriate compensation pursuant to
Section 7.07. The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
-----------------------------------
On or before each due date of the principal of and interest on any
Notes, the Company shall deposit with the Paying Agent a sum sufficient to pay
such principal and interest so becoming due. Each Paying Agent shall hold in
trust for the benefit of the Noteholders or the Trustee all money held by the
Paying Agent for the payment of principal of or interest on the Notes (whether
such money has been paid to it by the Company or any other obligor on the
Notes), and the Company and the Paying Agent shall notify the Trustee of any
default by the Company (or any other obligor on the Notes) in making any such
payment. Money held in trust by the Paying Agent need not be segregated except
as required by law and in no event shall the Paying Agent be liable
<PAGE>
-28-
for any interest on any money received by it hereunder. The Company at any time
may require a Paying Agent to pay all money held by it to the Trustee and the
Trustee, may at any time during the continuance of any Payment Default, upon
written request to a Paying Agent, require such Paying Agent to forthwith pay to
the Trustee all sums so held in trust by such Paying Agent together with a
complete accounting of such sums. Upon doing so, the Paying Agent shall have no
further liability for the money delivered to the Trustee.
Section 2.05. Noteholder Lists.
----------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders. If the Trustee is not the Registrar, the Company shall furnish to
the Trustee on or before each January 1 and July 1 in each year, and at such
other times as the Trustee may request in writing, a list in such form and as of
such date as the Trustee may reasonably require of the names and addresses of
Noteholders, including the aggregate principal amount of Notes held by each such
Noteholder.
Section 2.06. Transfer and Exchange.
---------------------
Subject to Section 2.15, when a Note is presented to the Registrar
with a request to register the transfer thereof, the Registrar shall register
the transfer as requested if the requirements of applicable law are met and,
when Notes are presented to the Registrar with a request to exchange them for an
equal principal amount of Notes of other authorized denominations, the Registrar
shall make the exchange as requested provided that every Note presented or
surrendered for registration of transfer or exchange shall be duly endorsed or
be accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar duly executed by the Holder thereof or his attorney,
duly authorized in writing. To permit registration of transfers and exchanges,
upon surrender of any Note for registration of transfer at the office or agency
maintained pursuant to Section 2.03 hereof, the Company shall issue and execute
and the Trustee shall authenticate Notes at the Registrar's request. Any
exchange or transfer shall be without any service charge to the Noteholder,
except that the Company may require payment by the Holder of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation to a
transfer or exchange, but this provision shall not apply to any exchange
pursuant to Section 2.09, 3.06 or 8.05 hereof. The Trustee shall not be
required to register transfers of Notes or to exchange Notes for a period of 15
days before selection of any Notes to be redeemed. The Trustee shall not be
required to exchange or register transfers of any Notes
<PAGE>
-29-
called or being called for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of the beneficial interests in such Global Note may
be effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Global Note shall be required to be reflected in a book entry.
Each Holder of a Note agrees to indemnify the Company and the Trustee
against any liability that may result from the transfer, exchange or assignment
of such Holder's Note in violation of any provision of this Indenture and/or
applicable U.S. Federal or state securities law.
Except as expressly provided herein, neither the Trustee nor the
Registrar shall have any duty to monitor the Company's compliance with or have
any responsibility with respect to the Company's compliance with any Federal or
state securities laws.
Section 2.07. Replacement Notes.
-----------------
If a mutilated Note is surrendered to the Registrar or Trustee or if
the Holder of a Note presents evidence to the satisfaction of the Company and
the Trustee that the Note has been lost, destroyed or wrongfully taken and of
the ownership thereof, the Company shall issue and the Trustee shall
authenticate a replacement Note if the requirements of Section 8-405 of the New
York Uniform Commercial Code as in effect on the date of this Indenture are met.
An indemnity bond may be required by the Company or the Trustee that is
sufficient in the judgment of the Company and the Trustee to protect the
Company, the Trustee or any Agent from any loss which any of them may suffer if
a Note is replaced. The Company and the Trustee each may charge for its
expenses (including reasonable attorneys' fees and expenses) in replacing a
Note. Every replacement Note is an additional obligation of the Company.
Section 2.08. Outstanding Notes.
-----------------
Notes outstanding at any time are all Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, and those described in this Section 2.08 as not outstanding.
If a Note is replaced pursuant to Section 2.07, it ceases to be
outstanding until the Company and the Trustee receive proof satisfactory to each
of them that the replaced Note is held by a bona fide purchaser.
<PAGE>
-30-
If a Paying Agent holds on a Redemption Date or Maturity Date money
sufficient to pay the principal of, premium, if any, and all accrued interest on
Notes payable on that date and is not prohibited from paying such money to the
Holders thereof pursuant to the terms of this Indenture, then on and after that
date such Notes cease to be outstanding and interest on them ceases to accrue.
Subject to Section 13.06, a Note does not cease to be outstanding
solely because the Company or an Affiliate holds the Note.
Section 2.09. Temporary Notes.
---------------
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form, and shall carry all rights, benefits and privileges,
of definitive Notes but may have variations that the Company considers
appropriate for temporary Notes. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate definitive Notes in exchange for
temporary Notes presented to it.
Section 2.10. Cancellation.
------------
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee
shall cancel and retain or, upon written request of the Company, may destroy
(subject to the record-retention requirements of the Exchange Act) or return to
the Company in accordance with its normal practice, all Notes surrendered for
transfer, exchange, payment or cancellation and if such Notes are destroyed,
deliver a certificate of destruction to the Company unless the Company instructs
the Trustee in writing to deliver the Notes to the Company. Subject to Section
2.07 hereof, the Company may not issue new Notes to replace Notes in respect of
which it has previously paid all principal, premium and interest accrued
thereon, or delivered to the Trustee for cancellation.
Section 2.11. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted amounts, plus (to the extent permitted by law) any
interest payable on defaulted amounts pursuant to Section 4.01 hereof, to the
persons who are Noteholders on a subsequent special record date. The Company
shall fix the special record date and payment date in a manner satisfactory to
the Trustee and provide the Trustee at least 20 days notice of the proposed
amount of default interest to be paid and the special
<PAGE>
-31-
payment date. At least 15 days before the special record date, the Company
shall mail or cause to be mailed to each Noteholder at his address as it appears
on the Notes register maintained by the Registrar a notice that states the
special record date, the payment date (which shall be not less than five nor
more than ten days after the special record date), and the amount to be paid.
In lieu of the foregoing procedures, the Company may pay defaulted interest in
any other lawful manner satisfactory to the Trustee.
Section 2.12. Deposit of Moneys.
-----------------
Prior to 10:00 a.m., New York City time, on each Interest Payment Date
and Maturity Date, the Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date or Maturity Date, as the case may be, in a timely
manner which permits the Trustee to remit payment to the Holders on such
Interest Payment Date or Maturity Date, as the case may be. The principal and
interest on Global Notes shall be payable to the Depository or its nominee, as
the case may be, as the sole registered owner and the sole holder of the Global
Notes represented thereby. The principal and interest on Physical Notes shall
be payable at the office of the Paying Agent.
Section 2.13. CUSIP Number.
------------
The Company in issuing the Notes may use a "CUSIP" number(s), and if
so, the Trustee shall use the CUSIP number(s) in notices of redemption or
exchange as a convenience to Holders, provided that any such notice may state
--------
that no representation is made as to the correctness or accuracy of the CUSIP
number(s) printed in the notice or on the Notes, and that reliance may be placed
only on the other identification numbers printed on the Notes. The Company will
promptly notify in writing the Trustee of any such CUSIP number used by the
Company in connection with the Notes and any change in such CUSIP number.
Section 2.14. Book-Entry Provisions for Global Notes.
--------------------------------------
(a) The Global Notes initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Exhibit B.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global
<PAGE>
-32-
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(b) Transfers of Global Notes shall be limited to transfer in whole,
but not in part, to the Depository, its successors or their respective nominees.
Interests of beneficial owners in the Global Notes may be transferred or
exchanged for Physical Notes in accordance with the rules and procedures of the
Depository and the provisions of Section 2.15. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in Global Notes if (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for any Global Note and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall upon receipt of a written order from the
Company authenticate and make available for delivery, one or more Physical Notes
of like tenor and amount.
(d) In connection with the transfer of Global Notes as an entirety to
beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in writing in exchange for its beneficial interest
in the Global Notes, an equal aggregate principal amount of Physical Notes of
authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in a Global Note pursuant to paragraph (b), (c) or (d)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.15, bear the legend regarding transfer restrictions applicable to the Physical
Notes set forth in Exhibit A.
<PAGE>
-33-
(f) The Holder of any Global Note may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture, the Notes or the Guarantees.
Section 2.15 Special Transfer Provisions.
---------------------------
(a) Transfers to Non-QIB Institutional Accredited Investors and Non-
---------------------------------------------------------------
U.S. Persons. The following provisions shall apply with respect to the
- ------------
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note constituting
a Restricted Security, whether or not such Note bears the Private Placement
Legend, if (x) the requested transfer is after July 23, 1999 or (y) (1) in
the case of a transfer to an Institutional Accredited Investor which is not
a QIB (excluding Non-U.S. Persons), the proposed transferee has delivered
to the Registrar a certificate substantially in the form of Exhibit C
hereto or (2) in the case of a transfer to a Non-U.S. Person (including a
QIB), the proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Note, upon receipt by the Registrar of (x)
the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depository's and the Registrar's
procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in a Global Note to be transferred,
and (b) the Company shall execute and the Trustee shall authenticate and make
available for delivery one or more Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for on
the form of Note stating, or has otherwise advised the Company and the
Registrar in
<PAGE>
-34-
writing, that the sale has been made in compliance with the provisions of
Rule 144A to a transferee who has signed the certification provided for on
the form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that it is purchasing the Note for its own account or
an account with respect to which it exercises sole investment discretion
and that it and any such account is a QIB within the meaning of Rule 144A,
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as
it has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Securities
to be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the Global Note, upon receipt by the Registrar
of instructions given in accordance with the Depository's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Global Note
in an amount equal to the principal amount of the Physical Notes to be
transferred, and the Trustee shall cancel the Physical Notes so
transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Securities bearing the Private Placement
Legend, the Registrar shall deliver only Notes that bear the Private Placement
Legend unless (i) the circumstances contemplated by paragraph (a)(i)(x) of this
Section 2.15 exist, (ii) there is delivered to the Registrar an Opinion of
Counsel reasonably satisfactory to the Company and the Trustee to the effect
that neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act or
(iii) such Note has been sold pursuant to an effective registration statement
under the Securities Act and the Registrar has received an Officers' Certificate
from the Company to such effect.
(d) General. By its acceptance of any Note bearing the Private
-------
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
<PAGE>
-35-
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.14 or this Section 2.15.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable notice to the Registrar.
ARTICLE 3.
REDEMPTION
Section 3.01. Notices to Trustee.
------------------
If the Company elects to redeem Notes pursuant to Section 3.07 hereof,
(i) at least 60 days prior to the Redemption Date in the case of a partial
redemption, (ii) at least 45 days prior to the Redemption Date in the case of a
total redemption or (iii) during such other period as the Trustee may agree to
in writing, the Company shall notify the Trustee in writing of the Redemption
Date, the principal amount of Notes to be redeemed and the redemption price, and
deliver to the Trustee an Officers' Certificate stating that such redemption
will comply with the conditions contained in Section 3.07 hereof, as
appropriate.
Section 3.02. Selection by Trustee of Notes to Be Redeemed.
--------------------------------------------
In the event that fewer than all of the Notes are to be redeemed, the
Trustee shall select the Notes to be redeemed, if the Notes are listed on a
national securities exchange, in accordance with the rules of such exchange or,
if the Notes are not so listed, on either a pro rata basis or by lot, or such
other method as it shall deem fair and appropriate; provided, however, that if
-------- -------
a partial redemption is made with the proceeds of a Public Equity Offering,
selection of the Notes or portion thereof for redemption shall be made by the
Trustee on a pro rata basis, unless such a method is prohibited by law or by the
--- ----
rules of such national securities exchange. The Trustee shall promptly notify
the Company of the Notes selected for redemption and, in the case of any Notes
selected for partial redemption, the principal amount thereof to be redeemed.
The Trustee may select for redemption portions of the principal of the Notes
that have denominations larger than $1,000. Notes and portions thereof the
Trustee selects shall be redeemed in amounts of $1,000 or whole multiples of
$1,000. For all purposes of this Indenture unless the context otherwise
requires, provisions of this Indenture that apply to Notes called for redemption
also apply to portions of Notes called for redemption.
<PAGE>
-36-
Section 3.03. Notice of Redemption.
--------------------
At least 30 days, but no more than 60 days, before a Redemption Date,
the Company shall mail, or cause to be mailed, a notice of redemption by first-
class mail to each Holder of Notes to be redeemed at his or her last address as
the same appears on the registry books maintained by the Registrar pursuant to
Section 2.03 hereof.
The notice shall identify the Notes to be redeemed (including the
CUSIP numbers thereof) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the Redemption Date and upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(6) that unless the Company defaults in making the redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
Redemption Date;
(7) the paragraph of Section 3.07 hereof pursuant to which the Notes
called for redemption are being redeemed; and
(8) the aggregate principal amount of Notes that are being redeemed.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's sole expense.
Section 3.04. Effect of Notice of Redemption.
------------------------------
Once the notice of redemption described in Section 3.03 is mailed,
Notes called for redemption become due and payable on the Redemption Date and at
the redemption price, including any premium, plus interest accrued to the
Redemption Date. Upon surrender to the Paying Agent, such Notes shall be paid
at the redemption price, including any premium, plus interest accrued to the
Redemption Date, provided that if the Redemption Date is after
--------
<PAGE>
-37-
a regular interest payment record date and on or prior to the Interest Payment
Date, the accrued interest shall be payable to the Holder of the redeemed Notes
registered on the relevant record date, and provided, further, that if a
-------- -------
Redemption Date is a Legal Holiday, payment shall be made on the next succeeding
Business Day and no interest shall accrue for the period from such Redemption
Date to such succeeding Business Day.
Section 3.05. Deposit of Redemption Price.
---------------------------
On or prior to 10:00 A.M., New York City time, on each Redemption
Date, the Company shall deposit with the Paying Agent in immediately available
funds money sufficient to pay the redemption price of and accrued interest on
all Notes to be redeemed on that date other than Notes or portions thereof
called for redemption on that date which have been delivered by the Company to
the Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay the
redemption price of and accrued interest on Notes called for redemption shall
have been made available in accordance with the preceding paragraph and payment
thereof is not prohibited pursuant to the terms of this Indenture, the Notes
called for redemption will cease to accrue interest and the only right of the
Holders of such Notes will be to receive payment of the redemption price of and,
subject to the first proviso in Section 3.04, accrued and unpaid interest on
such Notes to the Redemption Date. If any Note called for redemption shall not
be so paid, interest will be paid, from the Redemption Date until such
redemption payment is made, on the unpaid principal of the Note and any interest
not paid on such unpaid principal, in each case, at the rate and in the manner
provided in the Notes.
Section 3.06. Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is redeemed in part, the Trustee shall
authenticate for a Holder a new Note equal in principal amount to the unredeemed
portion of the Note surrendered.
Section 3.07. Optional Redemption.
-------------------
(a) The Company may redeem the Notes, 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:
Year Percentage
---- ----------
<PAGE>
-38-
<TABLE>
<S> <C>
2001 .......................................... 105.563%
2002 .......................................... 103.708%
2003 .......................................... 101.854%
2004 and thereafter ........................... 100.000%
</TABLE>
(b) 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, with the Net Proceeds of one or more Public Equity Offerings;
provided that at least $130,000,000 aggregate principal amount of Notes remains
- --------
outstanding immediately after the occurrence of any such redemption pursuant to
a Public Equity Offering and that any such redemption occurs within 90 days
following the closing of any such Public Equity Offering.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.
----------------
The Company shall pay the principal of and interest (including all
Additional Interest as provided in the Registration Rights Agreement, which
shall be deemed to be included in the term "interest" for purposes of this
Indenture and the Notes) on the Notes on the dates and in the manner provided in
the Notes and this Indenture. An installment of principal or interest shall be
considered paid on the date it is due if the Trustee or Paying Agent holds on
that date money designated for and sufficient to pay such installment.
The Company shall pay interest on overdue principal (including post-
petition interest in a proceeding under any Bankruptcy Law) and overdue
interest, to the extent lawful, at the rate specified in the Notes.
Section 4.02. SEC Reports.
-----------
(a) The Company will file with the SEC all information, documents and
reports to be filed with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act, whether or not the Company is subject to such filing requirements, so long
as the SEC will accept such filings; provided, however, that the Company shall
-------- -------
not be required to make any such filings prior to the date on which the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996
would have been required to be filed if, at the
<PAGE>
-39-
time such filings would have been required to be made with the SEC, the Exchange
Offer Registration Statement (as such term is defined in the Offering
Memorandum) has been filed with the SEC but has not yet been declared effective
and copies of the Exchange Offer Registration Statement and any amendments
thereto (to the extent such Registration Statement and/or amendments contain
additional information not disclosed in the Offering Memorandum that would have
been the subject of a filing required to be made under Section 13 or 15(d) of
the Exchange Act) have been provided to each Holder of the Notes, provided that
--------
any exhibits to the Exchange Offer Registration Statement (or any amendments
thereto) need not be delivered to any Holder of the Notes, but sufficient copies
thereof shall be furnished to the Trustee as reasonably requested to permit the
Trustee to deliver any such exhibits to any Holder of the Notes upon request.
The Company (at its own expense) will file with the Trustee within 15 days after
it files them with the SEC, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which the Company files with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act. Upon qualification
of this Indenture under the TIA, the Company shall also comply with the
provisions of TIA (S) 314(a). Delivery of such reports, information and
documents to the Trustee is for informational purposes only and the Trustee's
receipt of such shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
the Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
(b) At the Company's expense, regardless of whether the Company is
required to furnish such reports and other information referred to in paragraph
(a) above to its stockholders pursuant to the Exchange Act, the Company shall
cause such reports and other information to be mailed to the Holders at their
addresses appearing in the register of Notes maintained by the Registrar within
15 days after it files them with the SEC.
(c) The Company will, upon request, provide to any Holder of Notes or
any prospective transferee of any such Holder any information concerning the
Company (including financial statements) necessary in order to permit such
Holder to sell or transfer Notes in compliance with Rule 144A under the
Securities Act; provided, however, that the Company shall not be required to
-------- -------
furnish such information in connection with any request made on or after the
date which is three years from the later of (i) the date such Note (or any
predecessor Note) was acquired from the Company or (ii) the date such Note (or
any predecessor Note) was last acquired from an "affiliate" of the Company
within the meaning of Rule 144 under the Securities Act.
<PAGE>
-40-
Section 4.03. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead (as a defense or otherwise) or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit or forgive the
Company from paying all or any portion of the principal of, premium, if any,
and/or interest on the Notes as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company hereby expressly waives all benefit or advantage of any such law,
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
Section 4.04. Compliance Certificate.
----------------------
(a) The Company shall deliver to the Trustee, within 100 days after
the end of each fiscal year and on or before 50 days after the end of the first,
second and third quarters of each fiscal year, an Officers' Certificate (one of
the signers of which shall be the principal executive officer, principal
financial officer or principal accounting officer of the Company) stating that
a review of the activities of the Company and its Subsidiaries during such
fiscal year or fiscal quarter, as the case may be, has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions hereof (or, if a Default or Event of Default
shall have occurred, describing all or such Defaults or Events of Default of
which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes are
prohibited or, if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as (and to the extent) not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.02 above shall be
accompanied by a written
<PAGE>
-41-
statement of the Company's independent public accountants (who shall be a firm
of established national reputation) that in making the examination necessary for
certification of such financial statements nothing has come to their attention
which would lead them to believe that the Company has violated any provisions of
this Article 4 or Article 5 of this Indenture or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly for
any failure to obtain knowledge of any such violation.
(c) The Company will, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
Section 4.05. Taxes.
-----
The Company shall, and shall cause each of its Subsidiaries to, pay
prior to delinquency all material taxes, assessments, and governmental levies
except as contested in good faith and by appropriate proceedings.
Section 4.06. Limitation on Additional Indebtedness.
-------------------------------------
The Company will not, and will not permit any Restricted Subsidiary of
the Company to, directly or indirectly, incur any Indebtedness (including
Acquired Indebtedness) unless (a) after giving effect to the incurrence of such
Indebtedness and the receipt and application of the proceeds thereof, the ratio
of total Indebtedness of the Company and its Restricted Subsidiaries to the
Company's Adjusted EBITDA is less than 6.0 to 1 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 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.
<PAGE>
-42-
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may incur Permitted Indebtedness; provided, that the Company will
--------
not incur any Permitted Indebtedness, without meeting the Indebtedness
incurrence provisions of the preceding paragraph, that ranks pari passu or
junior in right of payment to the Notes and that has a maturity or mandatory
sinking fund payment prior to the maturity of the Notes.
Notwithstanding the two preceding paragraphs, the Company will not
permit any of its foreign Subsidiaries to incur any subordinated Indebtedness.
Section 4.07. 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 Section 4.06 hereof 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 Section 4.14 shall be permitted to issue
Preferred Stock that is not Disqualified Capital Stock.
Section 4.08. 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 Section 4.10 hereof or the issuance of Preferred Stock in
compliance with Section 4.07 hereof.
Section 4.09. 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;
<PAGE>
-43-
(b) immediately after giving pro forma effect to such Restricted
--- -----
Payment, the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under Section 4.06 hereof; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared (except to the extent not
made on the payment date) or made after the Issue Date does not exceed the
sum of (1) 50% of the cumulative Consolidated Net Income of the Company
subsequent to the Issue Date (or minus 100% of any cumulative deficit in
Consolidated Net Income during such 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 Section 4.09
shall not prohibit (i) the payment of any distribution within 60 days after the
date of declaration thereof, if at such date of declaration such payment would
comply with the provisions of this Indenture, (ii) the retirement of any shares
of Capital Stock of the Company or subordinated Indebtedness by conversion into,
or by or in exchange for, shares of Capital Stock (other than Disqualified
Capital Stock), or out of, the Net Proceeds of the substantially concurrent sale
(other than to a Subsidiary of the Company) of other shares of Capital Stock of
the Company (other than Disqualified Capital Stock), (iii) the redemption or
retirement of Indebtedness of the Company subordinated to the Notes in exchange
for, by conversion into, or out of the Net Proceeds of, a substantially
concurrent sale or incurrence of Indebtedness (other than any Indebtedness owed
to a Subsidiary) of the Company that is contractually subordinated in right of
payment to the Notes to at least the same extent as the subordinated
Indebtedness being redeemed or retired, (iv) the retirement of any shares of
Disqualified Capital Stock by conversion into, or by exchange for, shares of
Disqualified Capital Stock, or out of the Net Proceeds of the substantially
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,
<PAGE>
-44-
(vii) the Stock Redemption, (viii) distributions or other payments 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 Company's 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 Section 4.09 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.
Section 4.10. Limitation on Certain Asset Sales.
---------------------------------
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or its
Restricted Subsidiaries, as the case may be, receives consideration at the time
of such sale or other disposition at least equal to the fair market value
thereof (as determined for Asset Sales other than eminent domain, condemnation
or similar government proceedings in good faith by the Company's board of
directors, and evidenced by a board resolution); (ii) not less than 85% of the
consideration received by the Company or its Subsidiaries, as the case may be,
is in the form of cash or Temporary Cash Investments; and (iii) the Asset Sale
Proceeds received by the Company or such Restricted Subsidiary are applied (a)
first, to the extent the Company elects, or is required, to prepay, repay or
purchase debt under any then existing Senior Indebtedness of the Company or any
Restricted Subsidiary within 180 days following the receipt of the Asset Sale
Proceeds from any Asset Sale; (b) second, to the extent of the balance of Asset
Sale Proceeds after application as described above, to the extent the
<PAGE>
-45-
Company elects, to an investment in assets (including Capital Stock or other
securities purchased in connection with the acquisition of Capital Stock or
property of another Person) used or useful in businesses similar or ancillary to
the business of the Company or Restricted Subsidiary as conducted at the time of
such Asset Sale, provided that such investment occurs or the Company or a
Restricted Subsidiary enters into contractual commitments to make such
investment, subject only to customary conditions (other than the obtaining of
financing), on or prior to the 181st day following receipt of such Asset Sale
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").
(b) 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 (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. The Excess Proceeds Offer shall remain open for a period of 20 Business
Days following its commencement (the "Offer Period"). The notice, which shall
govern the terms of the Excess Proceeds Offer, shall state:
(1) that the Excess Proceeds Offer is being made pursuant to this
Section 4.10 and the length of time the Excess Proceeds Offer will remain
open;
(2) the purchase price and the Purchase Date;
(3) that any Note not tendered or accepted for payment will continue
to accrue interest;
(4) that any Note accepted for payment pursuant to the Excess Proceeds
Offer shall cease to accrue interest on and
<PAGE>
-46-
after the Purchase Date so long as payment thereof is not prohibited
pursuant to the terms of the Indenture;
(5) that Holders electing to have a Note purchased pursuant to any
Excess Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Company, a depositary, if appointed by the Company, or a
Paying Agent at the address specified in the notice at least three Business
Days before the Purchase Date;
(6) that Holders will be entitled to withdraw their election if the
Company, depositary or Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Note the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have the Note purchased;
(7) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Available Asset Sale Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis (with such adjustments as may
be deemed appropriate by the Company so that only Notes in denominations of
$1,000, or integral multiples thereof, shall be purchased) or by such other
method as the Trustee shall deem fair and appropriate; and
(8) that Holders whose Notes were purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered.
On or before the Purchase Date, the Trustee shall, to the extent
lawful, accept for payment, on a pro rata basis or by such other method as the
Trustee shall deem fair and appropriate to the extent necessary, Notes or
portions thereof tendered pursuant to the Excess Proceeds Offer, deposit with
the Paying Agent U.S. legal tender sufficient to pay the purchase price plus
accrued interest, if any, on the Notes to be purchased and deliver to the
Trustee an Officers' Certificate stating that such Notes or portions thereof
were accepted for payment by the Company in accordance with the terms of this
Section 4.10. The Paying Agent shall promptly (but in any case not later than 5
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Note tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee shall authenticate and mail or make available for delivery such new
Note to such Holder equal in principal amount to any unpurchased portion of the
Note surrendered. Any Note not so accepted shall be promptly mailed or
delivered by the Company to
<PAGE>
-47-
the Holder thereof. The Company will publicly announce the results of the
Excess Proceeds Offer on the Purchase Date. If an Excess Proceeds Offer is not
fully subscribed, the Company may retain that portion of the Available Asset
Sale Proceeds not required to repurchase Notes for general corporate purposes.
Section 4.11. Limitation on Transactions with Affiliates.
------------------------------------------
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any transaction or series of
related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with any Affiliate (including
entities in which the Company or any of its Restricted Subsidiaries own a
minority interest) or holder of 10% or more of the Company's Common Stock (an
"Affiliate Transaction") or extend, renew, waive or otherwise modify the terms
of any Affiliate Transaction entered into prior to the Issue 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).
(b) The limitations set forth in Section 4.11(a) will not apply to (i)
any Restricted Payment that is not prohibited by Section 4.09 hereof, (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
<PAGE>
-48-
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.
Section 4.12. Limitations on Liens.
--------------------
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens) upon any property
or asset of the Company or any Restricted Subsidiary or any shares of stock or
debt of any Restricted Subsidiary which owns property or assets, now owned or
hereafter acquired, in any case which secures Indebtedness pari passu with or
---- -----
subordinated to the Notes unless (i) if such Lien secures Indebtedness which is
pari passu with the Notes, then the Notes are secured on an equal and ratable
- ---- -----
basis with the obligations so secured until such time as such obligation is no
longer secured by a Lien or (ii) if such Lien secures Indebtedness which is
subordinated to the Notes, any such Lien shall be subordinated to the Lien
granted to the Holders of the Notes in the same collateral to the same extent as
such subordinated Indebtedness is subordinated to the Notes.
Section 4.13. Limitations on Investments.
--------------------------
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any Investment other than (i) a Permitted Investment or
(ii) an Investment that is made as a Restricted Payment in compliance with
Section 4.09 hereof, after the Issue Date.
Section 4.14. Limitation on Creation of Subsidiaries.
--------------------------------------
The Company shall not create or acquire, nor permit any of its
Restricted Subsidiaries to create or acquire, any Subsidiary other than (i) a
Restricted Subsidiary existing as of the date of this Indenture, (ii) a
Restricted Subsidiary that is acquired or created after the date of this
Indenture, or (iii) an Unrestricted Subsidiary; provided, however, that each
-------- -------
Restricted Subsidiary organized under the laws of the United States or any State
thereof or the District of Columbia acquired or created pursuant to clause (ii)
shall, at the time it has either assets or shareholder's equity in excess of
$5,000, execute a guarantee, in the form attached as Exhibit E to this 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 this Indenture and an Opinion of
Counsel as to the enforceability of such Guarantee).
<PAGE>
-49-
Section 4.15. Limitation on Other Senior Subordinated Debt.
--------------------------------------------
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, incur, contingently or otherwise, any
Indebtedness (other than the Notes and the Guarantees, as the case may be) that
is both (i) subordinate in right of payment to any Senior Indebtedness of the
Company or its Restricted Subsidiaries, as the case may be, and (ii) senior in
right of payment to the Notes and the Guarantees, as the case may be. For
purposes of this Section 4.15, Indebtedness is deemed to be senior in right of
payment to the Notes and the Guarantees, as the case may be, if it is not
explicitly subordinate in right of payment to Senior Indebtedness at least to
the same extent as the Notes and the Guarantees, as the case may be, are
subordinate to Senior Indebtedness.
Section 4.16. Limitation on Sale and Lease-Back Transactions.
----------------------------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold, as determined by a Board Resolution, and (ii)
the Company could incur the Attributable Indebtedness in respect of such Sale
and Lease-Back Transaction in compliance with Section 4.06.
Section 4.17. Payments for Consent.
--------------------
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or agreed
to be paid to all Holders of the Notes which so consent, waive or agree to amend
in the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
Section 4.18. Corporate Existence.
-------------------
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence, and the corporate, partnership or other existence of each Restricted
Subsidiary, in accordance with the respective organizational documents (as the
same may be amended from time to time) of each Restricted Subsidiary and the
rights (charter and statutory), licenses and franchises of the Company and its
Restricted Subsidiaries; provided, however, that the Company shall not be
-------- -------
required to
<PAGE>
-50-
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of its Restricted Subsidiaries, if the Board of Directors
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Restricted Subsidiaries, taken as
a whole, and that the loss thereof is not adverse in any material respect to the
Holders.
Section 4.19. Change of Control.
-----------------
(a) Within 30 days of the occurrence of a Change of Control, the
Company shall notify the Trustee in writing of such occurrence and shall make an
offer to purchase (the "Change of Control Offer") the outstanding Notes at a
purchase price equal to 101% of the principal amount thereof plus any accrued
and unpaid interest thereon to the Change of Control Payment Date (as
hereinafter defined) (such applicable purchase price being hereinafter referred
to as the "Change of Control Purchase Price") in accordance with the procedures
set forth in this Section 4.19.
If the Credit Facility is in effect, or any amounts are owing
thereunder or in respect thereof, at the time of the occurrence of a Change of
Control, prior to the mailing of the notice to Holders described in paragraph
(b) below, but in any event within 30 days following any Change of Control, the
Company covenants to (i) repay in full all obligations under or in respect of
the Credit Facility or offer to repay in full all obligations under or in
respect of the Credit Facility and repay the obligations under or in respect of
the Credit Facility of each lender who has accepted such offer or (ii) obtain
the requisite consent under Credit Facility to permit the repurchase of the
Notes pursuant to this Section 4.19. The Company must first comply with the
covenant described in the preceding sentence before it shall be required to
purchase Notes in the event of a Change of Control; provided that the Company's
--------
failure to comply with the covenant described in the preceding sentence
constitutes an Event of Default described in clause (3) under Section 6.01
hereof if not cured within 60 days after the notice required by such clause.
(b) Within 30 days of the occurrence of a Change of Control, the
Company also shall (i) cause a notice of the Change of Control Offer to be sent
at least once to the Dow Jones News Service or similar business news service in
the United States and (ii) send by first-class mail, postage prepaid, to the
Trustee and to each Holder of the Notes, at the address appearing in the
register maintained by the Registrar of the Notes, a notice stating:
(i) that the Change of Control Offer is being made pursuant to this
Section 4.19 and that all Notes tendered will
<PAGE>
-51-
be accepted for payment, and otherwise subject to the terms and conditions
set forth herein;
(ii) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 20 Business Days and no later than
60 Business Days from the date such notice is mailed (the "Change of
Control Payment Date"));
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(v) that Holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Note completed, to the Paying Agent at the address specified
in the notice prior to the close of business on the Business Day preceding
the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a 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;
(vii) that Holders whose Notes are being purchased only in part will
be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, provided that each Note purchased and each such new
--------
Note issued shall be in an original principal amount in denominations of
$1,000 and integral multiples thereof;
(viii) any other procedures that a Holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance; and
(ix) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment Notes or portions thereof or beneficial
interests under a Global Note properly
<PAGE>
-52-
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 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.
(c) (i) If the Company or any Subsidiary thereof has issued any
outstanding (A) Indebtedness that is subordinated in right of payment to the
Notes or (B) Preferred Stock, and the Company or such Subsidiary is required to
make a Change of Control Offer or to make a distribution with respect to such
subordinated Indebtedness or Preferred Stock in the event of a Change of
Control, the Company shall not consummate any such offer or distribution with
respect to such subordinated Indebtedness or Preferred Stock until such time as
the Company shall have paid the Change of Control Purchase Price in full to the
holders of Notes that have accepted the Company's Change of Control Offer and
shall otherwise have consummated the Change of Control Offer made to holders of
the Notes and (ii) the Company will not issue Indebtedness that is subordinated
in right of payment to the Notes or Preferred Stock with change of control
provisions requiring the payment of such Indebtedness or Preferred Stock prior
to the payment of the Notes in the event of a Change of Control under this
Indenture.
In the event that a Change of Control occurs and the Holders of Notes
exercise their right to require the Company to purchase Notes, if such purchase
constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act
at that time, the Company will comply with the requirements of Rule 14e-1 as
then in effect with respect to such repurchase.
<PAGE>
-53-
Section 4.20. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain an office or agency where Notes may be
surrendered for registration of transfer or exchange or for presentation for
payment and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee as set forth in Section 13.02.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations. The
Company shall give prompt written notice to the Trustee of such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby initially designates the Corporate Trust Office of
the Trustee set forth in Section 13.02 as such office of the Company.
Section 4.21. Maintenance of Properties and Insurance.
---------------------------------------
(a) The Company shall cause all material properties used or useful to
the conduct of its business or the business of any of its Subsidiaries to be
maintained and kept in good condition, repair and working order (reasonable wear
and tear excepted) and supplied with all equipment deemed necessary in the good
faith judgment of the Officers of the Company and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in its judgment may be necessary, so that the business carried on in
connection therewith may be properly and advantageously conducted at all times
unless the failure to so maintain such properties (together with all other such
failures) would not have a material adverse effect on the financial condition or
results of operations of the Company and its Subsidiaries, taken as a whole;
provided, however, that nothing in this Section 4.21 shall prevent the Company
- -------- -------
or any Subsidiary from discontinuing the operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal is
in the good faith judgment of the Board of Directors of the Company or the
Subsidiary concerned, as the case may be, desirable in the conduct of the
business of the Company or such Subsidiary, as the case may be, and is not
adverse in any material respect to the Holders.
<PAGE>
-54-
(b) The Company shall provide or cause to be provided, for itself and
each of its Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the reasonable, good faith opinion
of the Company are adequate and appropriate for the conduct of the business of
the Company and such Subsidiaries in a prudent manner, with reputable insurers
or with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be customary, in the good faith judgment of the Company, for
corporations similarly situated in the industry, unless the failure to provide
such insurance (together with all other such failures) would not have a material
adverse effect on the financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole.
ARTICLE 5.
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and Sale of Assets.
-------------------------------------------------------
(a) The Company will not and will not permit any Guarantor to
consolidate with, merge with or into, or transfer all or substantially all of
its assets (as an entirety or substantially as an entirety in one transaction or
a series of related transactions), to any Person unless: (i) the Company or the
Guarantor, as the case may be, shall be the continuing Person, or the Person (if
other than the Company or the Guarantor) formed by such consolidation or into
which the Company or the Guarantor, as the case may be, is merged or to which
the properties and assets of the Company or the Guarantor, as the case may be,
are transferred shall be a corporation organized and existing under the laws of
the United States or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all of the obligations of the
Company or the Guarantor, as the case may be, under the Notes and this
Indenture, and the obligations under this Indenture shall remain in full force
and effect; (ii) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; and (iii) immediately after giving effect to such transaction on a
pro forma basis the Company or such Person could incur at least $1.00 additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.06
hereof, provided, however, that a Guarantor may merge into the Company or
-------- -------
another Guarantor without complying with this clause (iii).
<PAGE>
-55-
(b) In connection with any consolidation, merger or transfer of assets
contemplated by this Section 5.01, 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 Section 5.01 and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
Section 5.02. Successor Person Substituted.
----------------------------
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company or any Guarantor in accordance
with Section 5.01 above, the successor corporation formed by such consolidation
or into which the Company is merged or to which such transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company or such Guarantor under this Indenture with the same effect as if
such successor corporation had been named as the Company or such Guarantor
herein, and thereafter the predecessor corporation shall be relieved of all
obligations and covenants under this Indenture and the Notes.
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
-----------------
An "Event of Default" occurs if
(1) there is a default in the payment of any principal of, or
premium, if any, on the Notes when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise, whether or not such
payment is prohibited by the provisions of Article 11 hereof;
(2) there is a default in the payment of any interest on any Note
when the same becomes due and payable and the Default continues for a
period of 30 days, whether or not such payment is prohibited by the
provisions of Article 11 hereof;
(3) the Company or any Guarantor defaults in the observance or
performance of any other covenant in the Notes or this Indenture for 60
days after written notice from the Trustee to the Company or written notice
from the Holders of
<PAGE>
-56-
not less than 25% in aggregate principal amount of the Notes then
outstanding to the Company and the Trustee;
(4) there is a default in the payment at final maturity of principal
in an aggregate amount of $3,000,000 or more with respect to any
Indebtedness of the Company or any Restricted Subsidiary thereof which
default shall not be cured, waived or postponed pursuant to an agreement
with the holders of such Indebtedness within 60 days after written notice,
or the acceleration of any such Indebtedness aggregating $3,000,000 or more
which acceleration shall not be rescinded or annulled within 20 days after
written notice to the Company of such Default by the Trustee or to the
Company and the Trustee by any Holder;
(5) a court of competent jurisdiction enters a final judgment or
judgments which can no longer be appealed for the payment of money in
excess of $3,000,000 (which are not paid or covered by third party
insurance by financially sound insurers that have not disclaimed coverage)
against the Company or any Restricted Subsidiary thereof and such judgment
remains undischarged, for a period of 60 consecutive days during which a
stay of enforcement of such judgment shall not be in effect;
(6) the Company or any Restricted Subsidiary pursuant to or within
the meaning of any Bankruptcy Law;
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in
an involuntary case,
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(D) makes a general assignment for the benefit of its creditors,
or
(E) generally is not paying its debts as they become due; or
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted
Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or any Restricted
Subsidiary or for all or substantially all of
<PAGE>
-57-
the property of the Company or any Restricted Subsidiary, or
(C) orders the liquidation of the Company or any Restricted
Subsidiary,
and, in each case, the order or decree remains unstayed and in effect
for 60 consecutive days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
Subject to the provisions of Sections 7.01 and 7.02, the Trustee shall
not be charged with knowledge of any Default or Event of Default unless written
notice thereof shall have been given to a Trust Officer at the Corporate Trust
Office by the Company or any other Person.
Section 6.02. Acceleration.
------------
If an Event of Default (other than an Event of Default arising under
Section 6.01(6) or (7) with respect to the Company) occurs and is continuing,
the Trustee by notice to the Company, or the Holders of not less than 25% in
aggregate principal amount of the Notes then outstanding by written notice to
the Company and the Trustee, may declare to be immediately due and payable the
entire principal amount of all the Notes then outstanding plus premium, if any,
and accrued but unpaid interest to the date of acceleration and (i) such amounts
shall become immediately due and payable or (ii) if there are any amounts
outstanding under or in respect of the Credit Facility, such amounts shall
become due and payable upon the first to occur of an acceleration of amounts
outstanding under or in respect of the Credit Facility or five Business Days
after receipt by the Company and the Representative of notice of the
acceleration of the Notes; provided, however, that after such acceleration but
-------- -------
before a judgement or decree based on such acceleration is obtained by the
Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Notes may rescind and annul such acceleration and its consequences
if all existing Events of Default, other than the nonpayment of accelerated
principal, premium, if any, or interest that has become due solely because of
the acceleration, have been cured or waived and if the rescission would not
conflict with any judgment or decree. No such rescission shall affect any
subsequent Default or impair any right consequent thereto. In case an Event of
Default specified in Section 6.01(6) or (7) with respect to the Company occurs,
the principal, premium, if any, and interest amount with respect to all of the
Notes shall be due and payable immediately without any
<PAGE>
-58-
declaration or other act on the part of the Trustee or the Holders of the Notes.
Section 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or premium, if any, and interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture and may
take any necessary action requested of it as Trustee to settle, compromise,
adjust or otherwise conclude any proceedings to which it is a party.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
Section 6.04. Waiver of Past Defaults and Events of Default.
---------------------------------------------
Subject to Sections 6.02, 6.07 and 8.02 hereof, the Holders of a
majority in principal amount of the Notes then outstanding have the right to
waive any existing Default or Event of Default or compliance with any provision
of this Indenture or the Notes. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereto.
Section 6.05. Control by Majority.
-------------------
The Holders of a majority in principal amount of the Notes then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee by this Indenture. The Trustee, however, may refuse to
follow any direction that conflicts with law or this Indenture or that the
Trustee determines may be unduly prejudicial to the rights of another Noteholder
not taking part in such direction, and the Trustee shall have the right to
decline to follow any such direction if the Trustee, being advised by counsel,
determines that the action so directed may not lawfully be taken or if the
Trustee in good faith shall, by a Trust Officer, determine that the proceedings
so directed may involve it in personal liability;
<PAGE>
-59-
provided that the Trustee may take any other action deemed proper by the Trustee
- --------
which is not inconsistent with such direction.
Section 6.06. Limitation on Suits.
-------------------
Subject to Section 6.07 below, a Noteholder may not institute any
proceeding or pursue any remedy with respect to this Indenture or the Notes
unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer, and if requested, provide to the
Trustee indemnity reasonably satisfactory to the Trustee against any loss,
liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60 day period by the Holders of a majority
in aggregate principal amount of the Notes then outstanding.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.07. Rights of Holders to Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal of, or premium, if any, and
interest of the Note on or after the respective due dates expressed in the Note,
or to bring suit for the enforcement of any such payment on or after such
respective dates, is absolute and unconditional and shall not be impaired or
affected without the consent of the Holder.
Section 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of principal, premium or interest
specified in Section 6.01(1) or (2) hereof occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust against
the Company or the Guarantors (or any other obligor on the Notes) for the whole
amount
<PAGE>
-60-
of unpaid principal and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest, in each case at the
rate then borne by the Notes, and such further amounts as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, including all sums due and owing to the Trustee pursuant to Section
7.07.
Section 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relative to the Company or the
Guarantors (or any other obligor upon the Notes), its creditors or its property
and shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same
after deduction of its reasonable charges and expenses to the extent that any
such charges and expenses are not paid out of the estate in any such proceedings
and any custodian in any such judicial proceeding is hereby authorized by each
Noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
or reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such proceedings.
Section 6.10. Priorities.
----------
If the Trustee collects any money pursuant to this Article 6, it shall
pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07 hereof;
SECOND: to Noteholders for amounts due and unpaid on the Notes for
principal, premium, if any, and interest as to each,
<PAGE>
-61-
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes; and
THIRD: to the Company or, to the extent the Trustee collects any amount
from any Guarantor, to such Guarantor.
The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section 6.10. The Trustee shall give the Company
prior notice of any such record date and payment date; provided, however, that
-------- -------
the failure to give any such notice shall not affect the establishment of such
record date or payment date or any payment to Noteholders pursuant to this
Section 6.10.
Section 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 hereof or a suit by Holders of more than 10% in
principal amount of the Notes then outstanding.
Section 6.12. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
<PAGE>
-62-
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the same circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture but, in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts stated
therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02 and 6.05 hereof.
<PAGE>
-63-
(4) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
satisfactory to it against such risk or liability is not reasonably assured
to it.
(d) Whether or not therein expressly so provided, paragraphs (a),
(b), (c), (e) and (f) of this Section 7.01 shall govern every provision of this
Indenture that in any way relates to the Trustee.
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity reasonably satisfactory to it against any
loss, liability, expense or fee.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company or
any Guarantor. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by the law.
Section 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01 hereof:
(1) The Trustee may rely on and shall be protected in acting or
refraining from acting upon any document reasonably believed by it to be
genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, or both, which shall
conform to the provisions of Section 13.05 hereof. The Trustee shall be
protected and shall not be liable for any action it takes or omits to take
in good faith in reliance on such certificate or opinion.
(3) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent (other than the negligence or
willful misconduct of an agent who is an employee of the Trustee) appointed
by it with due care.
(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers;
<PAGE>
-64-
provided that the Trustee's conduct does not constitute negligence or bad
--------
faith.
(5) The Trustee may consult with counsel of its selection, and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any
action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
Section 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may make loans to, accept deposits from, perform
services for or otherwise deal with the Company or any Guarantor, or any
Affiliates thereof, with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights. The Trustee, however, shall be
subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, it shall not be accountable for the Company's use
of the proceeds from the sale of Notes or any money paid to the Company pursuant
to the terms of this Indenture and it shall not be responsible for any statement
in the Notes or any document used in connection with the sale of the Notes other
than its certificate of authentication.
Section 7.05. Notice of Defaults.
------------------
If a Default occurs and is continuing and if it is known to the
Trustee, the Trustee shall mail to each Noteholder notice of the Default within
90 days after it occurs. Except in the case of a Default in payment of the
principal of, or premium, if any, or interest on any Note, the Trustee may
withhold the notice if and so long as the board of directors of the Trustee, the
executive committee or any trust committee of such board and/or its Trust
Officers in good faith determine(s) that withholding the notice is in the
interests of the Noteholders.
Section 7.06. Reports by Trustee to Holders.
-----------------------------
If required by TIA (S) 313(a), within 60 days after May 15 of any
year, commencing the May 15 following the date of this Indenture, the Trustee
shall mail to each Noteholder a brief report dated as of such May 15 that
complies with TIA (S) 313(a); provided that no such report need be transmitted
--------
if no such events listed in TIA (S) 313(a) have occurred within such period.
The Trustee also
<PAGE>
-65-
shall comply with TIA (S) 313(b)(2). The Trustee shall also transmit by mail
all reports as required by TIA (S) 313(c) and TIA (S) 313(d).
A copy of each report at the time of its mailing to Noteholders shall
be filed with the SEC and each stock exchange on which the Notes are listed.
The Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
Section 7.07. Compensation and Indemnity.
--------------------------
The Company and the Guarantors shall pay to the Trustee from time to
time such reasonable compensation as shall be agreed in writing between the
Company and the Trustee for its services hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust). The Company and the Guarantors shall reimburse the Trustee
upon request for all reasonable disbursements, expenses and advances incurred or
made by it in connection with its duties under this Indenture, including the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Company and the Guarantors shall indemnify each of the Trustee and
any predecessor Trustee for, and hold it harmless against, any and all loss,
damage, claim, liability, reasonable expense (including but not limited to
reasonable attorneys' fees and expenses) or taxes (other than taxes based on the
income of the Trustee) incurred by it in connection with the acceptance or
performance of its duties under this Indenture including the reasonable costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder
(including, without limitation, settlement costs). The Trustee shall notify the
Company and the Guarantors in writing promptly of any claim asserted against the
Trustee for which it may seek indemnity. However, the failure by the Trustee to
so notify the Company and the Guarantors shall not relieve the Company or the
Guarantors of their obligations hereunder.
Notwithstanding the foregoing, the Company and the Guarantors need not
reimburse the Trustee for any expense or indemnify it against any loss or
liability incurred by the Trustee through its negligence or bad faith. To
secure the payment obligations of the Company and the Guarantors in this Section
7.07, the Trustee shall have a lien prior to the Notes on all money or property
held or collected by the Trustee in its capacity as such, except such money or
property held in trust to pay principal of and interest on particular Notes.
The obligations of the Company and the Guarantors under this Section 7.07 to
compensate and indemnify the Trustee and each predecessor Trustee and to pay or
reimburse the Trustee and each predecessor Trustee for expenses,
<PAGE>
-66-
disbursements and advances shall be joint and several liabilities of the Company
and each of the Guarantors and shall survive the satisfaction and discharge of
this Indenture, including the termination or rejection hereof in any bankruptcy
proceeding to the extent permitted by law.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) hereof occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
For purposes of this Section 7.07, the term "Trustee" shall include
any trustee appointed pursuant to Article 9.
Section 7.08. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Company and the Guarantors
in writing, such resignation to become effective upon the appointment of a
successor Trustee. The Holders of a majority in principal amount of the
outstanding Notes may remove the Trustee by notifying the removed Trustee in
writing and may appoint a successor Trustee with the Company's written consent
which consent shall not be unreasonably withheld. The Company may remove the
Trustee at its election if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in principal amount of the outstanding Notes may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
<PAGE>
-67-
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07 hereof, transfer all property held by it as Trustee to the successor
Trustee, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Noteholder. Notwithstanding replacement of
the Trustee pursuant to this Section 7.08, the Company's obligations under
Section 7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Consolidation, Merger or Conversion.
---------------------------------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation or national banking association, subject to Section 7.10 hereof, the
successor corporation or national banking association without any further act
shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1) and (2) in every respect. The Trustee shall
have a combined capital and surplus of at least $100,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA (S) 310(b), including the provision in (S) 310(b)(1); provided that there
--------
shall be excluded from the operation of TIA (S) 310(b)(1) any indenture or
indentures under which other securities, or conflicts of interest or
participation in other securities, of the Company or the Guarantors are
outstanding if the requirements for exclusion set forth in TIA (S) 310(b)(1) are
met.
Section 7.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
Section 7.12. Paying Agents.
-------------
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to it and the Trustee an instrument
<PAGE>
-68-
in which such agent shall agree with the Trustee, subject to the provisions of
this Section 7.12:
(A) that it will hold all sums held by it as agent for the payment of
principal of, or premium, if any, or interest on, the Notes (whether such
sums have been paid to it by the Company or by any obligor on the Notes) in
trust for the benefit of Holders of the Notes or the Trustee;
(B) that it will at any time during the continuance of any Event of
Default, upon written request from the Trustee, deliver to the Trustee all
sums so held in trust by it together with a full accounting thereof; and
(C) that it will give the Trustee written notice within three (3)
Business Days of any failure of the Company (or by any obligor on the
Notes) in the payment of any installment of the principal of, premium, if
any, or interest on, the Notes when the same shall be due and payable.
ARTICLE 8.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.
--------------------------
The Company and the Guarantors, if any, when authorized by a Board
Resolution of each of them, and the Trustee may modify, waive, amend or
supplement this Indenture, the Pledge Agreement or the Notes without notice to
or consent of any Noteholder:
(1) to comply with Section 5.01 hereof;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to comply with any requirements of the SEC under the TIA;
(4) to cure any ambiguity, defect or inconsistency, or to make any
other change that does not materially and adversely affect the rights of
any Noteholder;
(5) to make any other change that does not adversely affect in any
material respect the rights of any Noteholders hereunder; or
<PAGE>
-69-
(6) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes.
The Trustee is hereby authorized to join with the Company and the
Guarantors, if any, in the execution of any supplemental indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained, but the Trustee
shall not be obligated to enter into any such supplemental indenture which
adversely affects its own rights, duties or immunities under this Indenture.
Section 8.02. With Consent of Holders.
-----------------------
The Company, the Guarantors, if any, and the Trustee may modify,
amend, waive or supplement this Indenture, the Pledge Agreement or the Notes
with the written consent of the Holders of not less than a majority in aggregate
principal amount of the outstanding Notes without notice to any Noteholder. The
Holders of not less than a majority in aggregate principal amount of the
outstanding Notes may waive compliance in a particular instance by the Company
with any provision of this Indenture or the Notes without notice to any
Noteholder. Subject to Section 8.04, without the consent of each Noteholder
affected, however, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, may not:
(1) reduce the amount of Notes whose Holders must consent to an
amendment, modification, supplement or waiver to this Indenture, the Pledge
Agreement or the Notes;
(2) reduce the rate of or change the time for payment of interest on
any Note;
(3) reduce the principal of or premium on or change the stated
maturity of any Note;
(4) make any Note payable in money other than that stated in the Note
or change the place of payment from New York, New York;
(5) change the amount or time of any payment required by the Notes or
reduce the premium payable upon any redemption of the Notes in accordance
with Section 3.07 hereof, or change the time before which no such
redemption may be made;
(6) waive a default in the payment of the principal of, or interest
on, or redemption payment with respect to, any Note (including any
obligation to make a Change of Control
<PAGE>
-70-
Offer or, after the Company's obligation to purchase Notes arises
thereunder, an Excess Proceeds Offer or modify any of the provisions or
definitions with respect to such offers);
(7) make any changes in Sections 6.04 or 6.07 hereof or this sentence
of Section 8.02; or
(8) affect the ranking of the Notes in a manner adverse to the
Holders.
After a modification, amendment, supplement or waiver under this
Section 8.02 becomes effective, the Company shall mail to the Holders a notice
briefly describing the modification, amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such modification,
amendment, supplement or waiver.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, modification,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
Section 8.03. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to or supplement of this Indenture or the Notes shall
comply with the TIA as then in effect.
Section 8.04. Revocation and Effect of Consents.
---------------------------------
Until a modification, amendment, supplement, waiver or other action
becomes effective, a consent to it by a Holder of a Note is a continuing consent
conclusive and binding upon such Holder and every subsequent Holder of the same
Note or portion thereof, and of any Note issued upon the transfer thereof or in
exchange therefor or in place thereof, even if notation of the consent is not
made on any such Note. Any such Holder or subsequent Holder, however, may
revoke the consent as to his Note or portion of a Note, if the Trustee receives
the notice of revocation before the date the modification, amendment,
supplement, waiver or other action becomes effective.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any modification,
amendment, supplement, or waiver. If a record date is fixed, then,
notwithstanding the preceding paragraph, those Persons who were Holders at such
record date (or their duly designated proxies), and only such Persons, shall be
entitled to consent to such modification, amendment, supplement, or waiver or to
revoke any consent previously given, whether or not
<PAGE>
-71-
such Persons continue to be Holders after such record date. No such consent
shall be valid or effective for more than 90 days after such record date unless
the consent of the requisite number of Holders has been obtained.
After a modification, amendment, supplement, waiver or other action
becomes effective, it shall bind every Noteholder, unless it makes a change
described in any of clauses (1) through (8) of Section 8.02 hereof. In that
case, the modification, amendment, supplement, waiver or other action shall bind
each Holder of a Note who has consented to it and every subsequent Holder of a
Note or portion of a Note that evidences the same debt as the consenting
Holder's Note.
Section 8.05. Notation on or Exchange of Notes.
--------------------------------
If a modification, amendment, supplement or waiver changes the terms
of a Note, the Trustee may request the Holder of the Note to deliver it to the
Trustee. In such case, the Trustee shall place an appropriate notation on the
Note about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Note shall
issue and the Trustee shall authenticate a new security that reflects the
changed terms. Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such modification, amendment,
supplement or waiver.
Section 8.06. Trustee to Sign Amendments, etc.
-------------------------------
The Trustee shall sign any modification, amendment, supplement or
waiver authorized pursuant to this Article 8 if the modification, amendment,
supplement or waiver does not adversely affect the rights, duties, liabilities
or immunities of the Trustee. If it does, the Trustee may, but need not, sign
it. In signing or refusing to sign such modification, amendment, supplement or
waiver, the Trustee shall be entitled to receive and, subject to Section 7.01
hereof, shall be fully protected in relying upon an Officers' Certificate and an
Opinion of Counsel stating that such modification, amendment, supplement or
waiver is authorized or permitted by this Indenture and such supplemental
indenture constitutes the legal, valid and binding obligation of the Company and
the Guarantors enforceable against each of them in accordance with its terms
(subject to customary exceptions). The Company or any Guarantor may not sign a
modification, amendment or supplement until the Board of Directors of the
Company or such Guarantor, as appropriate, approves it.
<PAGE>
-72-
ARTICLE 9.
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.
----------------------
The Company and the Guarantors, if any, may terminate their
obligations under the Notes, the Guarantees, if any, and this Indenture, except
the obligations referred to in the last paragraph of this Section 9.01, if there
shall have been cancelled by the Trustee or delivered to the Trustee for
cancellation all Notes theretofore authenticated and delivered (other than any
Notes that are asserted to have been destroyed, lost or stolen and that shall
have been replaced as provided in Section 2.07 hereof) and the Company has paid
all sums payable by it hereunder or deposited all required sums with the
Trustee.
After such delivery the Trustee upon request shall acknowledge in
writing the discharge of the Company's and the Guarantors' obligations under the
Notes, the Guarantees and this Indenture except for those surviving obligations
specified below.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company in Sections 2.07, 7.07, 9.05, 9.06 and 9.08 hereof
shall survive.
Section 9.02. Legal Defeasance.
----------------
The Company may at its option, by Board Resolution, be discharged from
its obligations with respect to the Notes and the Guarantors, if any, discharged
from their obligations under the Guarantees, if any, on the date the conditions
set forth in Section 9.04 below are satisfied (hereinafter, "Legal Defeasance").
For this purpose, such Legal Defeasance means that the Company shall be deemed
to have paid and discharged the entire indebtedness represented by the Notes and
to have satisfied all its other obligations under such Notes and this Indenture
insofar as such Notes are concerned (and the Trustee, at the expense of the
Company, shall, subject to Section 9.06 hereof, execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (A) the rights of Holders of
outstanding Notes to receive solely from the trust funds described in Section
9.04 hereof and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest on such Notes when such payments
are due, (B) the Company's obligations with respect to such Notes under Sections
2.03, 2.04, 2.05, 2.06, 2.07, 2.08 and 4.20 hereof, (C) the rights, powers,
trusts, duties, and immunities of the Trustee hereunder (including claims of, or
payments to, the
<PAGE>
-73-
Trustee under or pursuant to Section 7.07 hereof) and (D) this Article 9.
Subject to compliance with this Article 9, the Company may exercise its option
under this Section 9.02 with respect to the Notes notwithstanding the prior
exercise of its option under Section 9.03 below with respect to the Notes.
Section 9.03. Covenant Defeasance.
-------------------
At the option of the Company, pursuant to a Board Resolution, the
Company and the Guarantors, if any, shall be released from their respective
obligations under Sections 4.02 through 4.19 hereof, inclusive, and clause
(a)(iii) of Section 5.01 hereof with respect to the outstanding Notes on and
after the date the conditions set forth in Section 9.04 hereof are satisfied
(hereinafter, "Covenant Defeasance") and the Notes shall thereafter be deemed to
not be outstanding for purposes of any direction, waiver, consent, declaration
or act of the Holders (and the consequences thereof) in connection with such
covenants but shall continue to be outstanding for all other purposes hereunder.
For this purpose, such Covenant Defeasance means that the Company and the
Guarantors, if any, may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such specified
Section or portion thereof, whether directly or indirectly by reason of any
reference elsewhere herein to any such specified Section or portion thereof or
by reason of any reference in any such specified Section or portion thereof to
any other provision herein or in any other document, but the remainder of this
Indenture and the Notes shall be unaffected thereby.
Section 9.04. Conditions to Defeasance or Covenant Defeasance.
-----------------------------------------------
The following shall be the conditions to application of Section 9.02
or Section 9.03 hereof to the outstanding Notes:
(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 7.10 hereof who shall agree to comply with the provisions of
this Article 9 applicable to it) as funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of the Notes, (A) money in
an amount, or (B) U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with
their terms will provide, not later than the due date of any payment, money
in an amount, or (C) a combination thereof, sufficient, in the opinion of a
nationally-recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and
<PAGE>
-74-
which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, the principal of, premium, if any, and accrued interest on
the outstanding Notes at the maturity date of such principal, premium, if
any, or interest, or on dates for payment and redemption of such principal,
premium, if any, and interest selected in accordance with the terms of this
Indenture and of the Notes;
(2) no Event of Default or Default with respect to the Notes shall
have occurred and be continuing on the date of such deposit, or shall have
occurred and be continuing at any time during the period ending on the 91st
day after the date of such deposit or, if longer, ending on the day
following the expiration of the longest preference period under any
Bankruptcy Law applicable to the Company in respect of such deposit (it
being understood that this condition shall not be deemed satisfied until
the expiration of such period);
(3) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute default under any other agreement
or instrument to which the Company is a party or by which it is bound;
(4) the Company shall have delivered to the Trustee an Opinion of
Counsel stating that, as a result of such Legal Defeasance or Covenant
Defeasance, neither the trust nor the Trustee will be required to register
as an investment company under the Investment Company Act of 1940, as
amended;
(5) in the case of an election under Section 9.02 above, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (i)
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling to the effect that or (ii) there has been a change
in any applicable Federal income tax law with the effect that, and such
opinion shall confirm that, the Holders of the outstanding Notes or persons
in their positions will not recognize income, gain or loss for Federal
income tax purposes solely as a result of such Legal Defeasance and will be
subject to Federal income tax on the same amounts, in the same manner,
including as a result of prepayment, and at the same times as would have
been the case if such Legal Defeasance had not occurred;
(6) in the case of an election under Section 9.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the outstanding Notes will not recognize income, gain
or loss for Federal income tax purposes as a result of such Covenant
Defeasance and will be subject to Federal income tax on the
<PAGE>
-75-
same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(7) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the Legal Defeasance under
Section 9.02 above or the Covenant Defeasance under Section 9.03 hereof (as
the case may be) have been complied with; and
(8) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit under clause (1) was not made by the
Company with the intent of defeating, hindering, delaying or defrauding any
creditors of the Company or others.
Section 9.05. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.
-------------------------------------------------------------
All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 9.04 hereof in respect
of the outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent as the Trustee may determine, to the
Holders of such Notes, of all sums due and to become due thereon in respect of
principal, premium, if any, and accrued interest, but such money need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no duty to invest such money or U.S. Government Obligations.
The Company and the Guarantors shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against the U.S.
Government Obligations deposited pursuant to Section 9.04 hereof or the
principal, premium, if any, and interest received in respect thereof other than
any such tax, fee or other charge which by law is for the account of the Holders
of the outstanding Notes.
Anything in this Article 9 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 9.04 hereof which, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
<PAGE>
-76-
Section 9.06. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 9.01, 9.02 or 9.03 hereof by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the obligations of the Company and any Guarantor under this
Indenture, the Notes and the Guarantees, if any, shall be revived and reinstated
as though no deposit had occurred pursuant to this Article 9 until such time as
the Trustee or Paying Agent is permitted to apply all such money or U.S.
Government Obligations in accordance with Section 9.01 hereof; provided,
--------
however, that if the Company or any Guarantors have made any payment of
- -------
principal of, premium, if any, or accrued interest on any Notes because of the
reinstatement of their obligations, the Company or such Guarantors, as the case
may be, shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
Section 9.07. Moneys Held by Paying Agent.
---------------------------
In connection with the satisfaction and discharge of this Indenture,
all moneys then held by any Paying Agent under the provisions of this Indenture
shall, upon demand of the Company, be paid to the Trustee, or if sufficient
moneys have been deposited pursuant to Section 9.04 hereof, to the Company (or,
if such moneys had been deposited by any Guarantors, to such Guarantors), and
thereupon such Paying Agent shall be released from all further liability with
respect to such moneys.
Section 9.08. Moneys Held by Trustee.
----------------------
Any moneys deposited with the Trustee or any Paying Agent or then held
by the Company or any Guarantors in trust for the payment of the principal of,
or premium, if any, or interest on any Note that are not applied but remain
unclaimed by the Holder of such Note for two years after the date upon which the
principal of, or premium, if any, or interest on such Note shall have
respectively become due and payable shall be repaid to the Company (or, if
appropriate, the Guarantors) upon Company Request, or if such moneys are then
held by the Company or any Guarantors in trust, such moneys shall be released
from such trust; and the Holder of such Note entitled to receive such payment
shall thereafter, as an unsecured general creditor, look only to the Company and
the Guarantors, if any, for the payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money shall thereupon
cease; provided, however, that the Trustee or any such Paying Agent, before
-------- -------
being required to make any such repayment, may, at the expense of the Company
and the
<PAGE>
-77-
Guarantors, if any, either mail to each Noteholder affected, at the address
shown in the register of the Notes maintained by the Registrar pursuant to
Section 2.03 hereof, or cause to be published once a week for two successive
weeks, in a newspaper published in the English language, customarily published
each Business Day and of general circulation in The City of New York, New York,
a notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such mailing or
publication, any unclaimed balance of such moneys then remaining will be repaid
to the Company. After payment to the Company or the Guarantors, if any, or the
release of any money held in trust by the Company or any Guarantors, as the case
may be, Noteholders entitled to the money must look only to the Company and any
Guarantors for payment as general creditors unless applicable abandoned property
law designates another person.
ARTICLE 10.
GUARANTEE OF NOTES
Section 10.01. Guarantee.
---------
Subject to the provisions of this Article 10, each Guarantor, by
execution of the Guarantee, will jointly and severally unconditionally guarantee
to each Holder and to the Trustee, on behalf of the Holders, (i) the due and
punctual payment of the principal of, and premium, if any, and interest on each
Note, when and as the same shall become due and payable, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal of, and premium, if any, and interest on the Notes, to the
extent lawful, and the due and punctual performance of all other Obligations of
the Company to the Holders or the Trustee all in accordance with the terms of
such Note and this Indenture, and (ii) in the case of any extension of time of
payment or renewal of any Notes or any of such other Obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, at stated maturity, by acceleration or otherwise.
Each Guarantor, by execution of the Guarantee, will agree that its obligations
thereunder and hereunder shall be absolute and unconditional, irrespective of,
and shall be unaffected by, any invalidity, irregularity or unenforceability of
any such Note or this Indenture, any failure to enforce the provisions of any
such Note or this Indenture, any waiver, modification or indulgence granted to
the Company with respect thereto by the Holder of such Note or the Trustee, or
any other circumstances which may otherwise constitute a legal or equitable
discharge of a surety or such Guarantor.
<PAGE>
-78-
Each Guarantor, by execution of the Guarantee, will waive diligence,
presentment, filing of claims with a court in the event of merger or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest or notice with respect to any such Note or the Indebtedness evidenced
thereby and all demands whatsoever, and will covenant that the Guarantee will
not be discharged as to any such Note except by payment in full of the principal
thereof, premium if any, and interest thereon and as provided in Section 9.01
hereof. Each Guarantor, by execution of the Guarantee, will further agree that,
as between such Guarantor, on the one hand, and the Holders and the Trustee, on
the other hand, (i) the maturity of the Obligations guaranteed by the Guarantee
may be accelerated as provided in Article 6 hereof for the purposes of the
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the Obligations guaranteed thereby, and (ii) in
the event of any declaration of acceleration of such Obligations as provided in
Article 6 hereof, such Obligations (whether or not due and payable) shall
forthwith become due and payable by each Guarantor for the purpose of the
Guarantee. In addition, without limiting the foregoing provisions, upon the
effectiveness of an acceleration under Article 6 hereof, the Trustee shall
promptly make a demand for payment on the Notes under the Guarantee provided for
in this Article 10 and not discharged. Failure to make such demand shall not
affect the validity or enforceability of the Guarantee upon any Guarantor.
A Guarantee shall not be valid or become obligatory for any purpose
with respect to a Note unless the certificate of authentication on such Note
shall have been signed by or on behalf of the Trustee.
Section 10.02. Execution and Delivery of Guarantees.
------------------------------------
A Guarantee shall be executed on behalf of a Guarantor by the manual
or facsimile signature of an Officer of such Guarantor.
If an Officer of a Guarantor whose signature is on the Guarantee no
longer holds that office, such Guarantee shall be valid nevertheless.
Section 10.03. Limitation of Guarantee.
-----------------------
The obligations of each Guarantor will be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of 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
<PAGE>
-79-
obligations under this Indenture, result in the obligations of such Guarantor
under the Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under Federal or state law. Each Guarantor that makes a payment or
distribution under a Guarantee shall be entitled to a contribution from each
other Guarantor in a pro rata amount based on the Adjusted Net Assets of each
Subsidiary Guarantor.
Section 10.04. Release of Guarantor.
--------------------
A Guarantor shall be released from all of its obligations under its
Guarantee if:
(i) the Guarantor has sold all or substantially all of its assets or
the Company and its Restricted Subsidiaries have sold all of the Capital
Stock of the Guarantor owned by them, in each case in a transaction in
compliance with Sections 4.10 and 5.01 hereof to the extent applicable; or
(ii) the Guarantor merges with or into or consolidates with, or
transfers all or substantially all of its assets to, the Company or another
Guarantor in a transaction in compliance with Section 5.01 hereof;
and in each such case, the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transactions have been complied
with.
Section 10.05. Guarantee Obligations Subordinated to Guarantor Senior
------------------------------------------------------
Indebtedness.
------------
Each Guarantor, by execution of the Guarantee, will covenant and
agree, and each Holder of Notes, by its acceptance thereof, likewise covenants
and agrees, that to the extent and in the manner hereinafter set forth in this
Article 10, the Indebtedness represented by the Guarantee and the payment of any
obligations pursuant to the Guarantee by such Guarantor are hereby expressly
made subordinate and subject in right of payment as provided in this Article 10
to the prior indefeasible payment and satisfaction in full in cash or, as
acceptable to the holders of Guarantor Senior Indebtedness of such Guarantor, in
any other manner, of all existing and future Guarantor Senior Indebtedness of
such Guarantor.
This Section 10.05 and the following Sections 10.06 through 10.10
shall constitute a continuing offer to all Persons who, in reliance upon such
provisions, become holders of or continue to hold Guarantor Senior Indebtedness
of any Guarantor; and such provisions are made for the benefit of the holders of
<PAGE>
-80-
Guarantor Senior Indebtedness of each Guarantor; and such holders are made
obligees hereunder and they or each of them may enforce such provisions.
Section 10.0.6 Payment Over of Proceeds upon Dissolution, etc., of a Guarrantor.
----------------------------------------------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to any Guarantor or to its
creditors, as such, or to its assets, whether voluntary or involuntary, or (b)
any liquidation, dissolution or other winding-up of any Guarantor, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy
or (c) any general assignment for the benefit of creditors or any other
marshaling of assets or liabilities of any Guarantor, then and in any such
event:
(1) the holders of all Guarantor Senior Indebtedness of such
Guarantor shall be entitled to receive payment and satisfaction in full in
cash or, as acceptable to the holders of such Guarantor Senior
Indebtedness, in any other manner, of all amounts due on or in respect of
all such Guarantor Senior Indebtedness, before the Holders of the Notes are
entitled to receive or retain, pursuant to the Guarantee of such Guarantor,
any payment or distribution of any kind or character by such Guarantor on
account of any of its Obligations on its Guarantee; and
(2) any payment or distribution of assets of such Guarantor of any
kind or character, whether in cash, property or securities, by set-off or
otherwise, to which the Holders or the Trustee would be entitled but for
the subordination provisions of this Article 10 shall be paid by the
liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of Guarantor Senior
Indebtedness of such Guarantor or their representative or representatives
or to the trustee or trustees under any indenture under which any
instruments evidencing any of such Guarantor Senior Indebtedness may have
been issued, ratably according to the aggregate amounts remaining unpaid on
account of such Guarantor Senior Indebtedness held or represented by each,
to the extent necessary to make payment in full in cash or, as acceptable
to the Holders of such Guarantor Senior Indebtedness of such Guarantor, in
any other manner, of all such Guarantor Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or distribution to
the holders of such Guarantor Senior Indebtedness; and
<PAGE>
-81-
(3) in the event that, notwithstanding the foregoing provisions of
this Section 10.06, the Trustee or the Holder of any Note shall have
received any payment or distribution of assets of such Guarantor of any
kind or character, whether in cash, property or securities, including,
without limitation, by way of set-off or otherwise, in respect of any of
its Obligations on its Guarantee before all Guarantor Senior Indebtedness
of such Guarantor is paid and satisfied in full in cash or such payment and
satisfaction thereof in cash is provided for, then and in such event such
payment or distribution upon written notice to the Trustee or the Holder of
such Note, as the case may be, shall be held by the Trustee or the Holder
of such Note, as the case may be, in trust for the benefit of the holders
of such Guarantor Senior Indebtedness and shall be immediately paid over or
delivered forthwith to the liquidating trustee or agent or other Person
making payment or distribution of assets of such Guarantor for application
to the payment of all such Guarantor Senior Indebtedness remaining unpaid,
to the extent necessary to pay all of such Guarantor Senior Indebtedness in
full in cash or, as acceptable to the holders of such Guarantor Senior
Indebtedness, any other manner, after giving effect to any concurrent
payment or distribution to or for the holders of such Guarantor Senior
Indebtedness.
The consolidation of a Guarantor with, or the merger of a Guarantor
with or into, another Person or the liquidation or dissolution of a Guarantor
following the transfer of all of its assets (as an entirety or substantially as
an entirety) to another Person upon the terms and conditions set forth in
Article 5 hereof shall not be deemed a dissolution, winding-up, liquidation,
reorganization, assignment for the benefit of creditors or marshaling of assets
and liabilities of such Guarantor for the purposes of this Article 10 if the
Person formed by such consolidation or the surviving entity of such merger or
the Person which acquires by transfer such assets (as an entirety or
substantially as an entirety) shall, as a part of such consolidation, merger or
transfer comply with the conditions set forth in such Article 5 hereof.
Section 10.07. Suspension of Guarantee Obligations When Guarantor Senior
Indebtedness in Default.
---------------------------------------------------------
(a) Unless Section 10.06 hereof shall be applicable, after the
occurrence of a Payment Default, no payment or distribution of any assets or
securities of a Guarantor (or any Restricted Subsidiary or Subsidiary of such
Guarantor) of any kind or character (including, without limitation, cash,
property and any payment or distribution which may be payable or deliverable by
<PAGE>
-82-
reason of the payment of any other Indebtedness of such Guarantor being
subordinated to its Obligations on its Guarantee) may be made by or on behalf of
such Guarantor (or any Restricted Subsidiary or Subsidiary of such Guarantor),
including, without limitation, by way of set-off or otherwise, for or on account
of its Obligations on its Guarantee, and neither the Trustee nor any holder or
owner of any Notes shall take or receive from any Guarantor (or any Restricted
Subsidiary or Subsidiary of such Guarantor), directly or indirectly in any
manner, payment in respect of all or any portion of its Obligations on its
Guarantee following the delivery by the representative of the holders of
Guarantor Senior Indebtedness (the "Guarantor Representative") to the Trustee of
written notice of (i) the occurrence of a Payment Default on Designated Senior
Indebtedness which constitutes Guarantor Senior Indebtedness or (ii) the
occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness
which constitutes Guarantor Senior Indebtedness and the acceleration of the
maturity of such Designated Senior Indebtedness in accordance with its terms,
and in any such event, such prohibition shall continue until such Payment
Default is cured, waived in writing or ceases to exist or such acceleration has
been rescinded or otherwise cured. At such time as the prohibition set forth in
the preceding sentence shall no longer be in effect, subject to the provisions
of the following paragraph (b), such Guarantor shall resume making any and all
required payments in respect of its Obligations under its Guarantee.
(b) Unless Section 10.06 hereof shall be applicable, upon the
occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness
which constitutes Guarantor Senior Indebtedness of any Guarantor, no payment or
distribution of any assets or securities of such Guarantor of any kind or
character (including, without limitation, cash, property and any payment or
distribution which may be payable or deliverable by reason of the payment of any
other Indebtedness of such Guarantor being subordinated to its Obligations on
its Guarantee) shall be made by such Guarantor, including, without limitation,
by way of set-off or otherwise, for or on account of any of its Obligations on
its Guarantee, and neither the Trustee nor any holder or owner of any Notes
shall take or receive from any Guarantor (or any Restricted Subsidiary or
Subsidiary of such Guarantor), directly or indirectly in any manner, payment in
respect of all or any portion of its Obligations on its Guarantee for a period
(a "Guarantee Payment Blockage Period") commencing on the date of receipt by the
Trustee of written notice from the Guarantor Representative of such Non-Payment
Event of Default, unless and until (subject to any blockage of payments that may
then be in effect under the preceding paragraph (a)) the earliest to occur of
the following events: (x) more than 179 days shall have elapsed since the date
of receipt of such written notice by the Trustee, (y) such Non-Payment Event of
Default shall have been cured or waived in writing or shall have
<PAGE>
-83-
ceased to exist or such Designated Senior Indebtedness shall have been paid in
full in cash and the Trustee has been so notified by either the Guarantor
Representative or such Guarantor or (z) such Guarantee Payment Blockage Period
shall have been terminated by written notice to such Guarantor or the Trustee
from the Guarantor Representative, after which, in the case of clause (x), (y)
or (z), such Guarantor shall resume making any and all required payments in
respect of its Obligations on its Guarantee. Notwithstanding any other
provisions of this Indenture, no event of default with respect to Designated
Senior Indebtedness which constitutes Guarantor Senior Indebtedness (other than
a Payment Default) which existed or was continuing on the date of the
commencement of any Guarantee Payment Blockage Period initiated by the Guarantor
Representative shall be, or be made, the basis for the commencement of a second
Guarantee Payment Blockage Period initiated by the Guarantor Representative
unless such event of default shall have been cured or waived for a period of not
less than 90 consecutive days. In no event shall a Guarantee Payment Blockage
Period extend beyond 179 days from the date of the receipt by the Trustee of the
notice referred to in this Section 10.07(b) or, in the event of a Non-Payment
Event of Default which formed the basis for a Payment Blockage Period under
Section 11.03(b) hereof, 179 days from the date of the receipt by the Trustee of
the notice referred to in Section 11.03(b) (the "Initial Guarantee Blockage
Period"). Any number of additional Guarantee Payment Blockage Periods may be
commenced during the Initial Guarantee Blockage Period; provided, however, that
-------- -------
no such additional Guarantee Payment Blockage Period shall extend beyond the
Initial Guarantee Blockage Period. After the expiration of the Initial
Guarantee Blockage Period, no Guarantee Payment Blockage Period may be commenced
under this Section 10.07(b) and no Payment Blockage Period may be commenced
under Section 11.03(b) hereof until at least 180 consecutive days have elapsed
from the last day of the Initial Guarantee Blockage Period.
(c) In the event that, notwithstanding the foregoing, the Trustee or
the Holder of any Note shall have received any payment from a Guarantor
prohibited by the foregoing provisions of this Section 10.07, then and in such
event such payment shall be paid over and delivered forthwith to the Guarantor
Representative initiating the Guarantee Payment Blockage Period, in trust for
distribution to the holders of Guarantor Senior Indebtedness or, if no amounts
are then due in respect of Guarantor Senior Indebtedness, promptly returned to
the Guarantor, or as a court of competent jurisdiction shall direct.
<PAGE>
-84-
Section 10.08. Subrogation to Rights of Holders of Guarantor Senior
----------------------------------------------------
Indebtedness.
-------------
Upon the payment in full of all amounts payable under or in respect of
all Guarantor Senior Indebtedness of a Guarantor, the Holders shall be
subrogated to the rights of the holders of such Guarantor Senior Indebtedness to
receive payments and distributions of cash, property and securities of such
Guarantor made on such Guarantor Senior Indebtedness until all amounts due to be
paid under the Guarantee shall be paid in full. For the purposes of such
subrogation, no payments or distributions to holders of Guarantor Senior
Indebtedness of any cash, property or securities to which Holders of the Notes
or the Trustee would be entitled except for the provisions of this Article 10,
and no payments over pursuant to the provisions of this Article 10 to holders of
Guarantor Senior Indebtedness by Holders of the Notes or the Trustee, shall, as
among each Guarantor, its creditors other than holders of Guarantor Senior
Indebtedness and the Holders of the Notes, be deemed to be a payment or
distribution by such Guarantor to or on account of such Guarantor Senior
Indebtedness.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article 10 shall have been
applied, pursuant to the provisions of this Article 10, to the payment of all
amounts payable under Guarantor Senior Indebtedness, then and in such case, the
Holders shall be entitled to receive from the holders of such Guarantor Senior
Indebtedness at the time outstanding any payments or distributions received by
such holders of Guarantor Senior Indebtedness in excess of the amount sufficient
to indefeasibly pay all amounts payable under or in respect of such Guarantor
Senior Indebtedness in full in cash.
Section 10.09. Guarantee Subordination Provisions Solely to Define Relative
------------------------------------------------------------
Rights.
-------
The subordination provisions of this Article 10 are and are intended
solely for the purpose of defining the relative rights of the Holders of the
Notes on the one hand and the holders of Guarantor Senior Indebtedness on the
other hand. Nothing contained in this Article 10 or elsewhere in this Indenture
or in the Notes is intended to or shall (a) impair, as among each Guarantor, its
creditors other than holders of its Guarantor Senior Indebtedness and the
Holders of the Notes, the obligation of such Guarantor, which is absolute and
unconditional, to make payments to the Holders in respect of its Obligations on
its Guarantee in accordance with its terms; or (b) affect the relative rights
against such Guarantor of the Holders of the Notes and creditors of such
Guarantor other than the holders of the Guarantor Senior Indebtedness; or (c)
prevent the Trustee or the Holder of any Note
<PAGE>
-85-
from exercising all remedies otherwise permitted by applicable law upon a
Default or an Event of Default under this Indenture, subject to the rights, if
any, under this Article 10 of the holders of Guarantor Senior Indebtedness (1)
in any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, arrangement, reorganization or other similar case or proceeding in
connection therewith or any liquidation, dissolution or other winding-up, or any
assignment for the benefit of creditors or other marshaling of assets and
liabilities referred to in Section 10.06 hereof, to receive, pursuant to and in
accordance with such Section, cash, property and securities otherwise payable
or deliverable to the Trustee or such Holder, or (2) under the conditions
specified in Section 10.07 hereof, to prevent any payment prohibited by such
Section or enforce their rights pursuant to Section 10.07(c) hereof.
The failure by any Guarantor to make a payment in respect of its
obligations on its Guarantee by reason of any provision of this Article 10 shall
not be construed as preventing the occurrence of a Default or an Event of
Default hereunder.
Section 10.10. Application of Certain Article 11 Provisions.
---------------------------------------------
The provisions of Sections 11.04, 11.07, 11.08, 11.09, 11.10, 11.12
and 11.13 hereof shall apply, mutatis mutandis, to each Guarantor and their
------- --------
respective holders of Guarantor Senior Indebtedness and the rights, duties and
obligations set forth therein shall govern the rights, duties and obligations of
each Guarantor, the holders of Guarantor Senior Indebtedness, the Holders and
the Trustee with respect to the Guarantee and all references therein to Article
11 hereof shall mean this Article 10.
ARTICLE 11.
SUBORDINATION OF NOTES
Section 11.01. Notes Subordinate to Senior Indebtedness.
----------------------------------------
The Company covenants and agrees, and each Holder of Notes, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article 11, the Indebtedness
represented by the Notes and the payment of the principal of, premium, if any,
and interest on the Notes are hereby expressly made subordinate and subject in
right of payment as provided in this Article 11 to the prior indefeasible
payment and satisfaction in full in cash or, as acceptable to the
<PAGE>
-86-
holders of Senior Indebtedness, in any other manner, of all existing and future
Senior Indebtedness.
This Article 11 shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of or continue to hold
Senior Indebtedness; and such provisions are made for the benefit of the
holders of Senior Indebtedness; and such holders are made obligees hereunder and
they or each of them may enforce such provisions.
Section 11.02. Payment Over of Proceeds upon Dissolution, etc.
-----------------------------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, whether voluntary or involuntary or (b) any
liquidation, dissolution or other winding-up of the Company, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy, or (c) any
general assignment for the benefit of creditors or any other marshalling of
assets or liabilities of the Company, then and in any such event:
(1) the holders of Senior Indebtedness shall be entitled to receive
payment and satisfaction in full in cash or, as acceptable to the holders
of Senior Indebtedness, in any other manner, of all amounts due on or in
respect of all Senior Indebtedness, before the Holders of the Notes are
entitled to receive or retain any payment or distribution of any kind or
character on account of principal of, premium, if any, or interest on the
Notes; and
(2) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, by set-off or
otherwise, to which the Holders or the Trustee would be entitled but for
the provisions of this Article 11 shall be paid by the liquidating trustee
or agent or other Person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or otherwise,
directly to the holders of Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Senior Indebtedness may have
been issued, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Indebtedness held or represented by each, to the
extent necessary to make payment in full in cash or, as acceptable to the
holders of Senior Indebtedness, in any other manner, of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent
<PAGE>
-87-
payment or distribution, or provision therefor, to the holders of such
Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section 11.02, the Trustee or the Holder of any Note shall have
received any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, including, without
limitation, by way of set-off or otherwise, in respect of principal of,
premium, if any, and interest on the Notes before all Senior Indebtedness
is paid and satisfied in full in cash or such payment and satisfaction
thereof in cash is provided for, then and in such event such payment or
distribution upon written notice to the Trustee or the Holder of such Note,
as the case may be, shall be held by the Trustee or the Holder of such
Note, as the case may be, in trust for the benefit of the holders of such
Senior Indebtedness and shall be immediately paid over or delivered
forthwith to the liquidating trustee or agent or other Person making
payment or distribution of assets of the Company for application to the
payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full in cash or, as acceptable
to the holders of Senior Indebtedness, any other manner, after giving
effect to any concurrent payment or distribution, or provision therefor, to
or for the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
with or into, another Person or the liquidation or dissolution of the Company
following the transfer of all its assets (as an entirety or substantially as an
entirety) to another Person upon the terms and conditions set forth in Article 5
hereof shall not be deemed a dissolution, winding-up, liquidation,
reorganization, assignment for the benefit of creditors or marshaling of assets
and liabilities of the Company for the purposes of this Article 11 if the Person
formed by such consolidation or the surviving entity of such merger or the
Person which acquires by transfer such assets (as an entirety or substantially
as an entirety) shall, as a part of such consolidation, merger or transfer,
comply with the conditions set forth in such Article 5 hereof.
Section 11.03. Suspension of Payment When Senior Indebtedness in Default.
---------------------------------------------------------
(a) Unless Section 11.02 hereof shall be applicable, after the
occurrence of a Payment Default no payment or distribution of any assets or
securities of the Company or any Restricted Subsidiary of any kind or character
(including, without limitation, cash, property and any payment or distribution
which
<PAGE>
-88-
may be payable or deliverable by reason of the payment of any other Indebtedness
of the Company being subordinated to the payment of the Notes by the Company)
may be made by or on behalf of the Company or any Restricted Subsidiary,
including, without limitation, by way of set-off or otherwise, for or on account
of principal of, premium, if any, or interest on the Notes, or for or on account
of the purchase, redemption, defeasance or other acquisition of the Notes, and
neither the Trustee nor any holder or owner of any Notes shall take or receive
from the Company or any Restricted Subsidiary, directly or indirectly in any
manner, payment in respect of all or any portion of Notes following the delivery
by the representative of the holders of Designated Senior Indebtedness (the
"Representative") to the Trustee of written notice of (i) the occurrence of a
Payment Default on Designated Senior Indebtedness or (ii) the occurrence of a
Non-Payment Event of Default on Designated Senior Indebtedness and the
acceleration of the maturity of Designated Senior Indebtedness in accordance
with its terms, and in any such event, such prohibition shall continue until
such Payment Default is cured, waived in writing or ceases to exist or such
acceleration has been rescinded or otherwise cured; provided that nothing in
--------
this sentence shall be deemed to affect the right of the Holders to receive
solely from the funds deposited in trust pursuant to clause (1) of Section 9.04
hereof prior to the date of such Payment Default and as more fully set forth in
such Section payments or distributions in respect of the principal of, premium,
if any, and interest on the Notes in connection with any Legal Defeasance or
Covenant Defeasance. At such time as the prohibition set forth in the preceding
sentence shall no longer be in effect, subject to the provisions of the
following paragraph (b), the Company shall resume making any and all required
payments in respect of the Notes, including any missed payments.
(b) Unless Section 11.02 hereof shall be applicable, 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) shall be made by or on behalf of the Company, including,
without limitation, by way of set-off or otherwise, for or on account of any
principal of, premium, if any, or interest on the Notes or for or on account of
the purchase, redemption, defeasance or other acquisition of Notes, and neither
the Trustee nor any holder or owner of any Notes shall take or receive from the
Company, directly or indirectly in any manner, payment in respect of all or any
portion of the Notes, for a period (a "Payment Blockage Period") commencing on
the date of receipt by the Trustee of written notice from the Representative of
<PAGE>
-89-
such Non-Payment Event of Default unless and until (subject to any blockage of
payments that may then be in effect under the preceding paragraph (a)) the
earliest to occur of the following events: (x) more than 179 days shall have
elapsed since the date of receipt of such written notice by the Trustee, (y)
such Non-Payment Event of Default shall have been cured or waived in writing or
shall have ceased to exist or such Designated Senior Indebtedness shall have
been paid in full in cash and the Trustee has been so notified by either the
Representative or the Company or (z) such Payment Blockage Period shall have
been terminated by written notice to the Company or the Trustee from the
Representative, after which, in the case of clause (x), (y) or (z), the Company
shall resume making any and all required payments in respect of the Notes,
including any missed payments. Notwithstanding any other provisions of this
Indenture, no event of default with respect to Designated Senior Indebtedness
(other than a Payment Default) which existed or was continuing on the date of
the commencement of any Payment Blockage Period initiated by the Representative
shall be, or be made, the basis for the commencement of a second Payment
Blockage Period initiated by the Representative unless such event of default
shall have been cured or waived for a period of not less than 90 consecutive
days. In no event shall a Payment Blockage Period extend beyond 179 days from
the date of the receipt by the Trustee of the notice referred to in this Section
11.03(b) (the "Initial Blockage Period"). Any number of additional Payment
Blockage Periods may be commenced during the Initial Blockage Period; provided,
--------
however, that no such additional Payment Blockage Period shall extend beyond the
- -------
Initial Blockage Period. After the expiration of the Initial Blockage Period, no
Payment Blockage Period may be commenced under this Section 11.03(b) and no
Guarantee Payment Blockage Period may be commenced under Section 10.07(b) hereof
until at least 180 consecutive days have elapsed from the last day of the
Initial Blockage Period.
(c) In the event that, notwithstanding the foregoing, the Trustee or
the Holder of any Note shall have received any payment prohibited by the
foregoing provisions of this Section 11.03, then and in such event such payment
shall be paid over and delivered forthwith to the Representative initiating the
Payment Blockage Period, in trust for distribution to the holders of Senior
Indebtedness or, if no amounts are then due in respect of Senior Indebtedness,
promptly returned to the Company, or otherwise as a court of competent
jurisdiction shall direct.
Section 11.04. Trustee's Relation to Senior Indebtedness.
-----------------------------------------
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this
<PAGE>
-90-
Article 11, and no implied covenants or obligations with respect to the holders
of Senior Indebtedness shall be read into this Indenture against the Trustee.
The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Indebtedness and the Trustee shall not be liable to any holder of Senior
Indebtedness if it shall mistakenly pay over or deliver to Holders, the Company
or any other Person moneys or assets to which any holder of Senior Indebtedness
shall be entitled by virtue of this Article 11 or otherwise.
Section 11.05. Subrogation to Rights of Holders of Senior Indebtedness.
-------------------------------------------------------
Upon the payment in full of all Senior Indebtedness, the Holders of
the Notes shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of,
premium, if any, and interest on the Notes shall be paid in full. For purposes
of such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the Holders of the
Notes or the Trustee would be entitled except for the provisions of this Article
11, and no payments pursuant to the provisions of this Article 11 to the holders
of Senior Indebtedness by Holders of the Notes or the Trustee, shall, as among
the Company, its creditors other than holders of Senior Indebtedness and the
Holders of the Notes, be deemed to be a payment or distribution by the Company
to or on account of the Senior Indebtedness.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article 11 shall have been
applied, pursuant to the provisions of this Article 11, to the payment of all
amounts payable under the Senior Indebtedness of the Company, then and in such
case the Holders shall be entitled to receive from the holders of such Senior
Indebtedness at the time outstanding any payments or distributions received by
such holders of such Senior Indebtedness in excess of the amount sufficient to
indefeasibly pay all amounts payable under or in respect of such Senior
Indebtedness in full in cash.
Section 11.06. Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of this Article 11 are and are intended solely for the
purpose of defining the relative rights of the Holders of the Notes on the one
hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Notes is
intended to or
<PAGE>
-91-
shall (a) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Notes, the obligation of the
Company, which is absolute and unconditional, to pay to the Holders of the Notes
the principal of, premium, if any, and interest on the Notes as and when the
same shall become due and payable in accordance with their terms, or (b) affect
the relative rights against the Company of the Holders of the Notes and
creditors of the Company other than the holders of Senior Indebtedness or (c)
prevent the Trustee or the Holder of any Note from exercising all remedies
otherwise permitted by applicable law upon a Default or an Event of Default
under this Indenture, subject to the rights, if any, under this Article 11 of
the holders of Senior Indebtedness (1) in any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, arrangement, reorganization or
other similar case or proceeding in connection therewith, or any liquidation,
dissolution or other winding-up, or any assignment for the benefit of creditors
or other marshaling of assets and liabilities referred to in Section 11.02
hereof, to receive, pursuant to and in accordance with such Section, cash,
property and securities otherwise payable or deliverable to the Trustee or such
Holder, or (2) under the conditions specified in Section 11.03, to prevent any
payment prohibited by such Section or enforce their rights pursuant to Section
11.03(c) hereof.
The failure to make a payment on account of principal of, premium, if
any, or interest on the Notes by reason of any provision of this Article 11
shall not be construed as preventing the occurrence of a Default or an Event of
Default hereunder.
Section 11.07. Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of a Note by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article and appoints the
Trustee his attorney-in-fact for any and all such purposes, including, in the
event of any dissolution, winding-up, liquidation or reorganization of the
Company whether in bankruptcy, insolvency, receivership proceedings, or
otherwise, the timely filing of a claim for the unpaid balance of the
indebtedness of the Company owing to such Holder in the form required in such
proceedings and the causing of such claim to be approved. If the Trustee does
not file such a claim prior to 30 days before the expiration of the time to file
such a claim, the holders of Senior Indebtedness, or any Representative, may
file such a claim on behalf of Holders of the Notes.
<PAGE>
-92-
Section 11.08. No Waiver of Subordination Provisions.
-------------------------------------
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this Section
11.08, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article 11 or the
obligations hereunder of the Holders of the Notes to the holders of Senior
Indebtedness, do any one or more of the following: (1) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (3) release any Person liable in any manner for the collection or
payment of Senior Indebtedness; and (4) exercise or refrain from exercising any
rights against the Company and any other Person; provided, however, that in no
-------- -------
event shall any such actions limit the right of the Holders of the Notes to take
any action to accelerate the maturity of the Notes pursuant to Article 6 hereof
or to pursue any rights or remedies hereunder or under applicable laws if the
taking of such action does not otherwise violate the terms of this Indenture.
Section 11.09. Notice to Trustee.
-----------------
(a) The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee at its Corporate Trust Office in respect of the Notes.
Notwithstanding the provisions of this Article 11 or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to or by the Trustee in
respect of the Notes, unless and until the Trustee shall have received written
notice thereof from the Company or a holder of Senior Indebtedness or from any
trustee, fiduciary or agent therefor; and, prior to the receipt of any such
written notice, the Trustee, subject to the provisions of this Section 11.09,
shall be entitled in all respects to assume that no such facts exist.
<PAGE>
-93-
(b) Subject to the provisions of Section 7.01 hereof, the Trustee
shall be entitled to rely on the delivery to it of a written notice to the
Trustee and the Company by a Person representing itself to be a holder of Senior
Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such
notice has been given by a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor); provided, however, that failure to give such
-------- -------
notice to the Company shall not affect in any way the ability of the Trustee to
rely on such notice. In the event that the Trustee determines in good faith
that further evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 11, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article 11, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Section 11.10. Reliance on Judicial Order or Certificate of Liquidating Agent.
--------------------------------------------------------------
Upon any payment or distribution of assets of the Company referred to
in this Article 11, the Trustee, subject to the provisions of Section 7.01
hereof, and the Holders shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders, for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
Senior Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 11.
<PAGE>
-94-
Section 11.11. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
-----------------------------------------------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article 11 with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder. Nothing in this Article 11 shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
Section 11.12. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article 11 shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article 11 in addition to or in place of the Trustee.
Section 11.13. No Suspension of Remedies.
-------------------------
Nothing contained in this Article 11 shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Article 6 or to pursue any rights or remedies hereunder or
under applicable law, subject to the rights, if any, under this Article 11 of
the holders, from time to time, of Senior Indebtedness.
ARTICLE 12.
SECURITY
Section 12.01. Pledge Agreement.
----------------
Each Holder, by accepting any Notes, agrees to all of the terms and
provisions of the Pledge Agreement as the same may be in effect or may be
amended from time to time and authorizes and directs the Collateral Agent under
the Pledge Agreement to act as secured party with respect thereto. The due and
punctual payment of the principal of and interest on the Notes when and as the
same shall be due and payable, whether on an Interest Payment Date, at maturity,
by acceleration, call for redemption or otherwise, and interest on the overdue
principal and interest, if any, of the Notes and payment and performance of all
other obligations of the Company to the Holders or the Trustee under this
Indenture and the
<PAGE>
-95-
Notes, according to the terms hereunder or thereunder, shall, subject to the
prior Lien described therein, be secured as provided in the Pledge Agreement.
The security interest in the Collateral of the Holders of the Notes shall be
junior in priority to such security interest in the Collateral securing
indebtedness under the Credit Agreement (as defined in the Pledge Agreement) and
any renewals, extensions, replacements, refundings, refinancings and
restructurings thereof, and amendments, modifications and supplements thereto
and any other Senior Indebtedness that may have a lien on the Collateral.
Section 12.02. Certificates and Opinions.
-------------------------
The Company shall cause (a) TIA (S) 314(b), relating to an Opinion of
Counsel regarding the lien of the Pledge Agreement and (b) TIA (S) 314(d),
relating to an Officers' Certificate or other documents regarding the fair value
of the Collateral (as defined in the Pledge Agreement), to be complied with to
the extent applicable. Any determinations regarding fair value shall be made by
an independent appraiser or other expert.
Section 12.03. Authorization of Actions to Be Taken by the Collateral Agent
Under the Pledge Agreement.
------------------------------------------------------------
The Collateral Agent may (but shall not be obligated to), in its sole
discretion and without the consent of the Holders of the Notes, take all actions
it deems necessary or appropriate in order to (a) enforce or effect the Pledge
Agreement and (b) collect and receive any and all amounts payable in respect of
the obligations of the Company hereunder as provided therein. Such actions
shall include, but not be limited to, advising, instructing or otherwise
directing any agent appointed by it in connection with enforcing or effecting
any term or provision of the Pledge Agreement. Subject to the provisions of the
Pledge Agreement, the Collateral Agent shall have power to institute and to
maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts which may be unlawful or in violation
of the Pledge Agreement, and such suits and proceedings as the Collateral Agent
may deem expedient to preserve or protect its interests and the interests of
any parties secured by the Collateral (including power to institute and maintain
suits or proceedings to restrain the enforcement of or compliance with any
legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the security under the Pledge
Agreement or be prejudicial to the interests of any parties secured by the
Collateral or of the Collateral Agent).
<PAGE>
-96-
Section 12.04. Authorization of Receipt of Funds by the Trustee Under the
Pledge Agreement.
----------------------------------------------------------
The Trustee is authorized to receive any funds for the benefit of
Holders distributed under the Pledge Agreement, and to make further
distributions of such funds to the Holders according to the provisions of the
Indenture.
Section 12.05. Termination of Security Interest.
--------------------------------
Upon the payment in full of all obligations of the Company under this
Indenture and the Notes, or in the event of an earlier termination of the Pledge
Agreement pursuant to the terms thereof, the Trustee shall, at the request of
the Company together with an Officers' Certificate to such effect, deliver
notification to the Collateral Agent that such obligations have been paid in
full or, if the Collateral Agent is not the pledgee, send a certificate executed
by a Trust Officer to such pledgee, stating that such obligations have been paid
in full.
ARTICLE 13.
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provision shall control.
Section 13.02. Notices.
-------
Any notice or communication shall be given in writing and delivered in
person, sent by facsimile, delivered by commercial courier service or mailed by
first-class mail, postage prepaid, addressed as follows:
If to the Company or any Guarantor:
Pierce Leahy Corp.
631 Park Avenue
King of Prussia, Pennsylvania 19406
Attention: Chief Financial Officer
Fax Number: 610-992-8394
<PAGE>
-97-
Copy to:
Cozen and O'Connor
1900 Market Street
Philadelphia, Pennsylvania 19103
Attention: Richard J. Busis, Esq.
Fax Number: 215-665-2013
If to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Administration
Fax Number: 212-852-1625
Such notices or communications shall be effective when received and
shall be sufficiently given if so given within the time prescribed in this
Indenture.
The Company, any Guarantors or the Trustee by written notice to the
others may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Noteholder shall be mailed to
him by first-class mail, postage prepaid, at his address shown on the register
kept by the Registrar. If a notice or communication to a Noteholder is mailed
in the manner provided above, it shall be deemed duly given on the date so
deposited in the mail, whether or not the addressee receives it.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by this Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
Section 13.03. Communications by Holders with Other Holders.
--------------------------------------------
Noteholders may communicate pursuant to TIA (S) 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Guarantors, the Trustee, the Registrar and anyone else shall have
the protection of TIA (S) 312(c).
<PAGE>
-98-
Section 13.04. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company or any Guarantor to the
Trustee to take any action under this Indenture, the Company shall furnish to
the Trustee at the request of the Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 13.05 below) in form and substance reasonably satisfactory
to the Trustee stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 13.05 below) in form and substance reasonably satisfactory
to the Trustee stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
Section 13.05. Statements Required in Certificate and Opinion.
----------------------------------------------
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, it or he has made
such examination or investigation as is necessary to enable it or him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such covenant or condition has been complied with.
<PAGE>
-99-
Section 13.06. When Treasury Notes Disregarded.
-------------------------------
In determining whether the Holders of the required aggregate principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, any Guarantor or any other obligor on the Notes or by any
Affiliate of any of them shall be disregarded as though they were not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which the Trustee actually knows are so owned shall be so disregarded.
Notes so owned which have been pledged in good faith shall not be disregarded
if the pledgee establishes to the satisfaction of the Trustee the pledgee's
right so to act with respect to the Notes and that the pledgee is not the
Company, a Guarantor or any other obligor upon the Notes or any Affiliate of any
of them.
Section 13.07. Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by or meetings of
Noteholders. The Registrar and Paying Agent may make reasonable rules for their
functions.
Section 13.08. Business Days; Legal Holidays.
-----------------------------
A "Business Day" is a day that is not a Legal Holiday. A "Legal
Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day on
which banking institutions are not required to be open in the State of New York.
If a payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
Section 13.09. Governing Law.
-------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
Section 13.10. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan,
security or debt agreement of the Company or any Subsidiary thereof. No such
indenture, loan, security or debt agreement may be used to interpret this
Indenture.
<PAGE>
-100-
Section 13.11. No Recourse Against Others.
--------------------------
No recourse for the payment of the principal of or premium, if any, or
interest on any of the Notes, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company or any Guarantor in this Indenture or in any
supplemental indenture, or in any of the Notes, or because of the creation of
any Indebtedness represented thereby, shall be had against any stockholder,
officer, director, partner, affiliate, beneficiary or employee, as such, past,
present or future, of the Company or of any successor corporation or against the
property or assets of any such stockholder, officer, employee, partner,
affiliate, beneficiary or director, either directly or through the Company or
any Guarantor, or any successor corporation thereof, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that this Indenture and the
Notes are solely obligations of the Company and any Guarantors, and that no such
personal liability whatever shall attach to, or is or shall be incurred by, any
stockholder, officer, employee, partner, affiliate, beneficiary or director of
the Company or any Guarantor, or any successor corporation thereof, because of
the creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or the Notes or
implied therefrom, and that any and all such personal liability of, and any and
all claims against every stockholder, officer, employee, partner, affiliate,
beneficiary and director, are hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issuance of the Notes. It is understood that this limitation on recourse is
made expressly for the benefit of any such shareholder, employee, officer,
partner, affiliate, beneficiary or director and may be enforced by any one or
all of them.
Section 13.12. Successors.
----------
All agreements of the Company and the Guarantors in this Indenture and
the Notes shall bind their respective successors. All agreements of the
Trustee, any additional trustee and any Paying Agents in this Indenture shall
bind its successor.
Section 13.13. Multiple Counterparts.
---------------------
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
<PAGE>
-101-
Section 13.14. Table of Contents, Headings, etc.
--------------------------------
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 13.15. Separability.
------------
Each provision of this Indenture shall be considered separable and if
for any reason any provision which is not essential to the effectuation of the
basic purpose of this Indenture or the Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
<PAGE>
-102-
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed, and the Company's corporate seal to be hereunto affixed and attested,
all as of the date and year first written above.
PIERCE LEAHY CORP.
By: /s/ J. Peter Pierce
----------------------------------
Name: J. Peter Pierce
Title: President
ATTEST:
/s/ Joseph P. Linaugh
- ----------------------------------
Name: Joseph P. Linaugh
Title: Vice President, Treasurer
and Assistant Secretary
UNITED STATES TRUST COMPANY OF
NEW YORK,
as Trustee
By: /s/ Cynthia Chaney
----------------------------------
Name: Cynthia Chaney
Title: Assistant Vice President
ATTEST:
/s/ Patricia Stermer
- ----------------------------------
Name: Patricia Stermer
Title: Assistant Vice President
<PAGE>
EXHIBIT A
---------
(FACE OF NOTE)
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT
WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THREE YEARS AFTER ORIGINAL
ISSUANCE OF THIS NOTE, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE ACT.
A-1
<PAGE>
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.
A-2
<PAGE>
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
A-3
<PAGE>
(REVERSE SIDE)
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
A-4
<PAGE>
the Trustee. The terms of this Note include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture.
This Note is subject to all such terms, and the Holder of this Note is referred
to the Indenture and said Trust Indenture Act for a statement of them. All
capitalized terms in this Note, unless otherwise defined, have the meanings
assigned to them by the Indenture.
The Notes are general unsecured obligations of the Company limited to
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 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.
A-5
<PAGE>
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. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement by and between the
Company and CIBC Wood Gundy Securities Corp., as initial purchaser of the Notes,
the Company will be obligated to consummate an exchange offer pursuant to which
the Holder of this Note shall have the right to exchange this Note for Notes of
a separate series issued under the Indenture (or a trust indenture substantially
identical to the Indenture in accordance with the terms of the Registration
Rights Agreement) which have been registered under the Securities Act, in like
principal amount and having substantially identical terms as the Notes. The
Holders shall be entitled to receive certain additional interest payments in the
event such exchange offer is not consummated and upon certain other conditions,
all pursuant to and in accordance with the terms of the Registration Rights
Agreement.
10. 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.
A-6
<PAGE>
11. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner of it
for all purposes.
12. 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.
13. 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.
14. 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.
15. 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
A-7
<PAGE>
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. 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.
16. 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.
17. 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.
18. 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.
A-8
<PAGE>
19. 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).
20. 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.
21. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
THE COMPANY WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN REQUEST
AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO: PIERCE
LEAHY CORP., 631 Park Avenue, King of Prussia, Pennsylvania 19406, Attention:
Chief Financial Officer.
22. AUTHENTICATION
This Note shall not be valid until the Trustee manually signs the
Certificate of Authentication on the other side of this Note.
A-9
<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.
[Check One]
---------
[_] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act provided by Rule 144A
thereunder.
or
--
[_] (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.15 of the Indenture shall have been satisfied.
Date: _______________________ Your Signature: ______________________
_______________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: _______________________________________
<PAGE>
-2-
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: ____________________ ______________________________________
NOTICE: To be executed by
an executive officer
<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 B
---------
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A
DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER
THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
B-1
<PAGE>
EXHIBIT C
---------
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
___________, ____
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: Pierce Leahy Corp. (the "Company")
11 1/8% Senior Subordinated Notes
due 2006 (the "Notes")
-----------------------------------
Dear Sirs:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
dated as of July 15, 1996 relating to the Notes and the undersigned agrees
to be bound by, and not to resell, pledge or otherwise transfer the Notes
except in compliance with, such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the Notes have not been registered under the
Securities Act, and that the Notes may not be offered, sold, pledged or
otherwise transferred except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, that if we should sell any Notes, we will do
so only (A) to the Company or any subsidiary thereof, (B) inside the United
States in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined in Rule 144A), (C) inside the
United States to an institutional "accredited investor" (as defined below)
that, prior to such transfer, furnishes (or has furnished on its behalf by
a U.S. broker-dealer) to you a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the Notes, (D) outside the United States to persons other than U.S. persons
in offshore transactions meeting the requirements of Rule 904 of
C-1
<PAGE>
Regulation S under the Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available),
or (F) pursuant to an effective registration statement under the Securities
Act, and we further agree to provide to any person purchasing any of the
Notes from us a notice advising such purchaser that resales of the Notes
are restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or their investment, as the case may be.
5. We are acquiring the Notes purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By: __________________________________
Authorized Signature
C-2
<PAGE>
EXHIBIT D
---------
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-------------------------------------
______________, ____
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: Pierce Leahy Corp. (the "Company")
11 1/8% Senior Subordinated Notes
due 2006 (the "Notes")
---------------------------------
Dear Sirs:
In connection with our proposed sale of $___________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a U.S. person or to a
person in the United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been pre-
arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
D-1
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: _________________________________
Authorized Signature
D-2
<PAGE>
EXHIBIT E
---------
FORM OF GUARANTEE
The undersigned (the "Guarantor") hereby unconditionally guarantees,
on a senior subordinated basis, jointly and severally with all other guarantors
under the Indenture dated as of July 15, 1996 by and between Pierce Leahy Corp.,
a New York corporation, and United States Trust Company of New York, as trustee
(as amended, restated or supplemented from time to time, the "Indenture"), to
the extent set forth in the Indenture and subject to the provisions of the
Indenture, (a) the due and punctual payment of the principal of and interest on
the Notes, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on overdue principal, and, to the extent permitted
by law, interest, and the due and punctual performance of all other obligations
of the Company to the Noteholders or the Trustee all in accordance with the
terms set forth in Article 10 of the Indenture, and (b) in case of any extension
of time of payment or renewal of any Notes or any of such other obligations,
that the same will be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of the Guarantor to the Noteholders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
10 of the Indenture and reference is hereby made to the Indenture for the
precise terms and limitations of this Guarantee.
Guarantor:
By: ____________________________________
Name:
Title:
E-1
<PAGE>
EXHIBIT F
PLEDGE AND INTERCREDITOR AGREEMENT
PLEDGE AND INTERCREDITOR AGREEMENT, dated as of August 9, 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 9, 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 Agent for the benefit of the Lenders and the
Administrative Agents a first lien on the Pledged Stock (as hereinafter
defined);
<PAGE>
2
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).
"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.
<PAGE>
3
"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 and, in any event, shall include, without limitation,
all dividends or other income from the Pledged Stock, collections thereon
or distributions with respect thereto.
<PAGE>
4
"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 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,
<PAGE>
5
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 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
<PAGE>
6
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.
(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.
<PAGE>
7
(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 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
<PAGE>
8
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 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
<PAGE>
9
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 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
<PAGE>
10
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 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
<PAGE>
11
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 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
<PAGE>
12
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 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).
<PAGE>
13
(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).
(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.
<PAGE>
14
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 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
<PAGE>
15
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,
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
<PAGE>
16
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.
(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
<PAGE>
17
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 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
<PAGE>
18
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 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.
<PAGE>
19
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.
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.
<PAGE>
20
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 9, 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:
195 Summerlea Road
---------------------------------------
Brampton, Canada, Ontario, L6T 4P6
---------------------------------------
Attention: President
-----------------------------
Fax: (416) 992-8394
----------------------------------
- ---------------------------
1. Execution and delivery of this Acknowledgement will be included among the
conditions to the initial borrowing specified in the Credit Agreement.
<PAGE>
SCHEDULE 1 TO PLEDGE AND
INTERCREDITOR AGREEMENT
------------------------
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
Class Stock
Issuer of Certificate No. of Shares
Stock* No.
- ---------------- ------ -------------- ----------------
<S> <C> <C> <C>
Pierce Leahy
Command Company
</TABLE>
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT
WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THREE YEARS AFTER ORIGINAL
ISSUANCE OF THIS NOTE, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE ACT.
<PAGE>
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-1 CUSIP Number 720722 AA5
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 CEDE
& CO. or registered assigns the principal sum of $200,000,000 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.
<PAGE>
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
<PAGE>
the Trustee. The terms of this Note include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture.
This Note is subject to all such terms, and the Holder of this Note is referred
to the Indenture and said Trust Indenture Act for a statement of them. All
capitalized terms in this Note, unless otherwise defined, have the meanings
assigned to them by the Indenture.
The Notes are general unsecured obligations of the Company limited to
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 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.
<PAGE>
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. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement by and between the
Company and CIBC Wood Gundy Securities Corp., as initial purchaser of the Notes,
the Company will be obligated to consummate an exchange offer pursuant to which
the Holder of this Note shall have the right to exchange this Note for Notes of
a separate series issued under the Indenture (or a trust indenture substantially
identical to the Indenture in accordance with the terms of the Registration
Rights Agreement) which have been registered under the Securities Act, in like
principal amount and having substantially identical terms as the Notes. The
Holders shall be entitled to receive certain additional interest payments in the
event such exchange offer is not consummated and upon certain other conditions,
all pursuant to and in accordance with the terms of the Registration Rights
Agreement.
10. 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>
11. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner of it
for all purposes.
12. 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.
13. 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.
14. 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.
15. 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
<PAGE>
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. 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.
16. 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.
17. 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.
18. 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.
<PAGE>
19. 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).
20. 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.
21. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
THE COMPANY WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN REQUEST
AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO: PIERCE
LEAHY CORP., 631 Park Avenue, King of Prussia, Pennsylvania 19406, Attention:
Chief Financial Officer.
22. 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.
[Check One]
---------
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act provided by Rule 144A
thereunder.
or
--
[ ] (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.15 of the Indenture shall have been satisfied.
Date: ____________________ Your Signature: __________________
___________________________________
(Sign exactly as your name
appears on the face of this Note)
Signature Guarantee: ___________________________________
<PAGE>
-2-
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: ____________________ ______________________________
NOTICE: To be executed by
an executive officer
<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>
________________________________________________________________________________
NOTE REGISTRATION RIGHTS AGREEMENT
Dated as of July 23, 1996
by and between
PIERCE LEAHY CORP.
and
CIBC WOOD GUNDY SECURITIES CORP.
as Initial Purchaser
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions........................................................... 1
2. Exchange Offer........................................................ 5
3. Shelf Registration.................................................... 8
4. Additional Interest................................................... 10
5. Registration Procedures............................................... 11
6. Registration Expenses................................................. 23
7. Indemnification....................................................... 24
8. Rules 144 and 144A.................................................... 28
9. Underwritten Registrations............................................ 28
10. Miscellaneous......................................................... 29
a. Remedies........................................................ 29
b. Enforcement..................................................... 29
c. No Inconsistent Agreements...................................... 29
d. Adjustments Affecting Registrable Notes......................... 29
e. Amendments and Waivers.......................................... 29
f. Notices......................................................... 30
g. Successors and Assigns.......................................... 30
h. Counterparts.................................................... 31
i. Headings........................................................ 31
j. Governing Law................................................... 31
k. Severability.................................................... 31
l. Entire Agreement................................................ 31
m. Notes Held by the Company or Its Affiliates..................... 31
</TABLE>
-i-
<PAGE>
NOTE REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of July
23, 1996, by and between PIERCE LEAHY CORP., a New York corporation (the
"Company"), and CIBC WOOD GUNDY SECURITIES CORP., as initial purchaser (the
"Initial Purchaser").
This Agreement is entered into in connection with the Securities
Purchase Agreement, dated as of July 17, 1996, by and between the Company and
the Initial Purchaser (the "Purchase Agreement") relating to the sale by the
Company to the Initial Purchaser of $200,000,000 aggregate principal amount of
11 1/8% Senior Subordinated Notes due 2006 of the Company (the "Notes"). In
order to induce the Initial Purchaser to enter into the Purchase Agreement, the
Company has agreed to provide the registration rights set forth in this
Agreement for the benefit of the Initial Purchaser. The execution and delivery
of this Agreement is a condition to the Initial Purchaser's obligation to
purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a).
-------------------
Advice: See Section 5.
------
Applicable Period: See Section 2(b).
-----------------
Closing: See the Purchase Agreement.
-------
Company: See the introductory paragraph to this Agreement.
-------
Effectiveness Date: The 135th day after the Issue Date.
------------------
Effectiveness Period: See Section 3(a).
--------------------
Event Date: See Section 4(b).
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a).
--------------
Exchange Offer: See Section 2(a).
--------------
<PAGE>
-2-
Exchange Registration Statement: See Section 2(a).
-------------------------------
Filing Date: The 45th day after the Issue Date.
-----------
Holder: Any holder of a Registrable Note or Registrable Notes.
------
Indemnified Person: See Section 7(c).
------------------
Indemnifying Person: See Section 7(c).
-------------------
Indenture: The Indenture, dated as of July 15, 1996, by and between
---------
the Company and United States Trust Company of New York, as trustee, pursuant to
which the Notes are being issued, as amended or supplemented from time to time
in accordance with the terms thereof.
Initial Purchaser: See the introductory paragraph to this Agreement.
-----------------
Initial Shelf Registration: See Section 3(a).
--------------------------
Inspectors: See Section 5(o).
----------
Issue Date: The date on which the original Notes are sold to the
----------
Initial Purchaser pursuant to the Purchase Agreement.
Lien: See the Indenture.
----
NASD: See Section 5(t).
----
Notes: See the introductory paragraphs to this Agreement.
-----
Participant: See Section 7(a).
-----------
Participating Broker-Dealer: See Section 2(b).
---------------------------
Person: An individual, corporation, partnership, joint venture,
------
association, joint stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
Private Exchange: See Section 2(b).
----------------
Private Exchange Notes: See Section 2(b).
----------------------
<PAGE>
- 3 -
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Notes covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs to this
------------------
Agreement.
Records: See Section 5(o).
-------
Registrable Notes: The Notes upon original issuance of the Notes and
-----------------
at all times subsequent thereto and, if issued, the Private Exchange Notes,
until in the case of any such Notes or any such Private Exchange Notes, as the
case may be, (i) a Registration Statement covering such Notes or such Private
Exchange Notes has been declared effective by the SEC and such Notes or such
Private Exchange Notes, as the case may be, have been disposed of in accordance
with such effective Registration Statement, (ii) such Notes or such Private
Exchange Notes, as the case may be, are sold in compliance with Rule 144, (iii)
in the case of any Note, the Exchange Offer has been consummated, (iv) such
Notes or such Private Exchange Notes, as the case may be, cease to be
outstanding or (v) three years have passed from the Issue Date.
Registration Default: See Section 4(a).
--------------------
Registration Statement: Any registration statement of the Company,
----------------------
including, but not limited to, the Exchange Registration Statement, which covers
any of the Registrable Notes pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that
<PAGE>
-4-
are not affiliates of an issuer of such securities being free of the
registration and prospectus delivery requirements of the Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
---------
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
------------
Shelf Registration: See Section 3(b).
------------------
Subsequent Shelf Registration: See Section 3(b).
-----------------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
Trustee: The trustee under the Indenture and, if existent, the
-------
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
Underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of the Company are sold to an underwriter(s) for reoffering to
the public.
2. Exchange Offer
--------------
(a) The Company agrees to use its best efforts to file with the SEC
as soon as practicable after the Closing, but in no event later than the Filing
Date, an offer to exchange (the "Exchange Offer") any and all of the Notes for a
like aggregate principal amount of debt securities of the Company which are
identical to the Notes (the "Exchange Notes") (and which are entitled to the
benefits of the Indenture or a trust indenture which is substantially identical
to the Indenture (other than such
<PAGE>
-5-
changes to the Indenture or any such identical trust indenture as are necessary
to comply with any requirements of the SEC to effect or maintain the
qualification thereof under the TIA) and which, in either case, has been
qualified under the TIA), except that the Exchange Notes shall have been
registered pursuant to an effective Registration Statement under the Securities
Act. The Exchange Offer will be registered under the Securities Act on an
appropriate form (the "Exchange Registration Statement") and will comply with
all applicable tender offer rules and regulations under the Exchange Act. The
Company agrees to use its best efforts to (x) cause the Exchange Registration
Statement to become effective under the Securities Act on or before the
Effectiveness Date; (y) keep the Exchange Offer open for at least 30 days (or
longer if required by applicable law) after the date that notice of the Exchange
Offer is mailed to Holders; and (z) consummate the Exchange Offer on or prior to
the 60th day following the date on which the Exchange Registration Statement is
declared effective. Each Holder who participates in the Exchange Offer will be
required to represent that any Exchange Notes received by it will be acquired in
the ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
person to participate in the distribution of the Exchange Notes, and that such
Holder is not an affiliate of the Company within the meaning of Rule 405
promulgated under the Securities Act or if it is such an affiliate, that it will
comply with the registration and prospectus delivery requirements of the
Securities Act, to the extent applicable. Upon consummation of the Exchange
Offer in accordance with this Section 2, the provisions of this Agreement shall
continue to apply, mutatis mutandis, solely with respect to Registrable Notes
----------------
that are Private Exchange Notes and Exchange Notes held by Participating Broker-
Dealers (as defined below), and the Company shall have no further obligation to
register Registrable Notes (other than Private Exchange Notes and Exchange
Notes held by Participating Broker-Dealers) pursuant to Section 3 of this
Agreement.
(b) The Company shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchaser, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act)
of Exchange Notes received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"), whether such positions or policies have been
publicly disseminated by the staff of the SEC or such positions or policies, in
the reasonable
<PAGE>
-6-
judgment of the Initial Purchaser, represent the prevailing views of the staff
of the SEC. Such "Plan of Distribution" section shall also allow the use of the
Prospectus by all persons subject to the prospectus delivery requirements of the
Securities Act, including all Participating Broker-Dealers, and include a
statement describing the means by which Participating Broker-Dealers may resell
the Exchange Notes.
The Company shall use its best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Notes, provided that such period shall not
--------
exceed 180 days (or such longer period if extended pursuant to the last
paragraph of Section 5) after the date of the consummation of the Exchange Offer
(the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial Purchaser
holds any Notes acquired by it and having, or which are reasonably likely to be
determined to have, the status as an unsold allotment in the initial
distribution, the Company upon the request of the Initial Purchaser shall,
simultaneously with the delivery of the Exchange Notes in the Exchange Offer,
issue and deliver to the Initial Purchaser, in exchange (the "Private Exchange")
for the Notes held by such Initial Purchaser, a like principal amount of debt
securities of the Company that are identical in all material respects to the
Exchange Notes (the "Private Exchange Notes") (and which are issued pursuant to
the same indenture as the Exchange Notes). The Private Exchange Notes shall bear
the same CUSIP number as the Exchange Notes. Interest on the Exchange Notes and
any Private 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.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
<PAGE>
-7-
(ii) utilize the services of a depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York; and
(iii) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which the
Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer or the Private Exchange;
(ii) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture substantially identical to the Indenture,
which in either event will provide that the Exchange Notes will not be subject
to the transfer restrictions set forth in the Indenture and that the Exchange
Notes, the Private Exchange Notes and the Notes will vote and consent together
on all matters as one class and that neither the Exchange Notes, the Private
Exchange Notes nor the Notes will have the right to vote or consent as a
separate class on any matter.
(c) If (1) prior to the consummation of the Exchange Offer, the
Company or Holders of at least a majority in aggregate principal amount of the
Registrable Notes reasonably determine in good faith that (i) the Exchange Notes
would not, upon receipt, be tradeable by such Holders which are not affiliates
(within the meaning of the Securities Act) of the Company without restriction
under the Securities Act and without restrictions under applicable state
securities laws, (ii) the interests of the Holders under this Agreement would be
adversely affected by the consummation of the Exchange Offer or (iii) after
conferring with counsel, the SEC is unlikely to permit the consummation of the
Exchange Offer prior to the Effectiveness Date, (2) subsequent to the
consummation of the Private Exchange, any holder of the Private Exchange Notes
so
<PAGE>
-8-
requests, provided, that any such holder shall not be entitled to make any
--------
request pursuant to this Section 2(c)(2) unless at the time it so requests it is
the holder of at least $25 million in aggregate principal amount of the Private
Exchange Notes or (3) the Exchange Offer is commenced and not consummated within
180 days of the date of this Agreement, then the Company shall promptly deliver
to the Holders and the Trustee written notice thereof (the "Shelf Notice") and
shall file an Initial Shelf Registration pursuant to Section 3. Following the
delivery of a Shelf Notice to the Holders of Registrable Notes (in the
circumstances contemplated by clauses (1) and (3) of the preceding sentence),
the Company shall not have any further obligation to conduct the Exchange Offer
or the Private Exchange under this Section 2.
3. Shelf Registration
------------------
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) Initial Shelf Registration. The Company shall prepare and file
--------------------------
with the SEC a Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Registrable Notes (the "Initial
Shelf Registration"). If the Company shall have not yet filed an Exchange
Registration Statement, the Company shall use its best efforts to file with the
SEC the Initial Shelf Registration on or prior to the Filing Date. In any other
instance, the Company shall use its best efforts to file with the SEC the
Initial Shelf Registration within 30 days of the delivery of the Shelf Notice.
The Initial Shelf Registration shall be on Form S-1 or another appropriate form
permitting registration of such Registrable Notes for resale by such Holders in
the manner or manners designated by them (including, without limitation, one or
more underwritten offerings). The Company shall not permit any securities other
than the Registrable Notes to be included in the Initial Shelf Registration or
any Subsequent Shelf Registration (as defined below). The Company shall use its
best efforts to cause the Initial Shelf Registration to be declared effective
under the Securities Act on or prior to the Effectiveness Date and to keep the
Initial Shelf Registration continuously effective under the Securities Act until
three years from the Issue Date (the "Effectiveness Period"), or such shorter
period ending when (i) all Registrable Notes covered by the Initial Shelf
Registration have been sold in the manner set forth and as contemplated in the
Initial Shelf Registration or (ii) a Subsequent Shelf Registration covering all
of the Registrable Notes has been declared effective under the Securities Act.
<PAGE>
-9-
(b) Subsequent Shelf Registrations. If the Initial Shelf
------------------------------
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (prior to the sale of all of
the securities registered thereunder), the Company shall use its best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof,
and in any event shall within 45 days of such cessation of effectiveness amend
the Shelf Registration in a manner reasonably expected to obtain the withdrawal
of the order suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the Registrable
Notes (a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is
filed, the Company shall use its best efforts to cause the Subsequent Shelf
Registration to be declared effective as soon as practicable after such filing
and to keep such Registration Statement continuously effective during the
Effectiveness Period. As used herein the term "Shelf Registration" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Company shall promptly supplement
--------------------------
and amend the Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter(s) of such
Registrable Notes.
4. Additional Interest
-------------------
(a) The Company and the Initial Purchaser agree that the Holders of
Registrable Notes will suffer damages if the Company fails to fulfill its
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company agrees to pay additional interest on the Notes ("Additional
Interest") under the circumstances set forth below:
(i) if neither the Exchange Registration Statement nor the Initial
Shelf Registration has been filed on or prior to the Filing Date;
(ii) if neither the Exchange Registration Statement nor the Initial
Shelf Registration has been declared effective on or prior to the
Effectiveness Date; and/or
(iii) if either (A) the Company has not exchanged the Exchange Notes for
all Notes validly tendered in accordance
<PAGE>
-10-
with the terms of the Exchange Offer on or prior to 60 days after the date
on which the Exchange Registration Statement was declared effective or (B)
the Exchange Registration Statement ceases to be effective at any time
prior to the time that the Exchange Offer is consummated or (C) if
applicable, the Shelf Registration has been declared effective and such
Shelf Registration ceases to be effective at any time prior to the earlier
of the date on which all Registrable Notes covered by the Shelf
Registration have been sold in the manner set forth and as contemplated in
the Shelf Registration or the third anniversary of the Issue Date;
(each such event referred to in clauses (i) through (iii) above is a
"Registration Default"), the sole remedy available to holders of the Notes will
be the immediate accrual of Additional Interest as follows: the per annum
interest rate on the Notes will increase by 50 basis points upon the occurrence
of a Registration Default; 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, provided, however, that (1) upon the filing of
-------- -------
the Exchange Registration Statement or the Initial Shelf Registration (in the
case of (i) above), (2) upon the effectiveness of the Exchange Registration
Statement or a Shelf Registration (in the case of (ii) above) or (3) upon the
exchange of Exchange Notes for all Notes tendered (in the case of (iii)(A)
above), or upon the effectiveness of the Exchange Registration Statement which
had ceased to remain effective (in the case of (iii)(B) above), or upon the
effectiveness of the Shelf Registration which had ceased to remain effective (in
the case of (iii)(C) above), Additional Interest on the Notes as a result of
such clause (i), (ii) or (iii) (or the relevant subclause thereof), as the case
may be, shall cease to accrue and the interest rate on the Notes will revert to
the interest rate originally borne by the Notes and provided, further, that in
-------- -------
the case of a Registration Default under (iii)(c) above, Additional Interest
will only be payable with respect to Notes so long as they are Registrable
Notes.
(b) The Company shall notify the Trustee within one business day after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Any amounts of Additional
Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be
payable in cash semi-annually on each January 15 and July 15 (to the Holders of
record on the January 1 and July 1 immediately preceding such dates), commencing
with the first such date occurring after any such Additional Interest commences
to accrue. The amount of
<PAGE>
-11-
Additional Interest with respect to each Note will be determined by multiplying
the applicable Additional Interest rate by the principal amount of such Note,
multiplied by a fraction, the numerator of which is the number of days such
Additional Interest rate was applicable during such period (determined on the
basis of a 360-day year comprised of twelve 30-day months), and the denominator
of which is 360.
5. Registration Procedures
-----------------------
In connection with the registration of any Registrable Notes or
Private Exchange Notes pursuant to Section 2 or 3 hereof, the Company shall
effect such registrations to permit the sale of such Registrable Notes or
Private Exchange Notes in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall:
(a) Prepare and file with the SEC, prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Section
2 or 3, and to use its best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein,
provided that, if (1) such filing is pursuant to Section 3, or (2) a
--------
Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, before filing any Registration Statement or Prospectus
or any amendments or supplements thereto, the Company shall, if requested,
furnish to and afford the Holders of the Registrable Notes and each such
Participating Broker-Dealer, as the case may be, covered by such
Registration Statement, their counsel and the managing underwriter(s), if
any, a reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference therein
and all exhibits thereto) proposed to be filed (at least 5 business days
prior to such filing). The Company shall not file any Registration
Statement or Prospectus or any amendments or supplements thereto in respect
of which the Holders must be afforded an opportunity to review prior to the
filing of such document, if the Holders of a majority in aggregate
principal amount of the Registrable Notes covered by such Registration
Statement, or such Participating Broker-Dealer, as the case may be, their
counsel, or the managing underwriter(s), if any, shall reasonably object
provided, however, during any delay in meeting the time frames contemplated
-------- -------
by Section 4 hereof as a result of actions of any Holder of Registrable
Notes, no Additional Interest shall accrue or be payable to such Holder.
<PAGE>
-12-
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement,
as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the
Applicable Period, as the case may be; cause the related Prospectus to be
supplemented by any prospectus supplement required by applicable law, and
as so supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force) under the Securities Act; and comply with the
provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to them with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and with
respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus; the Company
shall be deemed not to have used its best efforts to keep a Registration
Statement effective during the Applicable Period if it voluntarily takes
any action that would result in selling Holders of the Registrable Notes
covered thereby or Participating Broker-Dealers seeking to sell Exchange
Notes not being able to sell such Registrable Notes or such Exchange Notes
during that period unless such action is required by applicable law or
unless the Company complies with this Agreement, including without
limitation, the provisions of clause 5(c)(v) below.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, notify the selling Holders of Registrable Notes, or each
such Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriter(s), if any, promptly (but in any event within two
business days), and confirm such notice in writing, (i) when a Prospectus
or any prospectus supplement or post-effective amendment thereto has been
filed, and, with respect to a Registration Statement or any post-effective
amendment thereto, when the same has become effective (including in such
notice a written statement that any Holder may, upon request, obtain,
without charge, one conformed copy of such Registration Statement or post-
effective amendment thereto including financial statements and schedules,
documents incorporated or deemed to be incorporated by reference and
exhibits), (ii) of the issuance by the SEC of any stop order suspending
the
<PAGE>
-13-
effectiveness of a Registration Statement or of any order preventing or
suspending the use of any preliminary Prospectus or the initiation of any
proceedings for that purpose, (iii) if at any time when a Prospectus is
required by the Securities Act to be delivered in connection with sales of
the Registrable Notes the representations and warranties of the Company
contained in any agreement (including any underwriting agreement)
contemplated by Section 5(n) below cease to be true and correct, (iv) of
the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer for offer or sale in
any jurisdiction, or the initiation or threatening of any proceeding for
such purpose, (v) of the happening of any event or any information becoming
known that makes any statement made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in, or amendments or supplements to,
such Registration Statement, Prospectus or documents so that, in the case
of the Registration Statement, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, and (vi)
the Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its best efforts to prevent the issuance of any
order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Notes or the Exchange Notes to be sold by any Participating Broker-Dealer,
for sale in any jurisdiction, and, if any such order is issued, to use its
best efforts to
<PAGE>
-14-
obtain the withdrawal of any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
reasonably requested by the managing underwriter(s), if any, or the Holders
of a majority in aggregate principal amount of the Registrable Notes being
sold in connection with an underwritten offering, (i) promptly incorporate
in a Prospectus supplement or post-effective amendment thereto such
information as the managing underwriter(s), if any, or such Holders
reasonably request to be included therein, (ii) make all required filings
of such Prospectus supplement or such post-effective amendment thereto as
soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment thereto and (iii) supplement or make amendments to such
Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, furnish to each selling Holder of Registrable Notes and
to each such Participating Broker-Dealer who so requests and to counsel and
the managing underwriter(s), if any, without charge, one conformed copy of
the Registration Statement or Registration Statements and each post-
effective amendment thereto, including financial statements and schedules,
and, if requested, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, deliver to each selling Holder of Registrable Notes, or
each such Participating Broker-Dealer, as the case may be, their counsel,
and the managing underwriter or underwriters, if any, without charge, as
many copies of the Prospectus or Prospectuses (including each form of
preliminary Prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Company
hereby consents to
<PAGE>
-15-
the use of such Prospectus and each amendment or supplement thereto by each
of the selling Holders of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, and the managing underwriter or
underwriters or agents, if any, and dealers (if any), in connection with
the offering and sale of the Registrable Notes covered by or the sale by
Participating Broker-Dealers of the Exchange Notes pursuant to such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use its best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing underwriter
or underwriters, if any, and their respective counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes or Exchange Notes for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any selling Holder, Participating Broker-Dealer, or the
managing underwriter or underwriters, if any, reasonably request in
writing, provided that where Exchange Notes held by Participating Broker-
--------
Dealers or Registrable Notes are offered other than through an underwritten
offering, the Company agrees to cause its counsel to perform Blue Sky
investigations and file registrations and qualifications required to be
filed pursuant to this Section 5(h); keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all
other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; provided that the Company shall not be
--------
required to (A) qualify generally to do business in any jurisdiction where
it is not then so qualified, (B) take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject or (C) subject itself to taxation in excess of a nominal dollar
amount in any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3, cooperate
with the selling Holders of Registrable Notes and the managing underwriter
or underwriters, if any, to facilitate the timely preparation and delivery
of certificates
<PAGE>
-16-
representing Registrable Notes to be sold, which certificates shall not
bear any restrictive legends and shall be in a form eligible for deposit
with The Depository Trust Company; and enable such Registrable Notes to be
in such denominations and registered in such names as the managing
underwriter or underwriters, if any, or Holders may reasonably request and
which are consistent with the terms of the indenture under which the
Registrable Notes are issued.
(j) Use its best efforts to cause the Registrable Notes covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the managing underwriter or underwriters, if
any, to consummate the disposition of such Registrable Notes, except as may
be required solely as a consequence of the nature of such selling Holder's
business, in which case the Company will cooperate in all reasonable
respects with the filing of such Registration Statement and the granting of
such approvals at such sellers' cost and expense.
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi) above, as promptly as reasonably practicable
prepare and (subject to Section 5(a) above) file with the SEC, at the
expense of the Company, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Notes being sold thereunder or to the
purchasers of the Exchange Notes to whom such Prospectus will be delivered
by a Participating Broker-Dealer during the Applicable Period, any such
Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading.
(l) Use its best efforts to cause the Registrable Notes covered by a
Registration Statement or the Exchange Notes sold by a Participating
Broker-Dealer during the Applicable Period, as the case may be, to be rated
with the appropriate rating
<PAGE>
-17-
agencies, if so requested by the Holders of a majority in aggregate
principal amount of Registrable Notes covered by such Registration
Statement (provided such Holders hold at least $25,000,000 principal amount
of Registrable Notes) or the managing underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with printed
certificates for the Registrable Notes in a form eligible for deposit with
The Depository Trust Company and (ii) provide a CUSIP number for the
Registrable Notes.
(n) In connection with an underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the
Notes and take all such other actions as are reasonably requested by the
managing underwriter(s), if any, in order to expedite or facilitate the
registration or the disposition of such Registrable Notes, and in such
connection, (i) make such representations and warranties to the managing
underwriter or underwriters on behalf of any underwriters, with respect to
the business of the Company and its subsidiaries and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings of debt securities, and
confirm the same if and when requested; (ii) obtain opinions of counsel to
the Company and updates thereof in form and substance reasonably
satisfactory to the managing underwriter or underwriters, addressed to the
managing underwriter or underwriters covering the matters customarily
covered in opinions requested in underwritten offerings of debt securities
and such other matters as may be reasonably requested by underwriters;
(iii) obtain "cold comfort" letters and updates thereof in form and
substance reasonably satisfactory to the managing underwriter or
underwriters from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by
the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to the
managing underwriter or underwriters on behalf of any underwriters, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings of
<PAGE>
-18-
debt securities and such other matters as reasonably requested by the
managing underwriter or underwriters; and (iv) if an underwriting agreement
is entered into, the same shall contain indemnification provisions and
procedures no less favorable than those set forth in Section 7 hereof (or
such other provisions and procedures acceptable to Holders of a majority in
aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to said
Section. The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, make available for inspection by any selling Holder of
such Registrable Notes being sold, or each such Participating Broker-
Dealer, as the case may be, the managing underwriter or underwriters
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by any such selling Holder or
each such Participating Broker-Dealer, as the case may be (collectively,
the "Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries
(collectively, the "Records") as shall be reasonably necessary to enable
them to exercise any applicable due diligence responsibilities, and cause
the officers, directors and employees of the Company and its subsidiaries
to supply all information in each case reasonably requested by any such
Inspector in connection with such Registration Statement. Records which
the Company determines, in good faith, to be confidential and any Records
which it notifies the Inspectors are confidential shall not be disclosed by
the Inspectors unless (i) the disclosure of such Records is necessary to
avoid or correct a material misstatement or material omission in such
Registration Statement, (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction or (iii) the information in such Records has been made
generally available to the public other than through the Inspectors' breach
of any confidentiality agreement. Each selling Holder of such Registrable
Notes and each such Participating Broker-Dealer or underwriter will be
required to agree that information obtained by it as a result
<PAGE>
-19-
of such inspections shall be deemed confidential and shall not be used by
it for any purpose other than discharging due diligence responsibilities.
In addition, such information shall not be used as the basis for any market
transactions in the securities of the Company unless and until such is made
generally available to the public. Each selling Holder of such Registrable
Notes and each such Participating Broker-Dealer will be required to further
agree that it will, upon learning that disclosure of such Records is sought
in a court of competent jurisdiction, give notice to the Company and allow
the Company to undertake appropriate action to prevent disclosure of the
Records deemed confidential at its expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a), as the case may be, to be qualified
under the TIA not later than the effective date of the Exchange Offer
Registration Statement or the first Registration Statement relating to the
Registrable Notes; and in connection therewith, cooperate with the trustee
under any such indenture and the Holders of the Registrable Notes, to
effect such changes to such indenture as may be required for such
indenture to be so qualified in accordance with the terms of the TIA; and
execute, and use its best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other forms
and documents required to be filed with the SEC to enable such indenture to
be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Notes are
sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company
after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(r) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company, in a form customary for
underwritten offerings of debt securities
<PAGE>
-20-
similar to the Notes, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the
Private Exchange, as the case may be, and which includes an opinion that
(i) the Company has duly authorized, executed and delivered the Exchange
Notes and Private Exchange Notes and the related indenture and (ii) each of
the Exchange Notes or the Private Exchange Notes, as the case may be, and
related indenture constitute a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its respective
terms (with customary exceptions).
(s) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to
such other Person as directed by the Company) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Company shall
mark, or cause to be marked, on such Registrable Notes that such
Registrable Notes are being cancelled in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be; and, in no event shall such
Registrable Notes be marked as paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and the managing underwriter(s), if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD").
(u) Use its best efforts to take all other steps necessary to effect
the registration of the Registrable Notes covered by a Registration
Statement contemplated hereby.
The Company may require each seller of Registrable Notes or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Company such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, as the
Company may, from time to time, reasonably request. The Company may exclude from
such registration the Registrable Notes of any seller or Participating Broker-
Dealer who unreasonably fails to furnish such information within a reasonable
time after receiving such request, and during any delay in meeting the time
frames contemplated by Section 4 hereof as a result of a delay in receiving any
such information, no Additional Interest shall accrue or be payable.
<PAGE>
-21-
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will forthwith
discontinue disposition of such Registrable Notes covered by such Registration
Statement or Prospectus or Exchange Notes to be sold by such Holder or
Participating Broker-Dealer, as the case may be, until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
5(k), or until it is advised in writing (the "Advice") by the Company that the
use of the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event the Company shall give any such
notice, the Applicable Period shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each seller of Exchange Notes to be sold by such
Participating Broker-Dealer, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) or (y) the
Advice.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not
the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registrable Notes or Exchange Notes and determination
of the eligibility of the Registrable Notes or Exchange Notes for investment
under the laws of such jurisdictions (x) where the Holders of Registrable Notes
are located, in the case of the Exchange Notes, or (y) as provided in Section
5(h), in the case of Registrable Notes or Exchange Notes to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing Prospectuses if the printing of
Prospectuses is reasonably requested by the managing underwriter or
underwriters, if any, or, in respect of Registrable Notes or Exchange Notes to
be sold by any Participating Broker-Dealer during the Applicable Period, by the
<PAGE>
-22-
Holders of a majority in aggregate principal amount of the Registrable Notes
included in any Registration Statement or of such Exchange Notes, as the case
may be), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and fees and disbursements of special
counsel for the sellers of Registrable Notes (subject to the provisions of
Section 6(b)), (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(n)(iii) (including, without limitation,
the expenses of any special audit and "cold comfort" letters required by or
incident to such performance), (vi) rating agency fees, (vii) Securities Act
liability insurance, if the Company desires such insurance, (viii) fees and
expenses of the Trustee, (ix) fees and expenses of all other Persons retained by
the Company, (x) internal expenses of the Company (including, without
limitation, all salaries and expenses of officers and employees of the Company
performing legal or accounting duties), (xi) the expense of any annual audit,
(xii) the fees and expenses incurred in connection with any listing of the
securities to be registered on any securities exchange if the Company elects to
list any such securities and (xiii) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, securities sales agreements, indentures and any other documents
necessary in order to comply with this Agreement.
(b) In connection with any Shelf Registration hereunder, the Company
shall reimburse the Holders of the Registrable Notes being registered in such
registration for the reasonable fees and disbursements (which fees and
disbursements shall not in any event exceed $20,000), of not more than one
counsel (in addition to appropriate local counsel) chosen by the Holders of a
majority in aggregate principal amount of the Registrable Notes to be included
in such Registration Statement and other reasonable out-of-pocket expenses of
the Holders of Registrable Notes incurred in connection with the registration of
the Registrable Notes. The Company shall not have any obligation to pay any
underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities.
7. Indemnification
---------------
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Notes and each Participating Broker-Dealer selling Exchange Notes
during the Applicable Period, the officers and directors of each such person,
and each person, if any, who controls any such person within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act
(each, a "Participant"), from and against any and all losses, claims, damages
and liabilities (including, without limitation, the
<PAGE>
-23-
reasonable legal fees and other expenses incurred in connection with any suit,
action or proceeding or any claim asserted) caused by, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary Prospectus, or caused by, arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except insofar
as such losses, claims, damages or liabilities are caused by any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information relating to any Participant or
underwriter furnished to the Company in writing by such Participant or
underwriter expressly for use therein; provided that the foregoing indemnity
--------
with respect to any preliminary Prospectus shall not inure to the benefit of any
Participant or underwriter (or to the benefit of any person controlling such
Participant or underwriter) from whom the person asserting any such losses,
claims, damages or liabilities purchased Registrable Notes or Exchange Notes if
such untrue statement or omission or alleged untrue statement or omission made
in such preliminary Prospectus is eliminated or remedied in the related
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) and a copy of the related Prospectus (as so
amended or supplemented) shall have been furnished to such Participant or
underwriter at or prior to the sale of such Registrable Notes or Exchange Notes,
as the case may be, to such person or at a time the Company had notified persons
under the last paragraph of Section 5 hereof to cease using such Registration
Statement or Prospectus.
(b) Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless the Company, its directors and officers
and each person who controls any such person within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to each Participant, but only with
reference to information relating to such Participant furnished to the Company
in writing by such Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any preliminary
Prospectus. The liability of any Participant under this paragraph (b) shall in
no event exceed the proceeds received by such Participant from sales of
Registrable Notes giving rise to such obligations.
<PAGE>
-24-
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either
paragraph (a) or (b) of this Section 7, such person (the "Indemnified Person")
shall promptly notify the person against whom such indemnity may be sought (the
"Indemnifying Person") in writing, and the Indemnifying Person, upon request of
the Indemnified Person, shall retain one counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses incurred by such counsel related to such
proceeding. In any such proceeding, any Indemnified Person shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Indemnifying Person and
the Indemnified Person shall have mutually agreed in writing to the contrary,
(ii) the Indemnifying Person has failed within a reasonable time to retain
counsel reasonably satisfactory to the Indemnified Person or (iii) the named
parties in any such proceeding (including any impleaded parties) include both
the Indemnifying Person and the Indemnified Person and representations of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Person
shall not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate law
firm (in addition to any local counsel) for all Indemnified Persons, and that
all such fees and expenses shall be reimbursed as they are incurred. Any such
separate firm for the Participants and such control persons of Participants
shall be designated in writing by Participants who sold a majority in interest
of Registrable Notes sold by all such Participants and any such separate firm
for the Company, its directors, its officers and such control persons of the
Company shall be designated in writing by the Company. The Indemnifying Person
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees to indemnify any
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall have requested an Indemnifying Person to reimburse
the Indemnified Person for reasonable fees and expenses incurred by counsel as
contemplated by the third sentence of this paragraph, the Indemnifying Person
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
days after receipt by such Indemnifying
<PAGE>
-25-
Person of the aforesaid request and (ii) such Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request prior to the
date of such settlement; provided, however, that the Indemnifying Person shall
-------- -------
not be liable for any settlement effected without its consent pursuant to this
sentence if the Indemnifying Party is contesting, in good faith, the request for
reimbursement. No Indemnifying Person shall, without the prior written consent
of the Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party, unless such settlement includes an unconditional release of such
Indemnified Person from all liability on claims that are the subject matter of
such proceeding.
If the indemnification provided for in paragraphs (a) and (b) of this
Section 7 is unavailable to an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and the Participants on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand and the Participants on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Participants and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The parties shall agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
--- ----
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the
<PAGE>
-26-
amount by which proceeds received by such Participant from sales of Registrable
Notes or Exchange Notes exceeds the amount of any damages that such Participant
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
------------------
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner and, if at any time
the Company is not required to file such reports, it will, upon the request of
any Holder of Registrable Notes, make publicly available other information of a
like nature until no longer necessary to permit sales pursuant to Rule 144 or
Rule 144A. The Company further covenants that so long as any Registrable Notes
remain outstanding to make available to any Holder of Registrable Notes in
connection with any sale thereof, the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Registrable Notes
pursuant to (a) such Rule 144A, or (b) any similar rule or regulation hereafter
adopted by the SEC, unless at such time the Registrable Notes are fully salable
under Rule 144 or any successor provision.
9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and shall be reasonably acceptable to the
Company.
No Holder of Registrable Notes may participate in any underwritten
registation hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and
<PAGE>
-27-
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
10. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Company of any of its
--------
obligations under this Agreement, other than the occurrence of an event which
requires payment of Additional Interest, each Holder of Registrable Notes, in
addition to being entitled to exercise all rights provided herein, in the
Indenture or, in the case of the Initial Purchaser, in the Purchase Agreement or
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of any of the provisions of this Agreement and hereby
further agrees that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at law would be
adequate.
(b) Enforcement. The Trustee shall be authorized to enforce the
-----------
provisions of this Agreement for the ratable benefit of the Holders.
(c) No Inconsistent Agreements. The Company does not have, as of the
--------------------------
date hereof, and the Company shall not, after the date of this Agreement, enter
into any agreement with respect to any of its securities that is inconsistent
with the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not entered and
will not enter into any agreement with respect to any of its securities which
will grant to any Person piggy-back rights with respect to a Registration
Statement.
(d) Adjustments Affecting Registrable Notes. The Company shall not,
---------------------------------------
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(e) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority of the then outstanding aggregate principal amount of
<PAGE>
-28-
Registrable Notes. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders of Registrable Notes whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Registrable
Notes may be given by Holders of at least a majority in aggregate principal
amount of the Registrable Notes being sold by such Holders pursuant to such
Registration Statement, provided that the provisions of this sentence may not be
--------
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(f) Notices. All notices and other communications (including without
-------
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Notes, at the most current address
given by the Trustee to the Company; and
(ii) if to the Company, Pierce Leahy Corp., 631 Park Avenue, King of
Prussia, PA 19406, Attention: President, with a copy to Cozen and O'Connor,
1900 Market Street, Philadelphia, PA 19103, Attention: Richard J. Busis,
Esq.
All such notices and communications shall be deemed to have been duly
given: (i) when delivered by hand, if personally delivered; (ii) five business
days after being deposited in the mail, postage prepaid, if mailed; (iii) one
business day after being timely delivered to a next-day air courier; and (iv)
when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(g) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Registrable Notes.
<PAGE>
-29-
(h) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT 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 AGREEMENT.
(k) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction.
(l) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement and the Indenture, is intended by the parties as a final expression of
their agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(m) Notes Held by the Company or Its Affiliates. Whenever the consent
-------------------------------------------
or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or its affiliates (as
such term is defined in Rule 405 under the Securities Act) shall not be deemed
outstanding for such purpose and shall not be counted in determining whether
such consent or approval was given by the Holders of such required percentage.
<PAGE>
-30-
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
PIERCE LEAHY CORP.
By: /s/ J. Peter Pierce
-----------------------------
Name: J. Peter Pierce
Title: President
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ Walter F. McLallen
---------------------------
Name: Walter F. McLallen
Title: Managing Director
<PAGE>
________________________________________________________________________________
SECURITIES PURCHASE AGREEMENT
by and between
PIERCE LEAHY CORP.
and
THE INITIAL PURCHASER NAMED HEREIN
_________________________________
Dated as of July 17, 1996
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.1. Definitions ............................................. 1
Section 1.2. Accounting Terms; Financial Statements .................. 5
ARTICLE II
ISSUE OF NOTES; PURCHASE AND SALE OF
NOTES; RIGHTS OF HOLDERS OF NOTES;
OFFERING BY INITIAL PURCHASER
Section 2.1. Issue of Notes .......................................... 5
Section 2.2. Purchase, Sale and Delivery of Notes .................... 6
Section 2.3. Registration Rights of Holders of Notes.................. 6
Section 2.4. Offering by the Initial Purchaser ....................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES; RESALE OF NOTES
Section 3.1. Representations and Warranties of the Company............ 7
Section 3.2. Resale of Notes ......................................... 19
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
Section 4.1. Conditions Precedent to Obligations of the Initial
Purchaser ............................................ 20
ARTICLE V
COVENANTS
Section 5.1. Covenants of the Company ................................ 23
ARTICLE VI
FEES
Section 6.1 Costs, Expenses and Taxes ............................... 25
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE VII
INDEMNITY
<S> <C> <C>
Section 7.1. Indemnity .............................................. 27
Section 7.2. Contribution ........................................... 30
Section 7.3. Note Registration Rights Agreement ..................... 31
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Survival of Provisions ................................. 31
Section 8.2. Termination ............................................ 31
Section 8.3. No Waiver; Modifications in Writing .................... 32
Section 8.4 Information Supplied by the Initial
Purchaser ............................................ 33
Section 8.5. Communications ......................................... 33
Section 8.6. Execution in Counterparts .............................. 34
Section 8.7. Successors ............................................. 34
Section 8.8. Governing Law .......................................... 34
Section 8.9. Severability of Provisions ............................. 34
Section 8.10. Headings ............................................... 35
</TABLE>
SIGNATURE PAGE
EXHIBITS
Exhibit 1 Form of Opinion of Cozen and O'Connor
Exhibit 2 Form of Opinion of Cahill Gordon & Reindel
-ii-
<PAGE>
SECURITIES PURCHASE AGREEMENT, dated as of July 17, 1996 (the
"Agreement"), by and between PIERCE LEAHY CORP., a New York corporation (the
"Company"), and CIBC WOOD GUNDY SECURITIES CORP. (the "Initial Purchaser").
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.1. Definitions. As used in this Agreement, and unless the
-----------
context requires a different meaning, the following terms have the meanings
indicated:
"Accredited Investor" has the meaning provided therefor in Section 3.2
-------------------
of this Agreement.
"Act" means the Securities Act of 1933, as amended, and the rules and
---
regulations of the Commission thereunder.
"Affiliate" means, with respect to any Person, any other Person which
---------
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Person in question. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling", "controlled by" and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise; provided, however, that beneficial ownership of at least 10% of the
-------- -------
voting securities of a Person shall be deemed to be control.
"Agreement" means this Agreement, as the same may be amended,
---------
supplemented or modified in accordance with the terms hereof.
"Basic Documents" means, collectively, the Indenture, the Notes, the
---------------
Note Registration Rights Agreement and this Agreement.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
------------
Friday which is not a day on which banking institutions in the City of New York
are authorized or obligated by law to close.
<PAGE>
-2-
"Closing" has the meaning provided therefor in Section 2.2(b) of this
-------
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Commission" means the Securities and Exchange Commission or any
----------
similar agency then having jurisdiction to enforce the Act.
"Common Stock" means, collectively, the Class A Common Stock and Class
------------
B Common Stock of the Company, each with a par value of $.01.
"Default" means any event, act or condition which, with notice or
-------
lapse of time or both, would constitute an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Event of Default" means any event defined as an Event of Default in
----------------
the Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations of the Commission thereunder.
"Exchange Notes" shall have the meaning provided therefor in the Note
--------------
Registration Rights Agreement.
"Final Memorandum" has the meaning provided therefor in Section 2.1
----------------
of this Agreement.
"Indemnified Party" has the meaning provided therefor in
-----------------
Section 7.1(c) of this Agreement.
"Indemnifying Party" has the meaning provided therefor in
------------------
Section 7.1(c) of this Agreement.
"Indenture" means the indenture dated as of July 15, 1996 by and
---------
between the Company and the Trustee under which the Notes will be issued.
"Initial Purchaser" has the meaning provided therefor in the
-----------------
introductory paragraph of this Agreement.
"Lien" means, with respect to any property or assets of any Person,
----
any mortgage or deed of trust, pledge, hypothecation,
<PAGE>
-3-
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 (as
defined in the Indenture), conditional sales, or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"Material Adverse Effect" means, with respect to the Company and its
-----------------------
Subsidiaries, a material adverse effect on the business, condition (financial or
otherwise), results of operations or prospects of the Company and its
Subsidiaries, taken as a whole; provided that, with respect to the Company,
--------
"Material Adverse Effect" shall also mean a material adverse effect on the
ability of the Company to perform its obligations under this Agreement or the
Basic Documents.
"Memorandum" has the meaning provided therefor in Section 2.1 of this
----------
Agreement.
"New Credit Facility" has the meaning provided therefor in the Final
-------------------
Memorandum.
"Note Registration Rights Agreement" means the registration rights
----------------------------------
agreement by and between the Company and the Initial Purchaser relating to the
Notes.
"Notes" means the 11-1/8% Senior Subordinated Notes due 2006 of the
-----
Company.
"Offering Materials" has the meaning provided therefor in Section 7.1
------------------
of this Agreement.
"Partnership Subsidiaries" means each of PLC Command I, L.P., a
------------------------
Pennsylvania limited partnership, and PLC Command II, L.P., a Pennsylvania
limited partnership.
"Person" means any individual, corporation, partnership, trust,
------
incorporated or unincorporated association, joint venture, joint-stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
"Pledged Securities" means 65% of the capital stock of Pierce Leahy
------------------
Command Company, a Nova Scotia unlimited liability company.
<PAGE>
-4-
"PORTAL" means the Private Offerings, Resales and Trading through
------
Automated Linkages Market.
"Preliminary Memorandum" has the meaning provided therefor in
----------------------
Section 2.1 of this Agreement.
"Private Exchange Notes" shall have the meaning provided therefor in
----------------------
the Note Registration Rights Agreement.
"Proceeding" has the meaning provided therefor in Section 7.1(c) of
----------
this Agreement.
"QIB" has the meaning provided therefor in Section 3.2 of this
---
Agreement.
"Real Estate Transactions" has the meaning provided therefor in the
------------------------
Memorandum.
"State" means each of the states of the United States, the District of
-----
Columbia and the Commonwealth of Puerto Rico.
"State Commission" means any agency of any State having jurisdiction
----------------
to enforce such State's securities laws.
"Subsidiaries" means, with respect to any Person, 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 generally accepted accounting principles such entity is
consolidated with the first-named Person for financial statement purposes.
"Supplement" has the meaning provided therefor in Section 2.1 of this
----------
Agreement.
"Taxes" has the meaning provided therefor in Section 3.1(u) of this
-----
Agreement.
"Time of Purchase" has the meaning provided therefor in Section 2.2(b)
----------------
of this Agreement.
<PAGE>
-5-
"Transactions" has the meaning provided therefor in the Memorandum.
------------
"Trustee" means United States Trust Company of New York, as trustee
-------
under the Indenture.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
-------------------
amended, and the rules and regulations of the Commission thereunder.
Section 1.2. Accounting Terms; Financial Statements. All accounting
--------------------------------------
terms used herein not expressly defined in this Agreement shall have the
respective meanings given to them in accordance with generally accepted
accounting principles in the United States as the same may be in effect from
time to time.
ARTICLE II
ISSUE OF NOTES; PURCHASE AND SALE
OF NOTES; RIGHTS OF HOLDERS OF NOTES;
OFFERING BY INITIAL PURCHASER
-------------------------------------
Section 2.1. Issue of Notes. The Company has authorized the issuance
--------------
of $200,000,000 aggregate principal amount of the Notes which are to be issued
pursuant to the Indenture. Each Note will be substantially in the form of the
Note set forth as Exhibit A to the Indenture.
The Notes will be offered and sold to the Initial Purchaser without
being registered under the Act, in reliance on exemptions therefrom.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum dated June 27, 1996 (the "Preliminary
Memorandum") and prepared a final offering memorandum dated July 17, 1996 (the
"Final Memorandum" and, together with the Preliminary Memorandum, the
"Memorandum") setting forth or including a description of the terms of the
Notes, the terms of the offering, a description of the Company and any material
developments relating to the Company occurring after the date of the most recent
financial statements included therein.
Section 2.2. Purchase, Sale and Delivery of Notes. (a) On the basis
------------------------------------
of the representations, warranties, agreements and covenants herein contained
and subject to the terms and conditions herein set forth, the Company agrees
that it will sell to the Initial Purchaser, and the Initial Purchaser agrees
that it will purchase from the Company at the Time of Purchase, $200,000,000
<PAGE>
-6-
aggregate principal amount of the Notes at a price equal to 97% of the principal
amount thereof.
(b) The purchase, sale and delivery of the Notes will take place at a
closing (the "Closing") at the offices of Cahill Gordon & Reindel, 80 Pine
Street, New York, New York, at 10:00 A.M., New York time, on July 23, 1996, or
such later date and time, if any, as the Initial Purchaser and the Company shall
agree. The time at which such Closing is concluded is herein called the "Time
of Purchase."
(c) One or more certificates in definitive form for the Notes that the
Initial Purchaser has agreed to purchase hereunder, and in such denomination or
denominations and registered in such name or names as the Initial Purchaser
requests upon notice to the Company at least 48 hours prior to the Closing,
shall be delivered by or on behalf of the Company to the Initial Purchaser,
against payment by or on behalf of the Initial Purchaser of the purchase price
therefor by wire transfer of immediately available funds wired in accordance
with the written instructions of the Company. The Company will make such
certificate or certificates for the Notes available for checking and packaging
by the Initial Purchaser at the offices of the Initial Purchaser, or such other
place as the Initial Purchaser may designate, at least 24 hours prior to the
Closing.
Section 2.3. Registration Rights of Holders of Notes. The Initial
---------------------------------------
Purchaser and its direct and indirect transferees of the Notes will have such
rights with respect to the registration thereof under the Act and qualification
of the Indenture under the Trust Indenture Act as are set forth in the Note
Registration Rights Agreement.
Section 2.4. Offering by the Initial Purchaser. The Initial
---------------------------------
Purchaser proposes to make an offering of the Notes at the price and upon the
terms set forth in the Final Memorandum, as soon as practicable after this
Agreement is entered into and as in the judgment of the Initial Purchaser is
advisable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES; RESALE OF NOTES
-----------------------------------------------
Section 3.1. Representations and Warranties of the Company. The
---------------------------------------------
Company represents and warrants to and agrees with the Initial Purchaser as
follows:
<PAGE>
-7-
(a) The Final Memorandum, as of its date and at the Time of Purchase,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this Section 3.1(a) do not
apply to statements or omissions made in reliance upon and in conformity
with information relating to the Initial Purchaser furnished to the Company
in writing by the Initial Purchaser expressly for use in the Final
Memorandum or any amendment or supplement thereto or relating to the manner
of sale of the Notes by the Initial Purchaser.
(b) The audited consolidated financial statements of the Company and
its Subsidiaries included in the Final Memorandum present fairly the
financial position, results of operations and cash flows of the Company and
its Subsidiaries at the dates and for the periods to which they relate and
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, except as otherwise stated
therein. The summary and selected financial data in the Final Memorandum
present fairly in all material respects the financial information shown
therein and have been prepared and compiled on a basis consistent with the
audited financial statements included therein, except as otherwise stated
therein. Arthur Andersen LLP ("Arthur Andersen") and Deloitte & Touche LLP
("Deloitte") are independent public accounting firms within the meaning of
the Act and the rules and regulations promulgated thereunder. The pro
forma financial statements (including the notes thereto) and the other pro
forma financial information included in the Final Memorandum have been
prepared using reasonable assumptions and in accordance with the applicable
requirements of the Act and include all adjustments necessary to present
fairly the pro forma financial information included within the Final
Memorandum at the respective dates and for the respective periods
indicated.
(c) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York and has filed all
reports with the Secretary of State of New York required to obtain a
certificate with respect to continued subsistence in good standing from
that office. Each Subsidiary of the Company is either (i) a corporation
duly incorporated or organized, validly existing and in good standing under
the laws of the state or other jurisdiction of its incorporation or
organization or (ii) a partnership duly organized and validly existing
under the applicable laws of
<PAGE>
-8-
the Commonwealth of Pennsylvania. Each of the Company and its Subsidiaries
is duly qualified and in good standing as a foreign corporation or
partnership, as the case may be, and is authorized to do business, in each
jurisdiction in which the ownership or leasing of any property or the
character of its operations makes such qualification necessary and in which
the failure so to qualify is reasonably likely to have a Material Adverse
Effect and except that the Company is in the process of qualifying to do
business in Michigan and reinstating its qualification in Connecticut and
Virginia.
(d) As of the Time of Purchase (after giving pro forma effect to the
Transactions), the Company will have the authorized, issued and outstanding
capitalization as set forth in the Final Memorandum. All of the issued and
outstanding shares of capital stock or partnership interests, as the case
may be, of the Company and its Subsidiaries are validly issued, all of such
capital stock is fully paid and nonassessable and none of such shares or
interests were issued in violation of any preemptive or similar rights.
Except as set forth in the Final Memorandum, (i) there are no outstanding
subscriptions, options, warrants, rights, convertible securities or other
binding agreements or commitments of any character obligating the Company
or its Subsidiaries to issue any securities and (ii) there is no agreement,
understanding or arrangement among the Company or its Subsidiaries and
their respective stockholders or any other Person relating to the ownership
or disposition of any capital stock or partnership interests, as the case
may be, in the Company or any of its Subsidiaries, the election of
directors of the Company or any of its Subsidiaries or the governance of
the Company's or any of its Subsidiaries' affairs, and such agreements,
arrangements or understandings will not be breached or violated as a result
of the execution and delivery of, or the consummation of the transactions
contemplated by, this Agreement and the other Basic Documents.
(e) This Agreement has been duly authorized, executed and delivered by
the Company and (assuming the due authorization, execution and delivery by
the Initial Purchaser) is a valid and legally binding agreement of the
Company, enforceable against it in accordance with its terms except (i)
that the enforcement hereof may be subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally, and to
general principles of equity and the discretion of the court before which
any proceeding therefor may be brought and (ii) as any
<PAGE>
-9-
rights to indemnity or contribution hereunder may be limited by federal and
state securities laws and public policy considerations.
(f) The Indenture has been duly authorized by the Company and, when
executed and delivered by the Company (assuming the due authorization,
execution and delivery by the Trustee), will constitute a valid and legally
binding agreement of the Company, enforceable against it in accordance with
its terms except (i) that the enforcement thereof may be subject to
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to creditors'
rights generally, and to general principles of equity and the discretion of
the court before which any proceeding therefor may be brought and (ii) as
any rights to indemnity or contribution thereunder may be limited by
federal and state securities laws and public policy considerations.
(g) The Note Registration Rights Agreement has been duly authorized by
the Company and, when executed and delivered by the Company (assuming the
due authorization, execution and delivery by the Initial Purchaser), will
constitute a valid and legally binding agreement of the Company,
enforceable against it in accordance with its terms except (i) that the
enforcement thereof may be subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally, and to
general principles of equity and the discretion of the court before which
any proceeding therefor may be brought and (ii) as any rights to indemnity
or contribution thereunder may be limited by federal and state securities
laws and public policy considerations.
(h) The Notes, the Exchange Notes and the Private Exchange Notes have
each been duly authorized by the Company and, when executed by the Company
and authenticated by the Trustee in accordance with the provisions of the
Indenture and, in the case of the Notes, delivered to and paid for by the
Initial Purchaser in accordance with the terms of this Agreement, will be
entitled to the benefits of the Indenture and will constitute valid and
legally binding obligations of the Company enforceable in accordance with
their terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to creditors'
rights generally, and (ii) general principles of
<PAGE>
-10-
equity and the discretion of the court before which any proceeding therefor
may be brought.
(i) Immediately after the consummation of the transactions
contemplated by this Agreement (including the use of proceeds from the sale
of Notes at the Time of Purchase), to the best of the Company's knowledge,
the fair value and present fair saleable value of the assets of the Company
(on a consolidated basis) will exceed the sum of its stated liabilities and
identified contingent liabilities; the Company (on a consolidated basis)
will not be, after giving effect to the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated
hereby (including the use of proceeds from the sale of Notes at the Time of
Purchase), (i) left with unreasonably small capital with which to carry on
its business as it is proposed to be conducted, (ii) unable to pay its
debts (contingent or otherwise) as they mature or (iii) otherwise
insolvent.
(j) The Company has all requisite corporate power and authority to (i)
execute, deliver and perform its obligations under each of this Agreement,
the Indenture, the Note Registration Rights Agreement and the Notes, (ii)
execute, deliver and perform its obligations under all other agreements and
instruments to be executed and delivered by the Company pursuant to or in
connection with each of the Basic Documents and the Transactions, (iii)
issue the Notes in the manner and for the purpose contemplated by this
Agreement and (iv) consummate each of the Transactions.
(k) Subsequent to the date as of which information is given in the
Final Memorandum to the date hereof, except as contemplated in the
Memorandum, there has not been (i) any event or condition that has had or
that could reasonably be expected to have a Material Adverse Effect, (ii)
any transaction entered into by the Company or any of its Subsidiaries,
other than in the ordinary course of business, that is material to the
Company and its Subsidiaries, taken as a whole, or (iii) any dividend or
distribution of any kind declared, paid or made by the Company on its
Common Stock (other than Permitted Tax Distributions, as such term is
defined in the Indenture).
(l) Except as set forth in the Final Memorandum, there is no action,
suit, investigation or proceeding, governmental or otherwise, pending or,
to the best knowledge of the Company, threatened to which the Company or
any of its Subsidiaries is or would be a party or of which the properties
<PAGE>
-11-
or assets of the Company or its Subsidiaries are or may be subject, that
(i) seeks to restrain, enjoin, prevent the consummation of or otherwise
challenge the issuance and sale of the Notes by the Company or any of the
other transactions contemplated hereby, (ii) questions the legality or
validity of any such transactions or seeks to recover damages or obtain
other relief in connection with any such transactions or (iii) could
reasonably be expected to have a Material Adverse Effect.
(m) The execution, delivery and performance by the Company of the
Basic Documents, the issuance and sale by the Company of the Notes, and the
execution, delivery and performance by the Company of all other agreements
and instruments to be executed and delivered by the Company pursuant hereto
or thereto or in connection herewith or therewith or in connection with any
of the Transactions, and compliance by the Company with the terms and
provisions hereof and thereof, do not and will not (i) violate any
provision of any law, rule or regulation (including, without limitation,
Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System), order, writ, judgment, decree, determination or award presently in
effect or in effect at the Time of Purchase having applicability to the
Company or any of its Subsidiaries, (ii) conflict with or result in a
breach of or constitute a default under the certificate of incorporation or
by-laws (or similar organizational document (including any partnership
agreement or certificate of limited partnership)) of the Company or any of
its Subsidiaries, or, as of the Time of Purchase, any indenture or loan or
credit agreement, or any other material agreement or instrument, to which
the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries or any of their respective properties or assets
may be bound or affected, or (iii) except as contemplated by the Basic
Documents or the New Credit Facility, result in, or require the creation or
imposition of, any Lien upon or with respect to any of the properties or
assets now owned or hereafter acquired by the Company or any of its
Subsidiaries, except, in each case, where such violation, conflict, default
or creation or imposition of any Lien would not (individually or in the
aggregate) be reasonably likely to have a Material Adverse Effect.
(n) Each agreement or instrument (other than the Basic Documents)
executed and delivered by the Company in connection with the Basic
Documents and the Transactions has been duly and validly authorized, and,
when executed and delivered by the Company, will constitute a valid and
legally binding
<PAGE>
-12-
obligation of the Company, enforceable against it in accordance with its
terms, except (i) that the enforcement thereof may be subject to
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to creditors'
rights generally, and to general principles of equity and the discretion
of the court before which any proceeding therefor may be brought and (ii)
as any rights to indemnity and contribution hereunder and thereunder may be
limited by applicable law.
(o) Neither the Company nor any of its Subsidiaries is currently or,
after giving effect to the consummation of the transactions contemplated by
this Agreement and the other Transactions, will be (i) in violation of its
respective certificate of incorporation or by-laws (or similar
organizational document (including any partnership agreement or certificate
of limited partnership)), (ii) in default (nor will an event occur which
with notice or passage of time or both would constitute such a default)
under or in violation of any indenture or loan or credit agreement or any
other material agreement or instrument to which it is a party or by which
it or any of its properties or assets may be bound or affected (except as
set forth in the Final Memorandum), (iii) in violation of any order of any
court, arbitrator or governmental body, or (iv) in violation of or will
have violated any statute, rule or regulation of any governmental
authority, except in each case, which default or violation (individually or
in the aggregate) could reasonably be expected to (y) affect the legality,
validity or enforceability of any of the Basic Documents in any material
respect or (z) have a Material Adverse Effect.
(p) Except as set forth in the Final Memorandum, and assuming the
accuracy of the Initial Purchaser's representations and warranties set
forth in Section 3.2 hereof, and the due performance by the Initial
Purchaser of the covenants and agreements set forth in Section 3.2 hereof,
no authorization, consent, approval, license, qualification or formal
exemption from, nor any filing, declaration or registration with, any
court, governmental agency or regulatory authority or any securities
exchange is required in connection with the execution, delivery or
performance by the Company or any of its Subsidiaries (to the extent they
are a party thereto) of any of the Basic Documents or any of the
Transactions, except (i) as may be required under state securities or "blue
sky" laws or the laws of any foreign jurisdiction in connection with the
offer and sale of the
<PAGE>
-13-
Notes or (ii) as would not (individually or in the aggregate) be reasonably
likely to have a Material Adverse Effect. All such authorizations,
consents, approvals, licenses, qualifications, exemptions, filings,
declarations and registrations set forth in the Final Memorandum (other
than as disclosed therein) which are required to have been obtained by the
date hereof have been obtained or made, as the case may be, and are in full
force and effect and not the subject of any pending or, to the knowledge of
the Company, threatened attack by appeal or direct proceeding or otherwise.
(q) The Company is not, and immediately after the Time of Purchase
will not be, an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
(r) The execution and delivery of this Agreement and the other Basic
Documents and the sale of the Notes to the Initial Purchaser will not
involve any non-exempt prohibited transaction within the meaning of Section
406 of ERISA, or Section 4975 of the Code on the part of the Company or any
of its Subsidiaries. No Reportable Event (as defined in Section 4043 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 Employee
Benefit Plan (as defined in Section 3(3) of ERISA), and the Company and its
Subsidiaries have complied in all material respects with the applicable
provisions of ERISA and the Code in connection with each Employee Benefit
Plan. The present value of all benefits vested under each Employee Benefit
Plan maintained by the Company or any person or entity treated with the
Company as a single employer under Section 414 of ERISA (a "Commonly
Controlled Entity") (based on the current liability, interest rate and
other assumptions used in preparation of the plan's Form 5500 Annual
Report) 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 (as defined in ERISA), 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 as of the
valuation date most closely preceding the date on which such representation
is made or deemed made. No such Multiemployer Plan is in reorganization or
insolvent. There are no material liabilities of the Company or any
Commonly Controlled Entity
<PAGE>
-14-
for post-retirement benefits to be provided to their current and former
employees under Plans which are welfare benefit plans (as described in
Section 3(1) of ERISA). To the best of the Company's knowledge, the
Company and its Subsidiaries are substantially and in all material respects
in compliance with all applicable laws with respect to all employee benefit
plans maintained or contributed to in respect of employees other than those
employed in the United States ("Foreign Plans"). There are no material
unfunded liabilities in respect of the Foreign Plans.
(s) The Company and each of its Subsidiaries have good and valid title
to, or valid and enforceable leasehold interests in, all properties and
assets identified in the Final Memorandum as owned or leased, respectively,
by each of them which are material to the business of the Company and its
Subsidiaries, taken as a whole, free and clear of all Liens, except (i)
such Liens as are described in the Final Memorandum or (ii) Liens created
in the ordinary course of business which are Permitted Liens (as defined in
the Indenture). All of the leases material to the business of the Company
or any of its Subsidiaries and under which the Company or any of its
Subsidiaries, as the case may be, holds properties described in the Final
Memorandum, are valid and binding as leased by them, with such exceptions
as are not material and do not interfere with the use made and proposed to
be made of such properties by the Company or any of its Subsidiaries, as
the case may be.
(t) No form of general solicitation or general advertising was used by
the Company, any of its Subsidiaries or any of their respective
representatives in connection with the offer and sale of the Notes.
Neither the Company, any of its Subsidiaries nor any Person authorized to
act for any of them has, either directly or indirectly, sold or offered for
sale any of the Notes or any other similar security of the Company to, or
solicited any offers to buy any thereof from, or has otherwise approached
or negotiated in respect thereof with, any Person or Persons other than
with or through the Initial Purchaser; and the Company agrees that neither
it, any of its Subsidiaries nor any Person acting on its or their behalf
will sell or offer for sale any Notes to, or solicit any offers to buy any
Notes from, or otherwise approach or negotiate in respect thereof with, any
Person or Persons so as thereby to bring the issuance or sale of any of
the Notes within the provisions of Section 5 of the Act.
<PAGE>
-15-
(u) All tax returns required to be filed by the Company or any of its
Subsidiaries in any jurisdiction (including foreign jurisdictions) have
been duly filed and all taxes, assessments, fees and other charges
including, without limitation, withholding taxes, penalties, and interest
("Taxes") due or claimed to be due have been paid, other than those Taxes
being contested in good faith and for which adequate reserves or accruals
have been established in accordance with generally accepted accounting
principles, except where the failure to file such returns or to pay such
Taxes is not reasonably likely to have, singly or in the aggregate, a
Material Adverse Effect. The Company knows of no actual or proposed
additional tax assessments for any fiscal period against the Company or any
of its Subsidiaries that, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect.
(v) The Company and its Subsidiaries are the owners or licensees of
all trade names, unregistered trademarks and service marks, brand names,
patents, registered and unregistered copyrights, registered trademarks and
service marks, and all applications for any of the foregoing, and all
permits, grants and licenses or other rights with respect thereto, the
absence of which could reasonably be expected to have a Material Adverse
Effect. Except as set forth in the Final Memorandum, neither the Company
nor any of its Subsidiaries has been charged with any material infringement
of any intangible property of the character described above or been
notified or advised of any material claim of any other Person relating to
any of the intangible property, which infringements or claims (individually
or in the aggregate) would be reasonably likely to have a Material Adverse
Effect.
(w) The Notes, the Indenture, the Note Registration Rights Agreement
and this Agreement conform in all material respects to the descriptions
thereof in the Final Memorandum.
(x) Assuming the accuracy of the Initial Purchaser's representations
and warranties set forth in Section 3.2 hereof, and the due performance by
the Initial Purchaser of the covenants and agreements set forth in Section
3.2 hereof, the offer and sale of the Notes to the Initial Purchaser in the
manner contemplated by this Agreement and the Memorandum does not require
registration under the Act and the Indenture does not require qualification
under the Trust Indenture Act of 1939, as amended.
<PAGE>
-16-
(y) Except as described in the Final Memorandum, each of the Company
and its Subsidiaries is in compliance with the common law and all federal,
state, local and foreign laws, and any rules, regulations, orders, decrees,
judgments or injunctions issued or promulgated thereunder relating to
pollution and protection of public and employee health and the environment
("Environmental Law") and with the terms and conditions of any permit,
license or approval required thereunder in connection with the ownership,
operation or use of its business, property and assets where the failure to
be in such compliance could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect; except as disclosed in the
Final Memorandum, and to the knowledge of the Company, none of the Company
or any of its Subsidiaries is subject to any liability, absolute or
contingent, under any Environmental Law which liability would, individually
or in the aggregate, be reasonably likely to result in a Material Adverse
Effect; except as disclosed in the Final Memorandum, there is no civil,
criminal or administrative action, suit, demand, hearing, notice of
violation or deficiency, investigation, proceeding or notice of potential
responsibility or liability or demand letter or request for information
pending or, to the knowledge of the Company, threatened against the Company
or any of its Subsidiaries under any Environmental Law which, if determined
adversely to the Company or any such Subsidiary, would, individually or in
the aggregate, be reasonably likely to result in a Material Adverse Effect.
(z) Except as set forth in the Final Memorandum, there is no strike,
labor dispute, slowdown or work stoppage with the employees of the Company
or any of its Subsidiaries which is pending or, to the best knowledge of
the Company or any of its Subsidiaries, threatened.
(aa) Each of the Company and its Subsidiaries carries insurance
(including self insurance) in such amounts and covering such risks as in
its reasonable determination is adequate for the conduct of its business
and the value of its properties.
(bb) No securities of the Company or any of its Subsidiaries are of
the same class (within the meaning of Rule 144A under the Act) as the Notes
and listed on a national securities exchange registered under Section 6 of
the Exchange Act, or quoted in a U.S. automated inter-dealer quotation
system.
<PAGE>
-17-
(cc) None of the Company or its Subsidiaries has taken, nor will any
of them take, directly or indirectly, any action designed to, or that might
be reasonably expected to, cause or result in stabilization or manipulation
of the price of the Notes.
(dd) None of the Company, its Subsidiaries, any of their respective
Affiliates or any person acting on its or their behalf (other than the
Initial Purchaser) has engaged in any directed selling efforts (as that
term is defined in Regulation S under the Act ("Regulation S") with respect
to the Notes and the Company, its Subsidiaries and their respective
Affiliates and any person acting on its or their behalf (other than the
Initial Purchaser) have acted in accordance with the offering restrictions
requirement of Regulation S.
(ee) The Company is an S corporation for federal income tax purposes
as defined in Section 1361 of the Code and has made an election pursuant to
Section 1362(a) of the Code to be an S corporation that remains effective
as of the date hereof. From the date of the Company's incorporation
through the date hereof, the Company has continuously qualified as an S
corporation under Subchapter S of the Code.
(ff) The Company has duly authorized each of the Transactions.
(gg) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the New Credit Facility
and to consummate the transactions contemplated thereby. The New Credit
Facility has been duly authorized by the Company and when executed and
delivered by the Company, will constitute a valid and legally binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except (i) that the enforcement thereof may be subject to
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to creditors'
rights generally and to general principles of equity and the discretion of
the court before which any proceeding therefor may be brought and (ii) as
any rights to indemnity or contribution thereunder may be limited by
federal and state securities laws and public policy considerations.
(hh) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Company believes
to be reliable and accurate or
<PAGE>
-18-
represents the Company's good faith estimates that are made on the basis of
data derived from such sources.
(ii) Except as stated in the Final Memorandum, the Company does not
know of any claims for services, either in the nature of a finder's fee or
financial advisory fee, with respect to the offering of the Notes and the
transactions contemplated by the Final Memorandum.
Section 3.2. Resale of Notes. The Initial Purchaser represents and
---------------
warrants that it is a "qualified institutional buyer" as defined in Rule 144A
under the Act ("QIB"). The Initial Purchaser agrees with the Company that (a)
it has not and will not, directly or indirectly, solicit offers for, or offer or
sell, the Notes by any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Act; (b) has not and
will not, directly or indirectly, engage in any "directed selling efforts" (as
defined in Regulation S under the Act); and (c) it has and will solicit offers
for the Notes only from, and will offer the Notes only to (A) in the case of
offers inside the United States, (i) Persons whom the Initial Purchaser
reasonably believes to be QIBs or, if any such Person is buying for one or more
institutional accounts for which such Person is acting as fiduciary or agent,
only when such Person has represented to the Initial Purchaser that each such
account is a QIB, to whom notice has been given that such sale or delivery is
being made in reliance on Rule 144A, and, in each case, in transactions under
Rule 144A or (ii) a limited number of other institutional investors reasonably
believed by the Initial Purchaser to be "Accredited Investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) of the Act) that, prior to their purchase of the
Notes, deliver to the Initial Purchaser a letter containing the representations
and agreements set forth in Annex A to the Final Memorandum and (B) in the case
of offers outside the United States, to Persons other than U.S. Persons
("foreign purchasers," which term shall include dealers or other professional
fiduciaries in the United States acting on a discretionary basis for foreign
beneficial owners (other than an estate or trust)); provided, however, that, in
-------- -------
the case of this clause (B), in purchasing such Notes such Persons are deemed to
have represented and agreed as provided under the caption "Notice to Investors"
contained in the Final Memorandum.
<PAGE>
-19-
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
Section 4.1. Conditions Precedent to Obligations of the Initial
--------------------------------------------------
Purchaser. The obligation of the Initial Purchaser to purchase the Notes to be
- ---------
purchased by it hereunder is subject to the satisfaction of the following
conditions:
(a) The Initial Purchaser shall have received an opinion, addressed to
the Initial Purchaser in form and substance reasonably satisfactory to
counsel to the Initial Purchaser and dated the Time of Purchase, from Cozen
and O'Connor, counsel to the Company, covering the matters set forth in
Exhibit 1 hereto.
(b) The Initial Purchaser shall have received an opinion, addressed to
the Initial Purchaser in form and substance satisfactory to the Initial
Purchaser and dated the Time of Purchase, of Cahill Gordon & Reindel,
counsel to the Initial Purchaser, substantially in the form of Exhibit 2
hereto.
In rendering such opinions in accordance with Sections 4.1(a) and (b),
each such counsel may rely as to factual matters upon certificates or other
documents furnished by officers and directors of the Company and
representations of the Initial Purchaser and by government officials, and
upon such other documents as such counsel deem appropriate as a basis for
their opinion. Each such counsel may specify the jurisdictions in which it
is admitted to practice and that it is not admitted to practice in any
other jurisdiction or an expert in the law of any other jurisdiction. To
the extent such opinion concerns the laws of any other such jurisdiction
such counsel may rely upon the opinion of counsel (satisfactory to the
Initial Purchaser) admitted to practice in such jurisdiction. Any opinion
relied upon by such counsel as aforesaid shall be delivered to the Initial
Purchaser together with the opinion of such counsel, which opinion shall
state that such counsel believes that their and the Initial Purchaser's
reliance thereon is justified.
(c) The Initial Purchaser shall have received from each of Arthur
Andersen and Deloitte a comfort letter or letters dated the date hereof
and, with respect to Arthur Andersen, the Closing in form and substance
reasonably satisfactory to counsel to the Initial Purchaser.
<PAGE>
-20-
(d) The representations and warranties made by the Company herein
shall be true and correct in all material respects (except for changes
expressly provided for in this Agreement) on and as of the Time of Purchase
with the same effect as though such representations and warranties had been
made on and as of the Time of Purchase, the Company shall have complied in
all material respects with all agreements as set forth in or contemplated
hereunder and in the other Basic Documents required to be performed by it
at or prior to the Time of Purchase.
(e) Subsequent to the date of the Final Memorandum, (i) there shall
not have been any change, or any development involving a prospective
change, which has had or could be reasonably likely to have a Material
Adverse Effect, and (ii) the Company and its Subsidiaries shall have
conducted their respective businesses only in the ordinary course.
(f) At the Time of Purchase and after giving effect to the
consummation of the transactions contemplated by this Agreement and the
other Basic Documents, there shall exist no Default or Event of Default.
(g) The purchase of and payment for the Notes by the Initial Purchaser
hereunder shall not be prohibited or enjoined (temporarily or permanently)
by any applicable law or governmental regulation (including, without
limitation, Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System).
(h) At the Time of Purchase, the Initial Purchaser shall have received
a certificate, dated the Time of Purchase, from the Company stating that
the conditions specified in Sections 4.1(d), (e), (f) and (l) have been
satisfied or duly waived at the Time of Purchase.
(i) Each of the Basic Documents shall be reasonably satisfactory in
form and substance to the Initial Purchaser and shall have been executed
and delivered by all the respective parties thereto and shall be in full
force and effect.
(j) All proceedings taken in connection with the issuance of the Notes
and the transactions contemplated by this Agreement, the other Basic
Documents and all documents and papers relating thereto shall be reasonably
satisfactory to the Initial Purchaser and counsel to the Initial Purchaser.
The Initial Purchaser and counsel to the Initial Purchaser
<PAGE>
-21-
shall have received copies of such papers and documents as they may
reasonably request in connection therewith, all in form and substance
reasonably satisfactory to them.
(k) The Company shall have furnished to the Initial Purchaser the form
of New Credit Facility and a true and correct copy of the Agreement and
Plan of Merger relating to the merger of Archives America of San Diego,
Inc. with and into the Company and independent valuations prepared by
Cushman & Wakefield with respect to the properties to be purchased pursuant
to the Real Estate Transactions.
(l) The sale of the Notes hereunder shall not have been enjoined
(temporarily or permanently) at the Time of Purchase.
(m) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of
Rule 436(g) under the Act, that (A) it is downgrading its rating assigned
to any debt securities of the Company, or (B) it is reviewing its rating
assigned to any debt securities of the Company with a view to possible
downgrading, or with negative implications, or direction not determined.
(n) The Initial Purchaser shall have sold $200,000,000 aggregate
principal amount of the Notes in accordance with the provisions of Section
3.2 hereof.
On or before the Closing, the Initial Purchaser and counsel to the
Initial Purchaser shall have received such further documents, opinions,
certificates and schedules or other instruments relating to the business,
corporate, legal and financial affairs of the Company and its Subsidiaries as
they may reasonably request.
ARTICLE V
COVENANTS
---------
Section 5.1. Covenants of the Company. The Company covenants and
------------------------
agrees with the Initial Purchaser that:
(a) The Company will not amend or supplement the Final Memorandum or
any amendment or supplement thereto of which the Initial Purchaser shall
not previously have been advised and furnished a copy for a reasonable
period of time prior to the proposed amendment or supplement and as to
which the Initial Purchaser shall not have given its consent, which consent
<PAGE>
-22-
shall not be unreasonably withheld. The Company will promptly, upon the
reasonable request of the Initial Purchaser or counsel to the Initial
Purchaser, make any amendments or supplements to the Preliminary Memorandum
or the Final Memorandum that may be necessary or advisable in the opinion
of the Initial Purchaser or counsel to the Initial Purchaser in connection
with the resale of the Notes by the Initial Purchaser.
(b) The Company will cooperate with the Initial Purchaser in arranging
for the qualification of the Notes for offering and sale under the
securities or "Blue Sky" laws of such jurisdictions as the Initial
Purchaser may designate and will continue such qualifications in effect for
as long as may be reasonably necessary to complete the resale of the Notes;
provided, however, that in connection therewith, the Company shall not be
-------- -------
required to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction or subject itself to
taxation in excess of a nominal dollar amount in any such jurisdiction
where it is not then so subject.
(c) If, at any time prior to the completion of the distribution by the
Initial Purchaser of the Notes, the Exchange Notes or the Private Exchange
Notes, any event occurs or information becomes known as a result of which
the Final Memorandum as then amended or supplemented would include any
untrue statement of a material fact, or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if for any other reason it
is necessary at any time to amend or supplement the Final Memorandum to
comply with applicable law, the Company will promptly notify the Initial
Purchaser thereof (who thereafter will not use such Final Memorandum until
appropriately amended or supplemented) and will prepare, at the expense of
the Company, an amendment or supplement to the Final Memorandum that
corrects such statement or omission or effects such compliance; provided,
--------
however, that the Company's obligation hereunder shall not be applicable to
-------
the extent resale by the Initial Purchaser may be accomplished pursuant to
a Registration Statement (as defined in the Note Registration Rights
Agreement).
(d) The Company will, without charge, provide to the Initial Purchaser
and to counsel to the Initial Purchaser as many copies of the Preliminary
Memorandum and the Final Memorandum or any amendment or supplement thereto
as the Initial Purchaser may reasonably request.
<PAGE>
-23-
(e) The Company will apply the net proceeds from the sale of the Notes
as set forth under "Use of Proceeds" in the Final Memorandum.
(f) For and during the period ending on the date no Notes are
outstanding, the Company will furnish to the Initial Purchaser copies of
all reports and other communications (financial or otherwise) furnished by
the Company to the Trustee or the holders of the Notes and, promptly after
available, copies of any reports or financial statements furnished to or
filed by the Company with the Commission or any national securities
exchange on which any class of securities of the Company may be listed.
(g) Prior to the Time of Purchase, the Company will furnish to the
Initial Purchaser, as soon as they have been prepared, a copy of any
unaudited interim financial statements of the Company for any period
subsequent to the period covered by the most recent financial statements
appearing in the Final Memorandum.
(h) None of the Company or any of its Affiliates will sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale
of the Notes in a manner which would require the registration under the Act
of the Notes.
(i) The Company will not, and will not permit any of its Subsidiaries
to, solicit any offer to buy or offer to sell the Notes by means of any
form of general solicitation or general advertising (as those terms are
used in Regulation D under the Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Act.
(j) For so long as any of the Notes remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the Act
and not salable in full under Rule 144 under the Act (or any successor
provision), the Company will make available, upon request, to any seller of
such Notes the information specified in Rule 144A(d)(4) under the Act,
unless the Company is then subject to Section 13 or 15(d) of the Exchange
Act.
(k) The Company will use its best efforts to (i) permit the Notes to
be included for quotation on PORTAL and (ii) permit the Notes to be
eligible for clearance and settlement through The Depository Trust Company.
<PAGE>
-24-
(l) The Company will use its best efforts to do and perform all things
required to be done and performed by it under this Agreement and the other
Basic Documents prior to or after the Closing and to satisfy all conditions
precedent on its part to the obligations of the Initial Purchaser to
purchase and accept delivery of the Notes.
(m) Upon execution and delivery of the New Credit Facility, the
Partnership Subsidiaries will execute and deliver a pledge agreement with
respect to the pledge of the Pledged Securities, by and between the
Partnership Subsidiaries, as pledgors, and the Trustee, for the benefit of
the holders of the Notes, in form and substance reasonably satisfactory to
counsel for the Initial Purchaser. Upon execution of such pledge
agreement, counsel for the Company shall deliver to the Trustee an opinion
of counsel substantially identical (except as to priority) as that provided
to the collateral agent for the lenders under the New Credit Facility
relating to the pledge of the Pledged Securities under the New Credit
Facility.
ARTICLE VI
FEES
----
Section 6.1. Costs, Expenses and Taxes. The Company agrees to pay
-------------------------
all costs and expenses incident to the performance of its obligations under this
Agreement, whether or not the transactions contemplated herein are consummated
or this Agreement is terminated pursuant to Section 8.2 hereof, including, but
not limited to, all costs and expenses incident to (i) its negotiation,
preparation, printing, typing, reproduction, execution and delivery of this
Agreement and each of the other Basic Documents, any amendment or supplement to
or modification of any of the foregoing and any and all other documents
furnished pursuant hereto or thereto or in connection herewith or therewith,
(ii) any costs of printing the Preliminary Memorandum and the Final Memorandum
and any amendment or supplement thereto, any other marketing related materials
and any "Blue Sky" memoranda (which shall include the reasonable disbursements
of counsel to the Initial Purchaser in respect thereof), (iii) all arrangements
relating to the delivery to the Initial Purchaser of copies of the foregoing
documents, (iv) the fees and disbursements of the counsel, the accountants and
any other experts or advisors retained by the Company, (v) preparation
(including printing), issuance and delivery to the Initial Purchaser of the
Notes, (vi) the qualification of the Notes under state securities and "Blue Sky"
laws, including filing fees and reasonable fees and disbursements of counsel to
the Initial
<PAGE>
-25-
Purchaser relating thereto, (vii) its expenses and the cost of any private or
chartered jets in connection with any meetings with prospective investors in the
Notes, (viii) fees and expenses of the Trustee including fees and expenses of
counsel to the Trustee, (ix) all expenses and listing fees incurred in
connection with the application for quotation of the Notes on PORTAL, (x) any
fees charged by investment rating agencies for the rating of the Notes and (xi)
except as limited by Article VII, all costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses), if any, in connection with
the enforcement of this Agreement, the Notes or any other agreement furnished
pursuant hereto or thereto or in connection herewith or therewith. In addition,
the Company shall pay any and all stamp, transfer and other similar taxes (but
excluding any income, franchise, personal property, ad valorem or gross
receipts taxes) payable or determined to be payable in connection with the
execution and delivery of this Agreement, any of the other Basic Documents or
the issuance of the Notes, and shall save and hold the Initial Purchaser
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying, or omission to pay, such taxes (other than if such
delay is caused by the Initial Purchaser).
ARTICLE VII
INDEMNITY
---------
Section 7.1. Indemnity.
---------
(a) Indemnification by the Company. The Company agrees and covenants
------------------------------
to hold harmless and indemnify the Initial Purchaser and any Affiliates thereof
(including any director, officer, employee, agent or controlling Person of any
of the foregoing) from and against any losses, claims, damages, liabilities and
expenses (including expenses of investigation) to which the Initial Purchaser
and its Affiliates may become subject arising out of or based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Memorandum and any amendments or supplements thereto, the Basic Documents, any
documents filed with the Commission or any State Commission (collectively, the
"Offering Materials") or arising out of or based upon the omission or alleged
omission to state in any of the Offering Materials a material fact required to
be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company shall not be liable under this paragraph (a)
- -------- -------
to the extent that such losses, claims, damages or liabilities arose out of or
are based upon an untrue statement or omission made in any of the documents
referred to in this paragraph (a) in reliance upon and in
<PAGE>
-26-
conformity with the information relating to the Initial Purchaser furnished in
writing by the Initial Purchaser for inclusion therein (or for a breach by the
Initial Purchaser of any representation or warranty contained in this
Agreement); provided, further, that the Company shall not be liable under this
-------- -------
paragraph (a) to the extent that such losses, claims, damages or liabilities
arose out of or are based upon an untrue statement or omission made in any
Memorandum that is corrected in the Final Memorandum (or any amendment or
supplement thereto) if the person asserting such loss, claim, damage or
liability purchased Notes from the Initial Purchaser in reliance on such
Memorandum but was not given the Final Memorandum (or any amendment or
supplement thereto) on or prior to the confirmation of the sale of such Notes.
The Company further agrees to reimburse the Initial Purchaser for any reasonable
legal and other expenses as they are incurred by it in connection with
investigating, preparing to defend or defending any lawsuits, claims or other
proceedings or investigations arising in any manner out of or in connection with
such Person being the Initial Purchaser; provided that if the Company reimburses
--------
the Initial Purchaser hereunder for any expenses incurred in connection with a
lawsuit, claim or other proceeding for which indemnification is sought, the
Initial Purchaser hereby agrees to refund such reimbursement of expenses to the
extent that the losses, claims, damages or liabilities arise out of or are based
upon an untrue statement or omission made in any of the documents referred to in
this paragraph (a) in reliance upon and in conformity with the information
relating to the Initial Purchaser furnished in writing by the Initial Purchaser
for inclusion therein (or for a breach by the Initial Purchaser of any
representation or warranty contained in this Agreement). The Company further
agrees that the indemnification, contribution and reimbursement commitments set
forth in this Article VII shall apply whether or not the Initial Purchaser is a
formal party to any such lawsuits, claims or other proceedings. The indemnity,
contribution and expense reimbursement obligations of the Company under this
Article VII shall be in addition to any liability the Company may otherwise
have.
(b) Indemnification by the Initial Purchaser. The Initial Purchaser
----------------------------------------
agrees and covenants to hold harmless and indemnify the Company and any
Affiliates thereof (including any director, officer, employee, agent or
controlling Person of any of the foregoing) from and against any losses, claims,
damages, liabilities and expenses insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement of
any material fact contained in the Offering Materials, or any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent,
<PAGE>
-27-
that such untrue statement or omission was made in reliance upon and in
conformity with the information relating to the Initial Purchaser furnished in
writing by the Initial Purchaser for inclusion therein. The indemnity,
contribution and expense reimbursement obligations of the Initial Purchaser
under this Article VII shall be in addition to any liability the Initial
Purchaser may otherwise have.
(c) Procedure. If any Person shall be entitled to indemnity hereunder
---------
(each an "Indemnified Party"), such Indemnified Party shall give prompt written
notice to the party or parties from which such indemnity is sought (each an
"Indemnifying Party") of the commencement of any action, suit, investigation or
proceeding, governmental or otherwise (a "Proceeding"), with respect to which
such Indemnified Party seeks indemnification or contribution pursuant hereto;
provided, however, that the failure so to notify the Indemnifying Parties shall
- -------- -------
not relieve the Indemnifying Parties from any obligation or liability except to
the extent that the Indemnifying Parties have been prejudiced materially by such
failure. The Indemnifying Parties shall have the right, exercisable by giving
written notice to an Indemnified Party promptly after the receipt of written
notice from such Indemnified Party of such Proceeding, to assume, at the
Indemnifying Parties' expense, the defense of any such Proceeding, with counsel
reasonably satisfactory to such Indemnified Party; provided, however, that an
-------- -------
Indemnified Party or parties (if more than one such Indemnified Party is named
in any Proceeding) shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or parties
unless: (1) the Indemnifying Parties agree to pay such fees and expenses; or
(2) the Indemnifying Parties fail promptly to assume the defense of such
Proceeding or fail to employ counsel reasonably satisfactory to such Indemnified
Party or parties; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party or parties and the
Indemnifying Party or an Affiliate of the Indemnifying Party and such
Indemnified Parties, and the Indemnified Parties shall have been advised in
writing by counsel that there may be one or more legal defenses available to
such Indemnified Party or parties that are different from or additional to those
available to the Indemnifying Parties, in which case, if such Indemnified Party
or parties notifies the Indemnifying Parties in writing that it elects to employ
separate counsel at the expense of the Indemnifying Parties, the Indemnifying
Parties shall not have the right to assume the defense thereof with respect to
the Indemnified Parties and such counsel shall be at the expense of the
Indemnifying Parties, it being understood, however, that the
<PAGE>
-28-
Indemnifying Parties shall not, in connection with any one such Proceeding or
separate but substantially similar or related Proceedings in the same
jurisdiction, arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such Indemnified Party
or parties, or for fees and expenses that are not reasonable. No Indemnified
Party or Parties will settle any Proceeding without the consent of the
Indemnifying Party or parties (but such consent shall not be unreasonably
withheld). No Indemnifying Party shall, without the prior written consent of
the Indemnified Party, effect any settlement of any pending or threatened
Proceeding in respect of which any Indemnified Party is or could have been or a
party and indemnity could have been sought hereunder by such Indemnified Party,
unless such settlement includes an unconditional release of such Indemnified
Party from all liability or claims that are the subject of such Proceeding.
Section 7.2. Contribution. If for any reason the indemnification
------------
provided for in Section 7.1 of this Agreement is unavailable to an Indemnified
Party, or insufficient to hold it harmless, in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then each applicable
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnifying Party on the one hand and the Indemnified Party on the other, but
also the relative fault of the Indemnifying and Indemnified Parties in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Indemnifying and
Indemnified Parties shall be deemed to be in the same proportion as the total
proceeds from the offering of the Notes (before deducting expenses, but after
giving effect to the Initial Purchaser's discount) received by the Company bear
to the total discounts and commissions received by the Initial Purchaser. The
relative fault of the Indemnifying and Indemnified Parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Indemnifying or Indemnified
Parties and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid
or payable by a party as a result of the losses, claims, damages and liabilities
referred to above shall be deemed to include any legal or other fees or expenses
incurred by such
<PAGE>
-29-
party in connection with investigating or defending any such claim.
The Company and the Initial Purchaser agree that it would not be just
and equitable if contribution pursuant to the immediately preceding paragraph
were determined pro rata or per capita or by any other method of allocation
which does not take into account the equitable considerations referred to in
such paragraph. Notwithstanding any other provision of this Section 7.2, the
Initial Purchaser shall not be obligated to make contributions hereunder that in
the aggregate exceed the total discounts, commissions and other compensation
received by the Initial Purchaser under this Agreement, less the aggregate
amount of any damages that the Initial Purchaser has otherwise been required to
pay by reason of the untrue or alleged untrue statements or a breach of a
representation or warranty or the omissions or alleged omissions to state a
material fact. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
Section 7.3. Note Registration Rights Agreement. Notwithstanding
----------------------------------
anything to the contrary in this Article VII, the indemnification and
contribution provisions of the Note Registration Rights Agreement shall govern
any claim with respect thereto.
ARTICLE VIII
MISCELLANEOUS
-------------
Section 8.1. Survival of Provisions. The representations, warranties
----------------------
and covenants of the Company, its officers and the Initial Purchaser made
herein, the indemnity and contribution agreements contained herein and each of
the provisions of Articles V, VII and VIII shall remain operative and in full
force and effect regardless of (a) the investigation made by or on behalf of the
Company, the Initial Purchaser or any Indemnified Party, (b) acceptance of any
of the Notes and payment therefor, (c) any termination of this Agreement or (d)
disposition of the Notes by the Initial Purchaser whether by redemption,
exchange, sale or otherwise.
Section 8.2. Termination. (a) This Agreement may be terminated in
-----------
the sole discretion of the Initial Purchaser by notice to the Company given
prior to the Time of Purchase in the event that the Company shall have failed,
refused or been unable to perform all obligations and satisfy all conditions on
its part to
<PAGE>
-30-
be performed or satisfied hereunder at or prior thereto or, if at or prior to
the Closing:
(i) the Company or any of its Subsidiaries shall have sustained
any loss or interference with respect to its businesses or properties from
fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any strike, labor dispute, slow down or work stoppage
or any legal or governmental proceeding, which loss or interference, in the
sole judgment of the Initial Purchaser, has had or has a Material Adverse
Effect, or there shall have been, in the sole judgment of the Initial
Purchaser, any event or development that, individually or in the aggregate,
has or could be reasonably likely to have a Material Adverse Effect
(including without limitation a change in control of the Company or any of
its Subsidiaries), except in each case as described in the Final Memorandum
(exclusive of any amendment or supplement thereto);
(ii) trading in securities of the Company or in securities
generally on the New York Stock Exchange, American Stock Exchange or the
Nasdaq National Market shall have been suspended or minimum or maximum
prices shall have been established on any such exchange or market;
(iii) a banking moratorium shall have been declared by New York or
United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international calamity
or emergency, or (C) any material change in the financial markets of the
United States which, in the case of (A), (B) or (C) above and in the sole
judgment of the Initial Purchaser, makes it impracticable or inadvisable to
proceed with the offering or the delivery of the Notes as contemplated by
the Final Memorandum; or
(v) any securities of the Company shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 8.2
shall be without liability of any party to any other party except as provided in
Section 8.1 hereof.
<PAGE>
-31-
Section 8.3. No Waiver; Modifications in Writing. No failure or
-----------------------------------
delay on the part of the Company or the Initial Purchaser in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies provided for herein are cumulative and are not exclusive
of any remedies that may be available to the Company or the Initial Purchaser at
law or in equity or otherwise. No waiver of or consent to any departure by the
Company or the Initial Purchaser from any provision of this Agreement shall be
effective unless signed in writing by the party entitled to the benefit thereof,
provided that notice of any such waiver shall be given to each party hereto as
- --------
set forth below. Except as otherwise provided herein, no amendment,
modification or termination of any provision of this Agreement shall be
effective unless signed in writing by or on behalf of each of the Company and
the Initial Purchaser. Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by the Company or the Initial Purchaser from the
terms of any provision of this Agreement, shall be effective only in the
specific instance and for the specific purpose for which made or given. Except
where notice is specifically required by this Agreement, no notice to or demand
on the Company in any case shall entitle the Company to any other or further
notice or demand in similar or other circumstances.
Section 8.4. Information Supplied by the Initial Purchaser. The
---------------------------------------------
statements set forth in the legend on the inside front cover of the Memorandum
and in the second and third sentences of the third paragraph and the seventh
paragraph under the heading "Plan of Distribution" in the Final Memorandum (to
the extent such statements relate to the Initial Purchaser) constitute the only
information furnished by the Initial Purchaser to the Company for the purposes
of Sections 3.1(a) and 7.1(a) and (b) hereof.
Section 8.5. Communications. All notices, demands and other
--------------
communications provided for hereunder shall be in writing, and, (a) if to the
Initial Purchaser, shall be given by registered or certified mail, return
receipt requested, telex, telegram, telecopy, courier service or personal
delivery, addressed to CIBC Wood Gundy Securities Corp., 425 Lexington Avenue,
3rd Floor, New York, New York 10017, Attention: Walter F. McLallen, with a copy
to Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005, Attention:
Roger Meltzer, Esq., and (b) if to the Company, shall be given by similar means
to Pierce Leahy Corp., 631 Park Avenue, King of Prussia, Pennsylvania 19406,
Attention: President, with a copy to Cozen and O'Connor, 1900 Market Street,
Philadelphia,
<PAGE>
-32-
Pennsylvania 19103, Attention: Richard J. Busis, Esq. In each case notices,
demands and other communications shall be deemed given when received.
Section 8.6. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
Section 8.7. Successors. This Agreement shall inure to the benefit
----------
of and be binding upon the Initial Purchaser, the Company and their respective
successors and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other Person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained; this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such Persons and for the benefit of no other Person except that (i)
the indemnities of the Company contained in Section 7.1(a) of this Agreement
shall also be for the benefit of the directors, officers, employees and agents
of the Initial Purchaser and any Person or Persons who control the Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnities of the Initial Purchaser contained in
Section 7.1(b) of this Agreement shall also be for the benefit of the directors
of the Company, its officers, employees and agents and any Person or Persons who
control the Company within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act. No purchaser of Notes from the Initial Purchaser will be
deemed a successor because of such purchase.
Section 8.8. Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A
-------------
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 8.9. Severability of Provisions. 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 or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 8.10. Headings. The Article and Section headings and Table
--------
of Contents used or contained in this Agreement
<PAGE>
-33-
are for convenience of reference only and shall not affect the construction of
this Agreement.
<PAGE>
-34-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
PIERCE LEAHY CORP.
By: /s/ J. Peter Pierce
-------------------------
Name: J. Peter Pierce
Title: President
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ Walter F. McLallen
----------------------------
Name: Walter F. McLallen
Title: Managing Director
<PAGE>
PIERCE LEAHY CORP.
COMPUTATION OF RATION OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Historical Pro Forma Historical Pro Forma
----------------------------------------------- ------------ --------------------- ------------
Three Months Three Months
Year Ended Ended Ended
Year Ended December 31, December 31, March 31, March 31,
-----------------------------------------------
1991 1992 1993 1994 1995 1995 1995 1996 1996
----------------------------------------------- ------------ --------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
Rent expense $8,205 $9,753 $11,070 $12,261 $14,097 $15,648 $3,276 $4,182 $4,247
----------------------------------------------- ------------ --------------------- ------------
Portion of rent
representative of an
interest factor (1/3) $2,735 $3,251 $3,690 $4,087 $4,699 $5,216 $1,092 $1,394 $1,416
Interest expense 6,677 6,388 6,160 7,216 9,622 23,686 1,928 2,846 5,921
----------------------------------------------- ------------ --------------------- ------------
Total fixed charges A 9,412 9,639 9,850 11,303 14,321 28,902 3,020 4,240 7,337
Income (loss) before
income taxes and
extraordinary items (666) 1,999 2,972 1,200 5,347 (438) 1,035 1,894 (181)
----------------------------------------------- ------------ --------------------- ------------
Earnings before
fixed charges B $8,746 $11,638 $12,822 $12,503 $19,668 $28,464 $4,055 $6,134 $7,156
----------------------------------------------- ------------ --------------------- ------------
Ratio of earnings to
fixed charges
(B divided by A) ($666)(1) 1.21x 1.30x 1.11x 1.37x ($438)(1) 1.34x 1.45x ($181)(1)
</TABLE>
(1) Earnings were inadequate to cover fixed charges by the amount indicated
<PAGE>
ARTHUR ANDERSEN LLP
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.,
August 9, 1996
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this 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
August 9, 1996
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
_______
--------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
---------------------------
Pierce Leahy Corp.
(Exact name of obligor as specified in its charter)
New York 23-2588479
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
631 Park Avenue 19406
King of Prussia, Pennsylvania (Zip code)
(Address of principal executive offices)
--------------------------
<PAGE>
- 2 -
GENERAL
1. General Information
-------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of New York (2nd District), New York, New
York (Board of Governors of the Federal Reserve System).
Federal Deposit Insurance Corporation, Washington, D. C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
-----------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3. Voting Securities of the Trustee
--------------------------------
2,999,020 shares of Common Stock - par value $5 per share.
4. Trusteeships under Other Indentures
-----------------------------------
(a) Title of the securities outstanding under each such indenture.
Not applicable.
5. Interlocking Directorates and Similar Relationships with the Obligor or
-----------------------------------------------------------------------
Underwriters
------------
Not applicable.
<PAGE>
- 3 -
6. Voting Securities of the Trustee Owned by the Obligor or its Officials
----------------------------------------------------------------------
Not applicable.
7. Voting Securities of the Trustee Owned by Underwriters or their
---------------------------------------------------------------
Officials
---------
Not applicable.
8. Securities of the Obligor Owned or Held by the Trustee
------------------------------------------------------
Not applicable.
9. Securities of Underwriters Owned or Held by the Trustee
-------------------------------------------------------
Not applicable.
10. Ownership or Holdings by the Trustee of Voting Securities of Certain
--------------------------------------------------------------------
Affiliates or Securityholders of the Obligor
--------------------------------------------
Not applicable.
11. Ownership or Holdings by the Trustee of any Securities of a Person
------------------------------------------------------------------
Owning 50 Percent or More of the Voting Securities of the Obligor
-----------------------------------------------------------------
Not applicable.
12. Indebtedness of the Obligor to the Trustee
------------------------------------------
Not applicable.
13. Defaults by the Obligor
-----------------------
Not applicable.
<PAGE>
- 4 -
14. Affiliations with the Underwriters
----------------------------------
Not applicable.
15. Foreign Trustee
---------------
Not applicable.
16. List of Exhibits
----------------
T-1.1 -- Organization Certificate, as amended, issued by the State
of New York Banking Department to transact business as a
Trust Company, is incorporated by reference to Exhibit T-
1.1 to Form T-1 filed on September 15, 1995 with the
Commission pursuant to the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990
(Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
T-1.4 -- The By-laws of the United States Trust Company of New
York, as amended, is incorporated by reference to Exhibit
T-1.4 to Form T-1 filed on September 15, 1995 with the
Commission pursuant to the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990
(Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of
the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
<PAGE>
- 5 -
NOTE
As of August 6, 1996, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U. S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United
States Trust Company of New York and its parent company, U. S. Trust
Corporation.
In answering Item 2 in this statement of eligibility, as to matters
peculiarly within the knowledge of the obligor or its directors, the
trustee has relied upon information furnished to it by the obligor and
will rely on information to be furnished by the obligor and the trustee
disclaims responsibility for the accuracy or completeness of such
information.
---------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended by the Trust Indenture Reform Act of 1990, the trustee, United
States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of New York, and State of New York, on
the 6th day of August, 1996.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
By: /s/Cynthia Chaney
---------------------------------------
Cynthia Chaney
Assistant Vice President
PSt/hlg
(rv.kk080696)
<PAGE>
Exhibit T-1.6
-------------
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
--------------------------
By: S/Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31, 1996
--------------
($ IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
Cash and Due from Banks $ 47,046
Short-Term Investments 50
Securities, Available for Sale 758,118
Loans 1,221,210
Less: Allowance for Credit Losses 13,113
---------
Net Loans 1,208,097
Premises and Equipment 58,360
Other Assets 125,979
---------
Total Assets $2,197,650
==========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 387,509
Interest Bearing 1,446,148
---------
Total Deposits 1,833,657
Short-Term Credit Facilities 82,285
Accounts Payable and Accrued Liabilities 128,745
---------
Total Liabilities $2,044,687
==========
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 42,394
Retained Earnings 96,511
Unrealized Gains on Securities Available
for Sale (Net of Taxes) (937)
---------
Total Stockholder's Equity 152,963
---------
Total Liabilities and
Stockholder's Equity $2,197,650
==========
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkman, SVP & Controller
June 7, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 722 474
<SECURITIES> 0 0
<RECEIVABLES> 14,669 16,316
<ALLOWANCES> 487 592
<INVENTORY> 762 654
<CURRENT-ASSETS> 16,691 18,464
<PP&E> 109,755 113,743
<DEPRECIATION> 35,328 36,633
<TOTAL-ASSETS> 131,328 138,628
<CURRENT-LIABILITIES> 24,830 25,059
<BONDS> 116,812 121,994
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 24 24
<TOTAL-LIABILITY-AND-EQUITY> 131,328 138,628
<SALES> 0 0
<TOTAL-REVENUES> 95,396 29,699
<CGS> 55,616 17,406
<TOTAL-COSTS> 80,427 24,959
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,622 2,846
<INCOME-PRETAX> 5,347 1,894
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 3,279 0
<CHANGES> 0 0
<NET-INCOME> 2,068 1,894
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
