<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 7, 1998
-------------
Pierce Leahy Corp.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 333-9963 23-2588479
- ------------------------------- ----------- ------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
631 Park Avenue
King of Prussia, Pennsylvania 19406
--------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 992-8200
--------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
------------------------------------
On April 7, 1998, Pierce Leahy Corp. (the "Company"), through two
Canadian subsidiaries, completed the purchase of substantially all of the assets
of Archivex Inc. ("Archivex"), a Canadian records storage company with
operations in six cities: Calgary; Edmonton; Montreal; Quebec City; Toronto;
and Winnipeg and certain real estate owned by affiliates of Archivex. Included
as part of the Archivex acquisition are six owned records storage facilities
with in excess of an aggregate of 600,000 square feet of space and five leased
records storage facilities with approximately 100,000 square feet of space.
The asset purchase was consummated pursuant to an Asset Purchase
Agreement dated as of February 4, 1998 among Pierce Leahy Command Company
("Command"), the Company's principal Canadian subsidiary, Archivex, the
shareholders of Archivex and certain parties related to Archivex (the
"Agreement"). The terms of the asset purchase were negotiated on an arms-length
basis.
The purchase price was approximately $63 million. The purchase price
was financed by a portion of the net proceeds of Command's $135 million
principal amount of 8-1/8% Senior Notes due 2008 which were privately placed
concurrently with the closing of the acquisition.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
------------------------------------------------------------------
(a) Financial Statements of Business Acquired.
Consolidated Financial Statements of Archivex Inc.:
Auditor's Report
Consolidated Balance Sheets
Consolidated Statements of Earnings
Consolidated Statements of Retained Earnings
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information.
Pro Forma Combined Consolidated Financial Statements (unaudited):
Basis of Presentation
Pro Forma Combined Consolidated Balance Sheet
Pro Forma Combined Consolidated Statement of Operations
Notes to Pro Forma Combined Consolidated Financial
Statements
-2-
<PAGE>
(c) Exhibits.
The following exhibits are filed as part of this Report:
10.1 Asset Purchase Agreement dated as of February 4, 1998
among Pierce Leahy Command Company, Archivex Inc., the
shareholders of Archivex Inc. and certain parties related
to Archivex Inc.
10.2 Amending Agreement dated as of April 7, 1998 among Pierce
Leahy Command Company, Archivex Limited, Archivex Inc.,
the shareholders of Archivex Inc. and certain parties
related to Archivex Inc.
23 Consent of Friedman & Friedman, Chartered Accountants
-3-
<PAGE>
AUDITORS' REPORT
To the Shareholders of Archivex Inc.
We have audited the consolidated balance sheets of Archivex Inc. as at
November 30, 1997 and 1996 and the statements of earnings, retained earnings
and cash flows for each of the years ended November 30, 1997, 1996 and 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 an audit to obtain
reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at November 30, 1997 and
1996 and the results of its operations and the changes in its financial
position for the three year period ended November 30, 1997 in accordance with
generally accepted accounting principles.
Friedman & Friedman
Chartered Accountants
Montreal, Quebec
January 13, 1998
(Except as to note 11 which is as of February 4, 1998)
4
<PAGE>
ARCHIVEX INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 30
----------------
1997 1996
------- -------
(IN CDN$)
<S> <C> <C>
ASSETS
Current Assets:
Accounts receivable (note 2)................................ $ 4,696 $ 3,609
Inventory................................................... 177 228
Prepaid expenses............................................ 298 326
Income taxes receivable..................................... -- 123
------- -------
5,171 4,286
------- -------
Property and Equipment (note 4)............................... 16,761 15,209
Less-accumulated depreciation and amortization.............. (7,746) (5,815)
------- -------
Net property and equipment.................................. 9,015 9,394
------- -------
Other Assets:
Intangible assets, net (note 5)............................. 6,029 5,797
Loans receivable, related parties (note 3).................. 668 886
------- -------
Total other assets........................................ 6,697 6,683
------- -------
$20,883 $20,363
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt........................... $ 3,775 $ 2,275
Bank advances............................................... 1,593 1,141
Accounts payable............................................ 283 364
Accrued expenses............................................ 1,164 915
Income taxes payable........................................ 352 --
Deferred revenues........................................... 2,282 2,054
------- -------
Total current liabilities................................. 9,449 6,749
Long-term Debt (note 6)....................................... 2,150 6,025
------- -------
11,599 12,774
------- -------
Deferred Income Taxes......................................... 1,696 1,196
------- -------
Commitments and Contingencies (note 7)
Shareholders' Equity
Capital stock (note 8)...................................... 4,000 4,000
Retained earnings........................................... 3,588 2,393
------- -------
7,588 6,393
------- -------
$20,883 $20,363
======= =======
</TABLE>
5
<PAGE>
ARCHIVEX INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
NOVEMBER 30
-----------------------
1997 1996 1995
------- ------- -------
(IN CDN$)
<S> <C> <C> <C>
Revenues:
Storage.............................................. $ 9,230 $ 8,811 $ 8,229
Service and storage material sales................... 11,080 10,252 9,607
------- ------- -------
Total revenues..................................... 20,310 19,063 17,836
------- ------- -------
Operating Expenses:
Cost of sales excluding depreciation and amortiza-
tion................................................ 10,629 10,573 10,057
Selling, general and administrative.................. 3,705 3,326 3,105
Depreciation and amortization........................ 2,276 1,022 1,172
Consulting payments to related parties............... 534 425 412
------- ------- -------
Total operating expenses........................... 17,144 15,346 14,746
------- ------- -------
Operating Income....................................... 3,166 3,717 3,090
Interest Expense....................................... 757 913 1,078
Write-Down of Property and Equipment................... -- 1,648 --
------- ------- -------
Net Income Before Taxes................................ 2,409 1,156 2,012
------- ------- -------
Income taxes--current................................ 714 120 66
- --deferred............................................. 500 434 762
------- ------- -------
1,214 554 828
------- ------- -------
Net Income............................................. $ 1,195 $ 602 $ 1,184
======= ======= =======
</TABLE>
6
<PAGE>
ARCHIVEX INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
EARNINGS
-----------
(IN CDN$)
<S> <C>
Balance, December 1, 1994........................................... $ 839
Net income........................................................ 1,184
Dividends......................................................... (207)
------
Balance, November 30, 1995.......................................... 1,816
Net income........................................................ 602
Dividends......................................................... (25)
------
Balance, November 30, 1996.......................................... 2,393
Net income........................................................ 1,195
------
Balance, November 30, 1997.......................................... $3,588
======
</TABLE>
7
<PAGE>
ARCHIVEX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
NOVEMBER 30
-------------------------
1997 1996 1995
------- ------- -------
(IN CDN$)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income........................................ $ 1,195 $ 602 $ 1,184
Adjustments to reconcile net income to net cash
provided by (used in) operating activities--
Write-down of property and equipment............ -- 1,648 --
Loss on disposal of property and equipment...... (6) -- (1)
Depreciation and amortization................... 2,276 1,022 1,172
Deferred income taxes........................... 500 434 762
Change in assets and liabilities--(Increase) de-
crease in--
Accounts receivable............................ (1,087) (516) 65
Inventory...................................... 51 (28) (1)
Prepaid expenses............................... 28 (21) 151
Income taxes receivable........................ 123 1 (9)
Increase (decrease) in--
Accounts payable............................... (81) 71 81
Accrued expenses............................... 249 17 260
Income taxes payable........................... 352 -- --
Deferred revenues.............................. 228 75 165
------- ------- -------
Net cash provided by operating activities..... 3,828 3,305 3,829
------- ------- -------
Cash Flows from Investing Activities:
Loans receivable, related parties................. 217 446 (1,231)
Capital expenditures.............................. (1,634) (2,443) (1,369)
Proceeds from disposal of capital assets.......... 123 9 56
Increase in intangible assets..................... (613) (426) (244)
Proceeds from disposal of deferred charges........ 2 -- --
------- ------- -------
Net cash used in investing activities......... (1,905) (2,414) (2,788)
------- ------- -------
Cash Flows from Financing Activities:
Payments of long-term debt........................ (2,375) (1,400) (905)
Dividends......................................... -- (25) (207)
------- ------- -------
Net cash used in financing activities......... (2,375) (1,425) (1,112)
------- ------- -------
Net Decrease in Cash................................ (452) (534) (71)
Cash, Beginning of Period........................... (1,141) (607) (536)
------- ------- -------
Cash, End of Year................................... $(1,593) $(1,141) $ (607)
======= ======= =======
</TABLE>
8
<PAGE>
ARCHIVEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE DATA)
NOVEMBER 30, 1997
(IN CDN$)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Stacs International Inc. and Faxtrieval
Inc. All material intercompany transactions and balances have been eliminated
on consolidation.
INVENTORY
Inventory is valued at cost. Cost is determined on a first-in, first-out
basis.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated or amortized as
follows:
<TABLE>
<S> <C>
Declining-balance method
Shelving............... 20%
Machinery and equip-
ment.................. 30%
Furniture and fix-
tures................. 30%
Computer equipment..... 30%
Computer software...... 10%-30%
Automotive equipment... 30%
Straight-line method
Leasehold improve- over the terms of the respective leases plus the first
ments................. renewal period, where applicable.
Lease rights........... over the terms of the respective leases plus the first
renewal period, where applicable
</TABLE>
Only the acquisitions in the first six months of the year are depreciated or
amortized in the year.
INTANGIBLE ASSETS
Goodwill is recorded at cost and amortized on a straight-line basis at an
annual rate of 2.5%.
Moving costs are recorded at cost and amortized on a straight-line basis
over the terms of the respective leases plus the first renewal period, where
applicable. Only the costs incurred in the first six months of the year are
amortized in the year.
Client acquisition costs consist of the unreimbursed costs and inducements
associated with moving the records of new clients into the Company's premises.
All such costs are recorded at cost and amortized on a straight-line basis
over six years. Only the costs incurred in the first six months of the year
are amortized in the year.
DEFERRED STORAGE REVENUE
The unearned portion of revenue arises when storage is billed for a period
of time overlapping the Company's fiscal year-end.
2. ACCOUNTS RECEIVABLE:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Trade........................................................ $4,415 $3,416
Allowance for doubtful accounts.............................. (29) (23)
------ ------
4,386 3,393
Sundry....................................................... 310 216
------ ------
$4,696 $3,609
====== ======
</TABLE>
9
<PAGE>
3. LOANS RECEIVABLE, RELATED PARTIES:
(a) Loans receivable from 19-12 Holding Ltd./Gestion 19-12 Ltee have no
specific terms of repayment and bear interest at the rate of 10%. An amount of
$86 (1996--$95) has been credited to earnings in the current year.
(b) The balance of the loans do not bear interest and have no specific terms
of repayment.
4. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Shelving.................................................... $ 5,258 $ 4,733
Machinery and equipment..................................... 379 330
Furniture and fixtures...................................... 596 462
Computer equipment.......................................... 807 625
Computer software........................................... 1,975 1,733
Automotive equipment........................................ 38 71
Leasehold improvements...................................... 2,708 2,254
Lease rights................................................ 5,000 5,000
------- -------
16,761 15,208
Less: Accumulated depreciation.............................. 7,746 5,814
------- -------
$ 9,015 $ 9,394
======= =======
</TABLE>
The Company has recognized a change in accounting estimate with respect to
depreciation of certain capital assets, to that described in note 1. The
effect of this change in estimate increased the depreciation expense for these
capital assets and reduced net earnings and net book value by $1,028 for the
year ended November 30, 1997. Deferred income taxes as at November 30, 1997
decreased by $417.
5. INTANGIBLE ASSETS:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Goodwill...................................................... $5,898 $5,898
Client acquisition costs...................................... 115 --
Moving costs.................................................. 1,709 1,213
------ ------
7,722 7,111
Less: Accumulated amortization................................ 1,693 1,314
------ ------
$6,029 $5,797
====== ======
</TABLE>
6. LONG-TERM DEBT:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Term loan, due on or before December 12, 1999, repayable in
annual variable capital instalments. Interest is calculated
daily and payable monthly in arrears at the rate of 8.99%
per annum................................................... $5,825 $8,100
Term loan, due January 4, 1998. Interest is calculated and
payable monthly in arrears at the rate of 10% per annum..... 100 200
------ ------
5,925 8,300
Current portion.............................................. 3,775 2,275
------ ------
$2,150 $6,025
====== ======
</TABLE>
10
<PAGE>
The term loan due December 12, 1999 is secured by:
1) Moveable hypothec covering the following universality of property, present
and future:
(a) claims, accounts receivable and book debts, and
(b) other moveable property;
2) $20,000 moveable hypothec covering all moveable property, corporeal or
incorporeal, present and future;
3) A demand debenture in the amount of $20,000 registered in the Province of
Alberta;
4) A registered general assignment of book debts, inventory and equipment
registered in the Provinces of Ontario and Alberta;
5) A General Security Agreement registered in the Province of Ontario;
6) Assignment of life insurance on two of the directors of the Company to the
extent of $1,000 each; and
7) Assignment of insurance policies.
Aggregate annual capital payments required are due approximately as follows:
<TABLE>
<S> <C>
1998............................................................... $3,775
1999............................................................... 1,862
2000............................................................... 288
------
$5,925
======
</TABLE>
The Company is in compliance with the covenants pursuant to the agreement
with its banker.
7. COMMITMENTS AND CONTINGENCIES:
a) The minimum rentals payable under long-term operating leases, exclusive
of certain operating costs for which the Company is responsible, are
approximately as follows:
<TABLE>
<S> <C>
1998............................................................... $2,345
1999............................................................... 2,221
2000............................................................... 2,094
2001............................................................... 2,094
2002............................................................... 2,094
</TABLE>
b) The Company has guaranteed certain mortgage indebtedness and bank loan of
19-12 Holding Ltd./Gestion 19-12 Ltee to the extent of $500 and $677
respectively.
8. CAPITAL STOCK:
Authorized:
(Unlimited as to capital contribution and the number of shares without par
value)
Common shares.
Class "A" voting, participating to the extent of the redemption
value shares, redeemable at their paid-in value plus an
annual amount of 24% thereof less distributions,
compounded annually.
Class "B" 8% non-cumulative, voting, non-participating shares,
redeemable at their paid-in value.
Class "C"
10% non-cumulative, non-voting, non-participating shares,
redeemable at their paid-in value.
11
<PAGE>
Class "D" 12% non-cumulative, non-voting, non-participating shares,
redeemable and retractable at their paid-in value.
Class "E" 0.5% per month non-cumulative, non-voting, non-
participating shares, redeemable and retractable at their
paid-in value.
<TABLE>
<CAPTION>
1997 1996
ISSUED: ---------- ----------
<S> <C> <C>
3,000 Common shares................................ $ 100 $ 100
3,000 Class "A" shares............................. 3,000,000 3,000,000
1,000 Class "C" shares............................. 1,000,000 1,000,000
---------- ----------
$4,000,100 $4,000,100
========== ==========
</TABLE>
9. INCOME TAX LOSSES:
The Company has utilized non-capital losses of prior years amounting to
approximately $854 (1996--$1,791, 1995--$1,236) to reduce taxable income for
Federal income tax purposes.
10. RELATED PARTY TRANSACTIONS:
The Company leases premises from a related company, 19-12 Holding
Ltd./Gestion 19-12 Ltee, and from a corporate shareholder, Sagarmatha Capital
Inc. The rental charges under the lease agreements amounted to $1,355 (1996--
$1,382, 1995--$1,056) and $882 (1996--$851, 1995--$850), respectively.
11. SUBSEQUENT EVENT:
On February 4, 1998, the Company, along with certain related companies
executed an agreement to sell substantially all of the assets used in its
business.
12
<PAGE>
PIERCE LEAHY CORP.
------------------
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------
BASIS OF PRESENTATION
---------------------
(Unaudited)
----------
The accompanying pro forma consolidated balance sheet as of December 31, 1997
and the related pro forma condensed consolidated statement of operations for the
year then ended gives effect to the acquisition of certain net assets of
Archivex Inc. ("Archivex") and real estate owned by affiliates of Archivex, as
described in Note 2, as if this transaction had occurred as of December 31,
1997, in the case of the pro forma condensed consolidated balance sheet, and as
of January 1, 1997, in the case of the pro forma condensed consolidated
statement of operations.
It should be noted that the year end of Pierce Leahy Corp. and subsidiaries (the
"Company") is December 31. Therefore, the Company's historical information
relates to the year ended December 31, 1997. The corresponding period for
Archivex is the fiscal year ended November 30, 1997.
The pro forma condensed consolidated financial statements have been prepared by
management of the Company and should be read in conjunction with the historical
consolidated financial statements of the Company, which have been previously
filed in the Company's Form 10-K for the year ended December 31, 1997, and the
historical financial statements of Archivex, which are included elsewhere in
this Form 8-K. The pro forma consolidated financial statements are based on
certain assumptions and preliminary estimates which are subject to change.
These statements do not purport to be indicative of the consolidated financial
position or results of operations of the Company that might have occurred, nor
are they indicative of future results.
13
<PAGE>
PIERCE LEAHY CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma for the
Acquisition of Archivex (Note 2)
------------------------------------
Actual Archivex Pro Forma
ASSETS (Note 1) Actual Adjustments Pro Forma
------ ---------------- --------------- ------------------ -----------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash $ 1,782 $ -- $ -- $ 1,782
Accounts receivable......................... 25,201 3,283 (3,283) (a) 25,201
Inventories................................. 813 124 (124) (a) 813
Prepaid expenses and other.................. 1,772 208 (208) (a) 1,772
Deferred income taxes....................... 2,621 -- -- 2,621
-------- ------- ------- --------
Total current assets................... 32,189 3,615 (3,615) 32,189
PROPERTY AND EQUIPMENT, net................... 160,481 6,303 8,390 (b) 175,174
OTHER ASSETS, primarily intangibles........... 202,043 4,682 44,947 (c) 251,672
-------- ------- ------- --------
$394,713 $14,600 $49,722 $459,035
======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt and
noncompete obligations..................... $ 1,304 $ 3,753 $(3,753) (a) $ 1,304
Accounts payable............................ 8,838 1,011 (1,011) (a) 8,838
Accrued expenses ........................... 24,754 139 (139) (a) 26,152
1,398 (d)
Deferred revenues .......................... 10,199 1,596 -- 11,795
-------- ------- ------- --------
Total current liabilities.............. 45,095 6,499 (3,505) 48,089
LONG-TERM DEBT AND NONCOMPETE
OBLIGATIONS................................. 277,893 1,503 (1,503) (a) 339,221
61,328 (e)
DEFERRED RENT................................. 3,993 -- -- 3,993
DEFERRED INCOME TAXES................... 8,409 1,186 (1,186) (a) 8,409
SHAREHOLDERS' EQUITY..................... 59,323 5,412 (5,412) (a) 59,323
-------- ------- ------- --------
$394,713 $14,600 $49,722 $459,035
======== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of this statement.
14
<PAGE>
PIERCE LEAHY CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma for the
Acquisition of Archivex (Note 2)
--------------------------------
Actual Archivex Pro Forma
(Note 1) Actual Adjustments Pro Forma
------------ -------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 183,517 $14,522 $ -- $ 198,039
----------- ------- ------- -----------
OPERATING EXPENSES:
Cost of sales, excluding depreciation and
amortization ................................ 101,940 7,600 (1,598) (f) 107,942
Selling, general and administrative........... 30,070 3,031 (382) (g) 32,719
Depreciation and amortization................. 21,528 1,627 2,006 (h) 25,161
Special compensation charge................... 1,752 -- -- 1,752
Foreign currency exchange..................... 702 -- -- 702
----------- ------- ------- -----------
Total operating expenses...................... 155,992 12,258 26 168,276
----------- ------- ------- -----------
Operating income.............................. 27,525 2,264 (26) 29,763
INTEREST EXPENSE.............................. 29,262 542 4,364 (i) 34,168
----------- ------- ------- -----------
Income (loss) before income taxes and
extraordinary charge......................... (1,737) 1,722 (4,390) (4,405)
INCOME TAXES.................................. 7,424 868 (1,748) (j) 6,544 (k)
----------- ------- ------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY
CHARGE....................................... $ (9,161) $ 854 $(2,642) $ (10,949)
=========== ======= ======= ===========
BASIC AND DILUTED LOSS BEFORE EXTRAORDINARY
CHARGE PER SHARE $(0.69) $ (0.82)
=========== ===========
SHARES USED IN COMPUTING BASIC AND DILUTED
LOSS PER SHARE 13,385,243 13,385,243
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement
15
<PAGE>
PIERCE LEAHY CORP.
------------------
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------
(Unaudited)
-----------
1. HISTORICAL:
-----------
The historical balances of Pierce Leahy Corp. and subsidiaries (the "Company"),
represent the consolidated balance sheet as of December 31, 1997 and the
consolidated results of operations for the year then ended as reported in the
consolidated financial statements which have been previously filed in the
Company's Form 10-K.
2. ACQUISITION OF ARCHIVEX INC.:
-----------------------------
On April 7, 1998, the Company acquired certain net assets of Archivex and real
estate owned by affiliates of Archivex for approximately $62,924, including
transaction costs and assumed liabilities of $1,596. In addition to the
purchase price, the Company has accrued $1,398 for estimated severance costs for
planned employee terminations. The acquisition has been accounted for using the
purchase method of accounting. Under this method, the purchase price is
allocated to the assets acquired and liabilities assumed based on the fair
values at the acquisition date. Such allocation has been based on estimates
that may be revised at a later date. The purchase price exceeded the fair value
of the net assets acquired by approximately $42,637, which has been recorded as
goodwill and will be amortized on a straight-line basis over 30 years.
The historical balances for Archivex were derived from the historical balance
sheet as of November 30, 1997 and the statement of operations for the year then
ended. The Archivex financial statements are prepared in Canadian dollars and
are included elsewhere in this Form 8-K. For purposes of the pro forma
condensed consolidated financial statements, the Archivex financial statements
were converted into US dollars by using the year-end exchange rate (.69915) for
the balance sheet and the average exchange rate (.715) for the statement of
operations.
The following pro forma adjustments for the acquisition are reflected in the pro
forma condensed consolidated balance sheet as of December 31, 1997 and the pro
forma condensed consolidated statement of operations for the year then ended.
Unaudited Pro Forma Adjustments to Condensed Consolidated Balance Sheet
- -----------------------------------------------------------------------
(a) Reflects the adjustment of certain assets and liabilities of Archivex not
acquired or assumed as part of the acquisition.
16
<PAGE>
(b) Reflects the purchase of real estate owned by affiliates of Archivex, which
is not included in the financial statements of Archivex. The purchase
price has been allocated $1,259 to land and $7,131 to buildings.
(c) Intangible assets of goodwill ($42,637) and a noncompete agreement ($6,992)
result from the preliminary allocation of the purchase price. These
intangibles are subject to adjustment based on the final allocation of the
purchase price to the net assets acquired. Management believes that the
final allocation of the purchase price will not differ materially from the
preliminary estimated amounts.
(d) In addition to the purchase price, the Company has accrued $1,398 for
estimated severance costs for planned employee terminations.
(e) Reflects the Company's borrowing of $61,328 on its credit facility to fund
the acquisition of Archivex and real estate owned by affiliates of
Archivex.
Unaudited Pro Forma Adjustments to Consolidated Statement of Operations
- -----------------------------------------------------------------------
(f) Represents the elimination of rent expense on facilities leased to Archivex
from its affiliates. These facilities were purchased as part of the
acquisition.
(g) Represents the elimination of management fees paid to an affiliate of
Archivex, which will be discontinued upon completion of the acquisition.
(h) To record additional amortization expense of $1,721 relating to goodwill
and noncompete agreement, based upon the estimated useful lives of each
intangible, plus depreciation expense of $285 relating to the estimated
fair value of the building purchased from affiliates of Archivex
depreciated over 30 years.
(i) To record additional interest expense on the $61,328 of borrowings to fund
the acquisition using an effective annual interest rate of 8%.
(j) To record an income tax benefit on the pro forma net loss generated by the
acquisition at the statutory Canadian tax rate of 45%, after the addback of
all nondeductible expenses.
(k) The Company operated as a Subchapter S corporation for income tax purposes
until July 1, 1997. The Company recorded a deferred income tax provision of
$6,600 in 1997 in connection with the termination of the Company's status
as a Subchapter S corporation. The pro forma income taxes represent taxes
on the pro forma loss before income taxes and extraordinary charge after
addback of all pro forma non-deductible expenses along with the $6,600
deferred income tax provision.
17
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: April 17, 1998 PIERCE LEAHY CORP.
By:/s/ Douglas B. Huntley
-----------------------------------------
Name: Douglas B. Huntley
Title: Vice President and
Chief Financial Officer
18
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description of Exhibit
- ----------- ----------------------
10.1 Asset Purchase Agreement dated as of February 4, 1998 among
Pierce Leahy Command Company, Archivex Inc., the
shareholders of Archivex Inc. and certain parties related to
Archivex Inc.
10.2 Amending Agreement dated as of April 7, 1998 among Pierce
Leahy Command Company, Archivex Inc., the shareholders of
Archivex Inc. and certain parties related to Archivex Inc.
23 Consent of Friedman & Friedman, Chartered Accountants
19
<PAGE>
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
ARCHIVEX INC.
AND
PIERCE LEAHY COMMAND COMPANY
Made as of February 4, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
PURCHASE AND SALE OF ASSETS
Section 1.1 Purchase and Sale of Assets................................ 3
Section 1.2 Purchase Price............................................. 6
Section 1.3 Non-Competition and Confidentiality Agreement.............. 7
Section 1.4 Assumption of Certain Liabilities.......................... 7
Section 1.5 Goods and Services Tax and Quebec Sales Tax Elections...... 8
Section 1.6 Date, Time and Place of Closing............................ 8
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER AND PRINCIPALS
Section 2.1 Status.................................................... 9
Section 2.2 Due Authorization......................................... 9
Section 2.3 Enforceability of Obligations............................. 10
Section 2.4 Absence of Conflicting Agreements......................... 11
Section 2.5 Title to Purchased Assets................................. 12
Section 2.6 Sufficiency of the Purchased Assets....................... 13
Section 2.7 No Expropriation.......................................... 13
Section 2.8 Real Property............................................. 13
Section 2.9 Real Property Leases...................................... 16
Section 2.10 Personal Property......................................... 16
Section 2.11 Intellectual Property..................................... 17
Section 2.12 Data Processing........................................... 17
Section 2.13 Inventories............................................... 18
Section 2.14 Legal Matters............................................. 18
Section 2.15 Management Agreements..................................... 18
Section 2.16 Contracts, Leases, Agreements and Other Commitments....... 19
Section 2.17 Employee Agreements....................................... 20
Section 2.18 Employees and Employee Benefit Plans...................... 21
Section 2.19 Financial Information..................................... 22
Section 2.20 Books and Records......................................... 22
Section 2.21 Liabilities............................................... 23
Section 2.22 Conflicts of Interest..................................... 23
Section 2.23 Actions Since Date of Financial Statements................ 23
Section 2.24 Permits and Licences...................................... 24
Section 2.25 Compliance with Laws...................................... 24
Section 2.26 Suppliers and Customers................................... 24
Section 2.27 GST Registration.......................................... 25
Section 2.28 Residence of Seller....................................... 25
Section 2.29 Environmental Matters..................................... 25
Section 2.30 Taxes..................................................... 27
Section 2.31 Insurance................................................. 27
(i)
<PAGE>
Section 2.32 Brokerage Fees............................................ 27
Section 2.33 Full Disclosure........................................... 28
Section 2.34 Knowledge................................................. 28
Section 2.35 Docuguard................................................. 28
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 3.1 Status.................................................... 29
Section 3.2 Due Authorization......................................... 29
Section 3.3 Enforceability of Obligations............................. 29
Section 3.4 Absence of Conflicting Agreements......................... 29
Section 3.5 Consents and Approvals.................................... 30
Section 3.6 Litigation................................................ 30
Section 3.7 GST Registration.......................................... 30
ARTICLE 4
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 4.1 Survival of Representations and Warranties of Seller and
Principals.............................................. 31
Section 4.2 Survival of Representations and Warranties of Purchaser... 31
Section 4.3 Covenants................................................. 32
ARTICLE 5
CONDUCT OF BUSINESS PENDING CLOSING
Section 5.1 Conduct of Business Pending Closing....................... 33
Section 5.2 Conduct of Business after Due Diligence Termination Date.. 34
Section 5.3 Risk of Loss.............................................. 34
Section 5.4 Exclusive Dealings........................................ 35
ARTICLE 6
FURTHER COVENANTS AND AGREEMENTS
Section 6.1 Due Diligence............................................. 36
Section 6.2 Schedules and Exhibits.................................... 36
Section 6.3 Access to Information..................................... 37
Section 6.4 Books and Records......................................... 38
Section 6.5 Cooperation............................................... 38
Section 6.6 Escrow Agreement.......................................... 38
Section 6.7 Employment of Employees................................... 39
Section 6.8 Severance Costs........................................... 40
Section 6.9 Employer Health Tax....................................... 41
Section 6.10 Employee Benefit Plans.................................... 41
Section 6.11 Transfer Taxes............................................ 42
(ii)
<PAGE>
Section 6.12 Investment Canada Act..................................... 42
Section 6.13 Environmental Audit....................................... 42
Section 6.14 Compliance with Bulk Sales Legislation.................... 42
Section 6.15 Change of Name............................................ 43
Section 6.16 Performance by Seller..................................... 43
Section 6.17 Gestion 19-12 Ltee........................................ 43
Section 6.18 Accounts Receivable and Trade Payables.................... 43
Section 6.19 Non-Competition........................................... 44
Section 6.20 Docuguard................................................. 45
Section 6.21 Shelving.................................................. 45
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF PURCHASER
Section 7.1 Representations and Warranties............................ 46
Section 7.2 Performance of Agreements................................. 46
Section 7.3 Due Diligence Investigations.............................. 46
Section 7.4 Exhibits and Schedules.................................... 46
Section 7.5 Board Approval............................................ 46
Section 7.6 No Material Adverse Change................................ 47
Section 7.7 No Actions, Etc........................................... 47
Section 7.8 Bankers' Approval......................................... 47
Section 7.9 Permits................................................... 47
Section 7.10 Consents; Acknowledgement of Lessor....................... 47
Section 7.11 Liens..................................................... 48
Section 7.12 Receipt of Environmental Audit............................ 48
Section 7.13 Reorganization............................................ 48
Section 7.14 Owned Real Property....................................... 48
Section 7.15 Deliveries................................................ 48
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF SELLER
Section 8.1 Representations and Warranties............................ 49
Section 8.2 Performance of Agreements................................. 49
Section 8.3 No Material Adverse Change................................ 49
Section 8.4 No Actions, Etc........................................... 49
Section 8.5 Exhibits.................................................. 49
Section 8.6 Deliveries................................................ 49
ARTICLE 9
TERMINATION
Section 9.1 Termination............................................... 50
Section 9.2 Status of Agreement after Termination..................... 51
(iii)
<PAGE>
ARTICLE 10
CLOSING
Section 10.1 Seller's Deliveries...................................... 52
Section 10.2 Purchaser's Deliveries................................... 54
Section 10.3 Prorations............................................... 55
Section 10.4 Parties to Bear Own Expenses............................. 55
ARTICLE 11
INDEMNIFICATION
Section 11.1 Indemnification by Seller................................ 56
Section 11.2 Environmental Indemnification............................ 57
Section 11.3 Limitation on Environmental Indemnity.................... 59
Section 11.4 Indemnification by Purchaser............................. 59
Section 11.5 Application of Escrow Amount............................. 59
Section 11.6 Basket................................................... 60
Section 11.7 Notice of Claim.......................................... 60
Section 11.8 Adjustment for Tax Effect................................ 60
Section 11.9 Direct Claims............................................ 60
Section 11.10 Indemnification Procedure................................ 61
Section 11.11 Duty to Mitigate......................................... 62
ARTICLE 12
GENERAL
Section 12.1 Headings and Table of Contents........................... 63
Section 12.2 Number and Gender........................................ 63
Section 12.3 Currency and Payment Obligations......................... 63
Section 12.4 Statute References....................................... 63
Section 12.5 Section and Schedule References.......................... 63
Section 12.6 Assignability of Environmental Indemnity................. 64
Section 12.7 Notices.................................................. 64
Section 12.8 Entire Agreement......................................... 66
Section 12.9 Time of Essence.......................................... 66
Section 12.10 Severability............................................. 66
Section 12.11 Governing Law............................................ 67
Section 12.12 Amendment and Waiver..................................... 67
Section 12.13 Further Assurances....................................... 67
Section 12.14 Assignability; Binding Effect............................ 67
Section 12.15 Language................................................. 68
Section 12.16 Counterpart Execution.................................... 68
(iv)
<PAGE>
LIST OF EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Allocation of Purchase Price
Exhibit C Non-Competition Agreement
Exhibit D Employment Agreement
Exhibit E Reorganization
Exhibit F General Conveyance and Assumption of Liabilities Agreement
Exhibit G Seller's Bring-Down Certificate
Exhibit H Seller's Corporate Certificate
Exhibit I Opinion of Seller's Counsel
Exhibit J Purchaser's Bring-Down Certificate
Exhibit K Purchaser's Corporate Certificate
Exhibit L Opinion of Purchaser's Counsel
LIST OF SCHEDULES
Schedule A Owned Real Property
Schedule B Leased Real Property
Schedule C Fixed Assets and Equipment
Schedule D List of Vehicles
Schedule E Permitted Liens
Schedule F Location of Assets
Schedule G Intellectual Property
Schedule H Data Processing
Schedule I Legal Matters
Schedule J Management Agreements
Schedule K Other Agreements
Schedule L Employee Agreements
Schedule M Employees
Schedule M.1 Employee Benefits Plans
Schedule N Financial Statements
Schedule O Conflicts of Interest
Schedule P Actions Since Date of Financial Statements
Schedule Q Suppliers and Customers
(v)
<PAGE>
Schedule R Environmental Permits
Schedule S Insurance
Schedule T Shelving
Schedule U GST Numbers
(vi)
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS AGREEMENT made as of the 4th day of February, 1998
B E T W E E N:
ARCHIVEX INC., a corporation organized and existing under the laws of
Canada
("Seller")
- and -
RICHARD INGRAM and JOHN RICHARDSON
(collectively, the "Principals")
- and -
SAGARMATHA CAPITAL INC., a corporation organized and existing under
the federal laws of Canada
("Sagarmatha")
- and -
GESTION 19-12 LTEE., a corporation organized and existing under the
federal laws of Canada
("Gestion")
- and -
3371751 CANADA INC., a corporation organized and existing under the
federal laws of Canada
("Newco")
- and -
PIERCE LEAHY COMMAND COMPANY, a corporation organized and existing
under the laws of the Province of Nova Scotia
<PAGE>
("Purchaser")
W H E R E A S :
1. Seller Group (as defined herein) is engaged in the business of records
storage and management of documents and records (the "Business").
2. The Principals, or entities controlled by the Principals (including,
without limitation, Sagarmatha), are the owners of all the issued and
outstanding shares of Seller.
3. Sagarmatha and Gestion, affiliates of Seller, individually hold all
freehold right, title and interest in and to the Owned Real Property (as defined
herein) pertaining to or used in connection with the Business;
4. Newco, a wholly-owned subsidiary of Seller, holds all beneficial
right, title and interest in and to the Trademark Assets (as defined herein)
pertaining to or used in connection with the Business;
5. Faxtrieval Inc. ("Faxtrieval"), a wholly-owned subsidiary of Seller,
holds all right, title and interest in and to the Active Storage Agreements (as
defined herein) pertaining to or used in connection with the Business, subject
to agreements with Seller;
6. Ingram is an expert in the Business, having developed the concepts,
methodology and market awareness of the Business;
7. Upon completion of the Reorganization (as defined herein) Seller will
hold all right, title and interest in and to the Active Storage Agreements;
8. Seller, the Principals, Sagarmatha, Gestion, Newco and Faxtrieval
shall hereinafter be collectively referred to as "Seller Group" and each shall
sometimes be individually referred to as a "Seller Group Member";
9. Seller desires to sell, or cause to be sold, to Purchaser and
Purchaser desires to purchase, as a going concern, substantially all of the
assets, property and undertaking of Seller Group pertaining to or used in
connection with the Business upon and subject to the terms and conditions
hereinafter set forth.
-2-
<PAGE>
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
---------------------------
Section 1.1 Purchase and Sale of Assets.
---------------------------
(a) Purchased Assets. Subject to the terms and conditions of this
----------------
Agreement and based upon the representations and warranties contained herein, on
the Closing Date (as defined below), Seller hereby agrees to sell, assign,
convey, transfer and deliver to Purchaser, or cause to be sold, assigned,
conveyed, transferred and delivered to Purchaser, and Purchaser hereby agrees to
purchase and acquire as of and with effect from the Closing Date, the Business,
as a going concern, and all of Seller Group's right, title and interest in, to
and under the property, assets, rights, claims and contracts of every kind and
description and wheresoever situated of Seller Group relating to, used or
intended for use in connection with the Business (other than the assets
expressly excluded as set forth in Section 1.1(b)), including, but not limited
to, the following (collectively, the "Purchased Assets"):
(i) all freehold property and interests in and to the real property
described in Schedule A including all rights of way, licenses or
rights of occupation, easements or other similar rights and
interests relating to such lands or appurtenances thereto
(collectively, the "Owned Real Property");
(ii) all plants, buildings, structures, erections, appurtenances,
fixtures and other improvements, systems and facilities situated on
or forming part of the Owned Real Property (collectively, the
"Buildings");
(iii) all of Seller Group's rights under each lease or sublease of real
property, agreements in the nature of leases of real property,
licenses, conversions or occupancy agreements and use or occupancy
rights with respect to real property and all agreements and
leasehold improvements relating thereto pertaining to or used in
connection with the Business, all of which are described in Schedule
B (collectively, the "Leased Real Property");
-3-
<PAGE>
(iv) all machinery, equipment, electronic data processing equipment,
hardware, computer and data processing facilities, office equipment,
furniture, furnishings, fixtures and other personal property and
fixed assets pertaining to or used in connection with the Business
and replacement parts therefor, including without limitation the
machinery and equipment described in Schedule C;
(v) all trucks, cars, forklifts and other vehicles pertaining to or used
in the Business, including, without limitation, the vehicles
described in Schedule D;
(vi) all of Seller Group's rights, title and interests in and to all of
the Corporation Agreements (as defined herein);
(vii) all books and records maintained by Seller Group through the Closing
Date pertaining to or used in connection with the Business,
including, without limitation, product manuals, operating manuals
and records relating to customers, suppliers, and trade accounts and
lists of similar operating data, business reports, plans and
projections and all other documents, files, records, correspondence,
and other data and information, financial or otherwise, including
all data and information stored on computer-related media (the
"Books and Records");
(viii) all supplies and inventory items pertaining to or used in
connection with the Business;
(ix) all federal, provincial and municipal Permits (as defined herein),
to the extent transferable;
(x) all prepaid expenses of the Business which can be utilized in full
by Purchaser after the Closing Date;
(xi) all right, title and interest of Seller Group in and to all
registered or unregistered trade-marks, trade names, business names,
designs, logos, identifying indicia, service marks, patents,
technology and all other industrial or intellectual property of, or
pertaining to or used in connection with the Business, including all
registrations and applications relating thereto and all licences,
permissions, agreements relating to any of the foregoing to which
any Seller Group Member is a party (the "Intellectual Property");
-4-
<PAGE>
(xii) the goodwill of the Business, and documents relevant thereto in the
possession of Seller Group including, without limitation, lists of
customers and suppliers, credit information and the exclusive right
of Purchaser to represent itself as carrying on the Business in
continuation of and in succession to Seller;
(xiii) subject to Section 6.20, all right, title and interest of Seller
Group in and to the shares of Docuguard K.F.T. ("Docuguard") (the
"Docuguard Shares") currently held by Seller and the related rights
and benefits (economic or otherwise) of Seller Group arising in
connection with Docuguard, in each case to the extent transferable;
and
(xiv) all other property, assets and rights of Seller Group related to the
Business, except for the Excluded Assets (as defined below).
(b) Excluded Assets. Purchaser and Seller acknowledge and agree that
---------------
Purchaser is not buying and Seller is not selling, or causing Seller Group to
sell, the following assets (collectively, the "Excluded Assets"):
(i) all cash and marketable securities on hand or in banks or other
depositories;
(ii) subject to Section 6.10, all Employee Benefit Plans (as defined
herein);
(iii) all accounts receivable, amounts receivable, claims receivable,
refunds, tax refunds, research and development claims, inter-
corporate loans, other loans and advances, returns of capital,
government assistance claims or benefits, tax credits and any other
amounts due by governmental agencies (the whole, whether real,
contingent, determined, determinable or determinable in the future
or otherwise) related to the Business together with any unpaid
interest accrued thereon and any security or collateral for such
items; and
(iv) subject to Section 6.17, all shares in the capital of any Seller
Group Member.
(c) Transfer of Purchased Assets Subject to Consent. To the extent that
-----------------------------------------------
any of the Purchased Assets to be transferred to Purchaser on the Closing, or
any claim, right or benefit arising under or resulting from such Purchased
Assets (collectively, the "Rights") is not capable of being transferred without
the approval, consent or waiver of any third person, or if the transfer of a
Right would constitute a breach of any obligation under, or a violation of, any
applicable law unless the approval, consent or waiver of such third person is
obtained, then,
-5-
<PAGE>
except as expressly otherwise provided in this Agreement and without limiting
the rights and remedies of Purchaser contained elsewhere in this Agreement, this
Agreement shall not constitute an agreement to transfer such Rights unless and
until such approval, consent or waiver has been obtained. After the Closing and
until all such Rights are transferred to Purchaser, Seller shall, or shall, if
applicable, cause any Seller Group Member to:
(i) maintain its existence and hold the Rights in trust for Purchaser;
(ii) comply with the terms and provisions of the Rights as agent for
Purchaser at Purchaser's cost and for Purchaser's benefit;
(iii) cooperate with Purchaser in any reasonable and lawful arrangements
designed to provide the benefits of such Rights to Purchaser; and
(iv) enforce, legally, at the request of Purchaser and at the expense and
for the account of Purchaser, any rights of Seller or such Seller
Group Member arising from such Rights against any third person,
including the right to elect to terminate any such rights in
accordance with the terms of such rights upon the written direction
of Purchaser.
In order that the full value of the Rights may be realized for the benefit of
Purchaser, Seller shall, at the request and expense and under the direction of
Purchaser, in the name of Seller or otherwise as Purchaser may specify, take all
such action and do or cause to be done all such things as are, in the opinion of
Purchaser acting reasonably, necessary or proper in order that the obligations
of Seller or a Seller Group Member under such Rights may be performed in such
manner that the value of such Rights is preserved and enures to the benefit of
Purchaser, and that any moneys due and payable and to become due and payable to
Purchaser in and under the Rights are received by Purchaser. Seller shall
promptly pay to Purchaser all moneys collected by or paid to Seller or a Seller
Group Member in respect of every such Right. Purchaser shall indemnify and hold
Seller Group harmless from and against any claim or liability under or in
respect of such Rights arising because of any action of Seller taken pursuant to
this Section 1.1(c).
Section 1.2 Purchase Price.
--------------
-6-
<PAGE>
(a) Purchase Price. The purchase price payable by Purchaser to Seller for
--------------
the Purchased Assets shall be Cdn.$90,000,000 less the Non-Competition
Consideration (see Section 1.3 below) (the "Purchase Price").
(b) Payment of Purchase Price. The Purchase Price shall be paid and
-------------------------
satisfied as follows:
(i) at the Closing, the sum of Cdn.$81,500,000 less the Non-Competition
Consideration (See Section 1.3 below) shall be paid by certified
cheque or wire transfer to Seller Group or as Seller Group directs,
provided such direction is not inconsistent with the allocation of the
Purchase Price set out in Exhibit B; and
(ii) Purchaser shall pay Cdn.$8,500,000 (the "Escrow Amount") to a mutually
agreed upon escrow agent (the "Escrow Agent") by certified cheque or
wire transfer, in accordance with the terms and conditions of the
escrow agreement attached hereto as Exhibit A (the "Escrow
Agreement"), to be held pursuant to the terms of the Escrow Agreement.
(c) Allocation of Purchase Price. The Purchase Price shall be
----------------------------
allocated in accordance with Exhibit B attached hereto. Neither Purchaser nor
Seller (or any other Seller Group Member) shall take any position with any
federal, provincial or municipal taxing authority which is inconsistent with
such allocation.
Section 1.3 Non-Competition and Confidentiality Agreement. Ingram recognizes
---------------------------------------------
that a significant portion of the goodwill relating to the Business is
attributable to him personally, that he has a unique amount of expertise
relating thereto and that the use by him of such expertise other than on behalf
of Purchaser or the divulgation by him of such expertise other than to Purchaser
would significantly reduce the value of the Business and the Purchased Assets.
Accordingly, Purchaser and Ingram agree to enter into a Non-Competition and
Confidentiality Agreement substantially in the form attached hereto as Exhibit C
(the "Non-Competition Agreement"). As consideration therefore, Purchaser agrees
to pay to Ingram the amount (the "Non-Competition Consideration") set forth in,
and in accordance with the terms of, the Non-Competition Agreement.
-7-
<PAGE>
Section 1.4 Assumption of Certain Liabilities.
---------------------------------
(a) Assumed Liabilities. On the Closing Date, Purchaser shall assume
-------------------
and agree to undertake to pay, perform and discharge as and when due, and shall
indemnify Seller for and hold Seller harmless from and against all obligations,
responsibilities and liabilities incurred in connection with the performance by
Purchaser of the Corporation Agreements from and after the Closing Date
(collectively, the "Assumed Liabilities").
(b) Purchaser Assumes No Other Debts or Liabilities of Seller. Except
---------------------------------------------------------
for the Assumed Liabilities assumed by Purchaser under Section 1.4(a) above, the
purchase by Purchaser of the Purchased Assets shall be free and clear of all
liens, claims and encumbrances of any kind and nature, and without any
assumption by Purchaser of any debts, taxes, obligations or liabilities
whatsoever of Seller or any other persons (including, without limitation, any
Seller Group Member), whether such liabilities are actual or contingent, known
or unknown, liquidated or unliquidated, whether trade payable liabilities, tax
liabilities, liabilities to creditors, liabilities arising under any profit
sharing, pension or other similar employee benefit plans, liabilities to
governmental agencies or third parties, liabilities assumed or incurred by
Purchaser by operation of law or otherwise (collectively, the "Unassumed Debts
and Liabilities"). Seller agrees to pay, satisfy and discharge or cause to be
paid, satisfied and discharged, any and all Unassumed Debts and Liabilities and
to indemnify and hold Purchaser harmless from and against any and all Unassumed
Debts and Liabilities.
Section 1.5 Goods and Services Tax and Quebec Sales Tax Elections. Purchaser
-----------------------------------------------------
and Seller shall at the Closing jointly execute elections under subsection
167(1) of the Excise Tax Act (Canada) and section 75 of An Act respecting the
Quebec Sales Tax (Quebec), and any related tax elections and filings required to
exempt taxation of the transfer of the Owned Real Property, and any other
elections, exemption agreements or licenses required by any other province
having jurisdiction, in each case in the forms prescribed, in respect of the
sale and transfer of the Purchased Assets hereunder. Purchaser shall file the
respective elections with its Goods and Services Tax and Quebec Sales Tax
returns for the reporting period which includes the Closing Date.
Section 1.6 Date, Time and Place of Closing. The transactions provided for by
-------------------------------
this agreement shall be consummated (the "Closing") at the offices of
Purchaser's counsel in Toronto at 11:00 a.m. (Toronto time) on the day which is
fifteen days following the Due Diligence Termination Date (as defined herein) or
at such other place and time as Seller and
-8-
<PAGE>
Purchaser shall mutually agree. The date and time of Closing is hereinafter
sometimes called the "Closing Date".
------------------------------
-9-
<PAGE>
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER AND PRINCIPALS
-------------------------------------------------------
Seller and Principals hereby jointly and severally represent and
warrant to Purchaser as set out below and acknowledge that Purchaser is relying
on such representations and warranties in connection with its purchase of the
Purchased Assets.
Section 2.1 Status.
------
(a) Seller. Seller is a corporation duly organized, validly existing
------
and in good standing under the laws of Canada and has full power and authority
to own and dispose of its properties (including the Purchased Assets which
Seller is selling) and to carry on the business as presently conducted by it.
Seller is duly qualified to do business and is in good standing in all other
jurisdictions where the conduct of its business so requires. No act or
proceeding has been taken by or against Seller in connection with the
dissolution, liquidation, winding up, bankruptcy or reorganization of Seller.
(b) Seller Group. Each Seller Group Member (other than the Principals)
------------
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each Selling Group Member has full power and
authority to own and dispose of its properties (including the Purchased Assets
which it is selling) and to carry on the business as conducted by it.
Section 2.2 Due Authorization.
-----------------
(a) Seller. Seller has the corporate power, authority and capacity to
------
enter into this Agreement and all other agreements and instruments to be
executed by it as contemplated by this Agreement and to carry out its
obligations under this Agreement and such other agreements and instruments. The
execution and delivery of this Agreement and such other agreements and
instruments and the completion of the transactions contemplated by this
Agreement and such other agreements and instruments have been duly authorized by
all necessary corporate action on the part of Seller, its directors and its
shareholders.
-10-
<PAGE>
(b) Seller Group. Each Seller Group Member (other than the Principals)
------------
has the corporate power, authority and capacity to enter into this Agreement (if
a party hereto) and any other agreements and instruments to be executed by it as
contemplated by this Agreement and to carry out its obligations under this
Agreement and such other agreements and instruments to which it is a party. The
execution and delivery of this Agreement and such other agreements and
instruments to which it is a party and the completion of the transactions
contemplated by this Agreement and such other agreements and instruments have
been duly authorized by all necessary corporate action on the part of each
Seller Group Member (other than the Principals), its directors and its
shareholders. Each Principal has all necessary capacity and authority to execute
this Agreement and any other agreements and instruments to be executed by such
Principal as contemplated by this Agreement and to carry out his obligations
under this Agreement and such other agreements and instruments.
Section 2.3 Enforceability of Obligations.
-----------------------------
(a) Seller. This Agreement constitutes a valid and binding obligation
------
of Seller enforceable against Seller in accordance with its terms subject,
however, to limitations on enforcement imposed by bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of the rights of
creditors or others and to the extent that equitable remedies such as specific
performance and injunctions are only available in the discretion of the court
from which they are sought. Seller is not an insolvent person within the meaning
of the Bankruptcy and Insolvency Act (Canada) and will not become an insolvent
person as a result of the Closing.
(b) Seller Group. This Agreement constitutes a valid and binding
------------
obligation of each Seller Group Member party hereto enforceable against each
such Seller Group Member in accordance with its terms subject, however, to
limitations on enforcement imposed by bankruptcy, insolvency, reorganization or
other laws affecting the enforcement of the rights of creditors or others and to
the extent that equitable remedies such as specific performance and injunctions
are only available in the discretion of the court from which they are sought.
No Seller Group Member is an insolvent person within the meaning of the
Bankruptcy and Insolvency Act (Canada) and will not become an insolvent person
as a result of the Closing.
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<PAGE>
Section 2.4 Absence of Conflicting Agreements.
---------------------------------
(a) Seller. The execution, delivery and performance of this Agreement
------
by Seller and the completion (with any consents and approvals and notices) of
the transactions contemplated by this Agreement do not and will not result in or
constitute any of the following:
(i) a default, breach or violation or an event that, with notice or
lapse of time or both, would be a default, breach or violation of
any of the terms, conditions or provisions of the articles or by-
laws of Seller or of any contract, agreement, commitment,
indenture, mortgage, pledge, note, bond, licence, permit or other
instrument or obligation (each, a "Contract") to which Seller is a
party or bound or by which any of the Purchased Assets or other
properties of Seller are bound or affected;
(ii) an event which, pursuant to the terms of any Contract, causes any
right or interest of Seller to come to an end or be amended in any
way that is detrimental to the Business or entitles any other
person to terminate or amend any such right or interest;
(iii) the creation, imposition, default, breach or violation of any lien,
security interest, charge, encumbrance, restriction or right
(collectively, "Liens") on any Purchased Asset, other than certain
Liens in favour of The Toronto Dominion Bank, RoyNat Inc. and
Gilbey Canada Inc., all of which will be discharged to the
satisfaction of Purchaser on or prior to the Closing; or
(iv) the violation of any applicable law applicable to or affecting
Seller which is related to the Business.
(b) Seller Group. The execution, delivery and performance of this
------------
Agreement by each Seller Group Member party hereto and the completion (with any
consents and approvals and notices) of the transactions contemplated by this
Agreement do not and will not result in or constitute any of the following:
(i) a default, breach or violation or an event that, with notice or
lapse of time or both, would be a default, breach or violation of
any of the terms, conditions or provisions of the articles or by-
laws of each Seller Group Member (other than the Principals) or of
any Contract to which each Seller Group Member is a party
-12-
<PAGE>
or bound or by which any of the Purchased Assets or other
properties of Seller Group are bound or affected;
(ii) an event which, pursuant to the terms of any Contract, causes any
right or interest of a Seller Group Member to come to an end or be
amended in any way that is detrimental to the Business or entitles
any other person to terminate or amend any such right or interest;
(iii) the creation, imposition, default, breach or violation of any Lien
on any Purchased Asset, other than certain Liens in favour of The
Toronto Dominion Bank, RoyNat Inc. and Gilbey Canada Inc., all of
which will be discharged to the satisfaction of Purchaser on or
prior to the Closing; or
(iv) the violation of any applicable law applicable to or affecting a
Seller Group Member which is related to the Business.
Section 2.5 Title to Purchased Assets.
-------------------------
(a) Owned Real Property. Sagarmatha and Gestion have good and
-------------------
marketable right, title and interest in and to all Owned Real Property set out
opposite their names in Schedule A, free and clear of any and all Liens, except
for permitted Liens identified in Schedule A. Other than this Agreement, there
is no agreement, option or other right or privilege outstanding in favour of any
person for the purchase from Sagarmatha or Gestion of any of the Owned Real
Property.
(b) Trademark Assets. Newco has good and marketable beneficial right,
----------------
title and interest in and to all the Trademark Assets (to which Seller holds
registered title), free and clear of any and all Liens. Other than this
Agreement, there is no agreement, option or other right or privilege outstanding
in favour of any person for the purchase from Newco of any of the Trademark
Assets.
(c) Active Storage Agreements. Faxtrieval has, and Seller will have at
-------------------------
Closing as a result of the Reorganization, good and marketable right, title and
interest in and to the Active Storage Agreements, free and clear of any and all
Liens, other than those Liens which will be discharged to the satisfaction of
Purchaser on or prior to the Closing. Other than this Agreement or the
transactions contemplated pursuant to the Reorganization, there is no
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<PAGE>
agreement, option or other right or privilege outstanding in favour of any
person for the purchase from Faxtrieval or Seller, as applicable, of any of the
Active Storage Agreements.
(d) Other Purchased Assets. Subject to Sections 2.5(a), 2.5(b) and
----------------------
2.5(c), Seller has good and marketable title to all the Purchased Assets, free
and clear of any and all Liens, except for permitted Liens identified in
Schedule E, and other than those Liens which will be discharged to the
satisfaction of Purchaser on or prior to the Closing. Other than this Agreement,
there is no agreement, option or other right or privilege outstanding in favour
of any person for the purchase from Seller of the Business or of any of the
Purchased Assets out of the ordinary course of business.
(e) Location of Purchased Assets. Schedule F sets out a complete and
----------------------------
accurate list of all locations where the Purchased Assets are situate, including
a brief description of the Purchased Assets situate at each location.
Section 2.6 Sufficiency of the Purchased Assets. The Purchased Assets are
-----------------------------------
sufficient to carry on the Business in substantially the manner it has
heretofore been carried on by Seller Group. The Purchased Assets constitute all
of the undertaking, property and assets used in connection with or otherwise
relating to the Business (other than the Excluded Assets), whether real or
personal, tangible or intangible, of every kind and description and wheresoever
situate, as a going concern.
Section 2.7 No Expropriation. No part of the Purchased Assets has been taken
----------------
or expropriated by any federal, provincial, municipal or other authority, nor
has any notice or proceeding in respect thereof been given or commenced, nor
does any Seller Group Member have any knowledge of any intent or proposal to
give any such notice or commence any such proceeding.
Section 2.8 Real Property.
-------------
(a) Schedule A sets out a complete and accurate description of all
Owned Real Property which, together with the Leased Real Property, is all of the
real property used in the Business.
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<PAGE>
(b) There are no unregistered agreements to which any Seller Group
Member is a party, and to the Knowledge of Seller and the Principals (as defined
herein) there are no other unregistered agreements, in respect of access to or
encroachments on or by the Real Property.
(c) All municipal and realty taxes, rates, special levies and
assessments with respect to the Owned Real Property that are due have been paid
in full.
(d) Except as disclosed in Schedule A, no local improvement charges or
special levies outstanding against the Real Property are currently due and owing
by any Seller Group Member nor has a Seller Group Member received any notice of
a proposed new local improvement charge or special levy.
(e) To the Knowledge of Seller and the Principals, the Buildings are in
good operating condition and repair, reasonable wear and tear excepted, and do
not require any repairs other than normal routine maintenance to maintain them
in good operating condition and repair. To the Knowledge of Seller and the
Principals, the Buildings comply in all material respects with all agreements,
restrictions and regulations registered against title to the Owned Real Property
or otherwise affecting the Owned Real Property.
(f) Except as described on Schedule A, to the Knowledge of Seller and
the Principals, each of the Buildings and all of the buildings, fixtures and
improvements located on the Leased Real Property, and all heating and air
conditioning equipment, plumbing, electrical and other mechanical facilities
which are located on or in such buildings or improvements, or form a part
thereof, are in good operating condition and repair, reasonable wear and tear
excepted, and do not require any repairs other than normal routine maintenance
to maintain them in good operating condition and repair.
(g) To the Knowledge of Seller and the Principals there is no material
defect in the design, construction or structure of the Buildings or any other
material defect in the Buildings including the footings, foundations, bearing
walls, cladding or roof of the Buildings.
(h) To the Knowledge of Seller and the Principals, the Buildings,
together with the buildings located on the Leased Real Property, are located
entirely within the boundaries of the Real Property.
(i) Seller Group has such rights of access to and from the Real
Property as are necessary to carry on the Business in the manner in which the
Business is currently carried on
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<PAGE>
and Seller and Principals do not have any knowledge of any fact or condition
which would result in the termination of such access.
(j) To the Knowledge of Seller and the Principals, all public utilities
required for the use and operation of the Owned Real Property connect into the
Owned Real Property through adjoining public streets, or, if they pass through
adjoining private land, do so in accordance with valid registered easements and
are sufficient for the actual use of the Owned Real Property.
(k) Except as disclosed in Schedule A, the Owned Real Property, the
Buildings forming part thereof, and the use thereof, and to the Knowledge of
Seller and the Principals, the Leased Real Property and the use thereof, comply
in all material respects with all applicable laws relating to the use of real
property including, without limitation laws relating to zoning, fire, safety,
building standards, health standards and Environmental laws (as defined herein),
and no Seller Group Member has received notice of any impending or threatened
change in any such applicable law which would adversely affect the Owned Real
Property, the Buildings or, to the Knowledge of Seller and the Principals, the
Leased Real Property. The current use of the Owned Real Property and to the
Knowledge of Seller and the Principals the current use of the Leased Real
Property is in compliance in all material respects with, and is not in violation
of, any covenants, conditions, restrictions or easements affecting the Real
Property or with respect to the use or occupancy of the Real Property.
(l) No Seller Group Member has received any written work order,
deficiency notice, notice of violation or other similar communication from any
governmental agency or otherwise which is outstanding requiring or recommending
that material work or repairs in connection with the Real Property or any part
thereof is necessary or required.
(m) No part of the Real Property has been taken or expropriated by any
federal, provincial, municipal or other competent authority not has any notice
or proceeding in respect thereof been given or commenced.
(n) Schedule A also contains a list of all Liens which affect the Real
Property and there is no default nor is there any event that with the passage of
time or the giving of notice would constitute a default under or with respect to
any permitted Liens relating to the Real Property, each of which has been
complied with in all respects and is in good standing.
(o) The transfer of the Owned Real Property to Purchaser by Sagarmatha
and Gestion will not contravene the provisions of any provincial planning
legislation applicable to
-16-
<PAGE>
such transfer and no consent pursuant thereto is required to permit the
conveyance of the Owned Real Property to Purchaser.
(p) All accounts for work and services performed and materials placed
or furnished upon or in respect of the Real Property at the request of a Seller
Group Member have been fully paid and satisfied and no person is entitled to
claim a construction, builders, mechanics or similar lien against the Real
Property or any part thereof, other than current accounts in respect of which
the payment due date has not yet passed.
Section 2.9 Real Property Leases. True, complete and correct copies of the
--------------------
lease agreements pertaining to the Leased Real Property are attached to Schedule
B (individually, a "Lease" and collectively, the "Leases"). The Leases are in
good standing and in full force and effect without amendment thereto, and
neither Seller nor any other party thereto (including, without limitation, any
Seller Group Member) is in breach of any covenants, conditions or obligations
contained therein. Seller has not assigned any of the Leases nor has the Seller
sublet any of the Leased Real Property. Seller has the exclusive right to
occupy and use the Leased Real Property.
Section 2.10 Personal Property. Schedules C and D contain complete and
-----------------
accurate lists or summaries of all personal property which is being sold,
assigned, conveyed, transferred and delivered to Purchaser pursuant to this
Agreement ("Personal Property"), including, without limitation, all equipment
(telecommunications and computer equipment included), fixtures and furnishings,
storage racking and inventory items, such as folding cartons, containers and
other storage materials. The Personal Property also includes lists of all
customers of the Business and the books and records (whether electronically
maintained or otherwise) which will provide Purchaser with the ability to
generate such lists, as well as all business addresses, post office boxes,
telephone, telex and telecopier numbers and marketing and administrative data.
Also included among the Personal Property is the computerized records management
and billing system currently utilized by Seller to manage the Business. All of
the Personal Property is in good operating condition and repair and does not
require any repairs other than normal routine maintenance to maintain the
Personal Property in good operating condition and repair. Schedules C and D
also list or provide a summary of all the Personal Property leases (the
"Personal Property Leases") related to the Business, identifying those which
cannot be terminated by Seller without liability at any time upon notice of one
month or less and which involve payment by Seller in the future of more than
$15,000. Each Personal Property Lease is in full force and effect and has not
been amended, and Seller is entitled to the full benefit
-17-
<PAGE>
and advantage of each Personal Property Lease in accordance with its terms. Each
Personal Property Lease is in good standing and there has not been any default
by any party under any Personal Property Lease nor any dispute between Seller
and any other party under any Personal Property Lease.
Section 2.11 Intellectual Property.
---------------------
(a) Schedule G contains a complete and accurate listing of all
registrations and applications relating to the Intellectual Property. Seller
Group is the sole beneficial owner of the Intellectual Property (other than the
software licensed to Seller Group as disclosed in Schedule G). Seller Group has
the right to use and assign the use of the Intellectual Property and to transfer
the Intellectual Property to the Purchaser. The Intellectual Property and the
conduct of the Business in connection with the Intellectual Property do not
infringe upon or breach the intellectual property rights of any other person and
to the Knowledge of Seller and the Principals no person has infringed or
breached or is infringing or breaching any of the Intellectual Property.
(b) All of the Intellectual Property identified in Schedule G as being
registered is duly and validly registered in the name of Seller or other Seller
Group Members in the appropriate offices to preserve the rights thereof and
thereto.
(c) Without limiting the generality of the foregoing, Newco is the
sole and exclusive beneficial owner (and Seller is the registered owner) of the
trademarks and service marks, including particulars of any registration thereof
or applications for registration therefor, listed on Schedule G (the "Trademark
Assets"). The Trademark Assets are the only names, trademarks and service marks
which are used by Seller Group in the operation of the Business.
(d) No Seller Group Member has received any notice challenging the
validity of, use of or ownership of Seller Group in the Intellectual Property
and to the Knowledge of Seller and Principals there are no facts upon which such
a challenge could be made; and
(e) There are no outstanding rights or licences granted by Seller to
any Person to use the Intellectual Property other than those set out in Schedule
G.
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<PAGE>
Section 2.12 Data Processing. Schedule H sets out:
---------------
(a) a brief description of the computer equipment and associated
peripheral devices and operating in application systems and software and
hardware owned by, or leased or licensed to, Seller Group and used by Seller
Group to carry on the Business ("Data Processing System"); and
(b) a list of all agreements including warranties, leases and licence
relating to the Data Processing System.
To the Knowledge of Seller and the Principals, the Data Processing System
adequately meets the data processing needs of the Business and operations of
Seller Group as presently conducted. To the Knowledge of Seller and the
Principals, the data processing and data storage facilities of Seller Group are
adequate and properly protected. Seller has arranged for back-up data to be
stored such that, to the Knowledge of Seller and the Principals, it would
adequately meet the data requirements of the Business in the event the Data
Processing System or any of its components is rendered temporarily or
permanently inoperative as a result of a natural or other disaster.
Section 2.13 Inventories. The inventory levels of the Business have been
-----------
maintained at such amounts as are required for the operation of the Business or
any material part thereof as heretofore conducted by Seller Group and such
inventory levels are adequate therefor. The inventories consist of items of a
quality and quantity usable and saleable in the ordinary course of business.
All items included in the inventories are owned by Seller.
Section 2.14 Legal Matters. Except as described in Schedule I, no Seller Group
-------------
Member is a party to nor has any Seller Group Member been threatened with, any
suit, action, arbitration or other legal or administrative proceeding or
governmental inquiry or investigation by which the Purchased Assets or the
Business would be adversely affected. Neither Seller nor the Principals have
any Knowledge of any current existing state of facts upon which any such suit,
action, arbitration or other legal or administrative proceeding or governmental
inquiry or investigation might be commenced with any reasonable likelihood of
success. There are no judgments, orders, decrees or awards before any court,
department, commission, board, instrumentality or arbitrator which affects the
Purchased Assets or the Business.
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<PAGE>
Section 2.15 Management Agreements. Schedule J contains a list as of all
---------------------
customers whose files and records are stored, held and maintained by Seller
Group in cartons and containers and otherwise pursuant to written agreements
(collectively, the "Management Agreements"). At Closing, Seller shall deliver a
revised Schedule J to effect changes therein up to the Closing Date. The rights
and benefits of Seller under and pursuant to the Management Agreements are
presently the property of Seller and will be the property of Seller at the
Closing, except for:
(a) items or files returned to customers in the ordinary course of
business between the date hereof and the Closing Date.
(b) the active storage agreements described in Schedule J (the "Active
Storage Agreements") in which Faxtrieval holds all right title and
interest as of the date hereof, the property rights of which will
be transferred to Seller prior to the Closing upon giving effect to
the Reorganization.
Except for the Liens in favour of The Toronto Dominion Bank which will be
discharged to the satisfaction of Purchaser on or prior to the Closing, no
Management Agreement has been pledged as collateral or is subject to any
security agreement, lease, conditional sales contract or other title retention
or security arrangement. Also included with Schedule I are true, correct and
accurate copies of all current standard forms of Management Agreement used by
Seller.
Section 2.16 Contracts, Leases, Agreements and Other Commitments. No Seller
---------------------------------------------------
Group Member is a party to or bound by any written, oral or implied Contract in
respect of or related to the Business except for the following (collectively,
the "Corporation Agreements"):
(a) the Management Agreements (including, without limitation, the
Active Storage Agreements) described in Schedule J;
(b) the Leases described in Schedule B;
(c) the Personal Property Leases described in Schedules C and D;
(d) agreements, each of which either (i) involves a maximum possible
liability or obligation on the part of a Seller Group Member of
less than $15,000 per annum or (ii) is terminable by a Seller
Group Member on less than 90 days notice without any termination
or breakage costs; and
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<PAGE>
(e) the agreements listed on Schedule K.
True, correct and complete copies of all of the Corporation
Agreements (other than the Management Agreements and those agreements identified
in Section 2.16(d)), including all amendments thereto, will be delivered or made
available to Purchaser. Access to true, correct and complete copies of all of
the Management Agreements, including all amendments thereto, has been provided
to Purchaser. Except as shown on Schedule K, Seller and all other parties to all
of the Corporation Agreements (including, without limitation, any Selling Group
Members) have performed all of the obligations required to be performed to date
under the Corporation Agreements, and neither Seller nor any other party
(including, without limitation, any Selling Group Member) is materially in
default or arrears under the terms thereof, and no condition exists or event has
occurred which, with the giving of notice or lapse of time or both, would
constitute a material default under such Corporation Agreements or give rise to
a right of termination under the Corporation Agreements. Subject to Section
6.20, the consummation of the transactions provided for in this Agreement will
not result in a termination of any of the rights of a Selling Group Member under
any Corporation Agreement and do not require the consent of or notice to any
party other than a Seller Group Member. None of the terms or provisions of any
Corporation Agreement materially adversely affects the Purchased Assets or the
Business. Schedule K also contains a list of all outstanding, binding proposals
advanced within the last 12 months, other than those proposals advanced in the
normal course of business at competitive market rates.
Section 2.17 Employee Agreements.
-------------------
(a) Except as described in Schedule L, and other than the collective
bargaining agreement between Seller and Confederation des Syndicates Nationaux
(the "Collective Agreement"), Seller is not a party to or bound by any written
employment agreement, confidentiality agreement, consulting agreement or
collective bargaining agreement with any employee or former employee (including
with any management employee, officer or consultant to the Business) any labour
or trade union or employee association or employer's association applicable as
of the Closing Date to the Business, and Seller has not communicated an
intention or promised to amend, or conducted negotiations with respect to, any
such agreement or commitment in the future. Other than as described in Schedule
L, Seller is not a party to or bound by any written or oral employment agreement
with any employee or former employee that extends the severance or termination
obligations of Seller beyond the severance or termination obligations prescribed
by applicable law.
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<PAGE>
(b) Except as described in Schedule L, no trade union, employee
association or other entity has acquired any bargaining rights by either
certification or voluntary recognition with respect to any of the employees
employed or formerly employed in connection with the Business and to the
Knowledge of Seller and the Principals there are no current attempts to organize
or establish any labour or trade union or employee association with respect to
any such employees.
(c) Except as described in Schedule L, there are no labour
controversies, strikes, work stoppages, picketing, lock-outs, boycotts, slow-
downs, arbitrations, grievances, claims, complaints, applications for
declaration of successor employer, unfair labour practice complaints or charges
or similar disputes or labour related proceedings relating to, in respect of or
which may adversely affect the Business or the employees employed in the
Business pursuant to any applicable laws relating to the employment of labour
including employment standards, occupational health and safety, workers'
compensation, pay equity and human rights legislation and, to the Knowledge of
Seller and the Principals, there is no state of facts or event which would
reasonably be expected to form the basis thereof.
Section 2.18 Employees and Employee Benefit Plans.
------------------------------------
(a) Schedule M contains a complete and accurate list, as of the date
hereof, of all individuals employed in connection with the Business (the
"Employees") and sets forth for each Employee, the position, salary (including
sales commission and bonus entitlements), years of service and date of hire and
if absent on short term disability, sick leave or long term disability or any
other approved or statutory leave of absence or layoff, and Seller will provide
as soon as reasonably possible, information as to the reason for such absence,
leave or layoff and the related disability or workers' compensation benefit.
The Employees constitute all employees of Seller employed in connection with the
Business as of the date hereof.
(b) All outstanding salaries, wages, vacation pay, bonuses,
commissions and other emoluments for or in respect of the Employees which may be
payable to or receivable by the Employees for all periods up to and including
the Closing Date will be paid in full by Seller. Notwithstanding the foregoing,
there are no bonuses presently accruing, due or payable to any of the Employees
except as disclosed in Schedule M. Seller is in compliance with all applicable
laws respecting employment, employment practices, employment standards and pay
equity, and is not in arrears in the payment of any salaries, wages, vacation
pay, bonuses, commissions, pension or other benefits or contributions in respect
thereof and no dispute or grievance exists with respect thereto, except as
described in Schedule M. All amounts
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<PAGE>
withheld, required to be withheld, paid or required to be paid prior to the
Closing in respect of the Employees pursuant to any applicable law including,
without limitation, statutes relating to income and other taxes, employment
insurance, employment standards, pay equity, health insurance, workers'
compensation and statutory pension plans have been or will be withheld, paid,
discharged or otherwise settled by Seller.
(c) Except as described on Schedule M, none of the Employees is on
long term disability, extended sick leave or lay-off or is receiving workers'
compensation benefits and except as described on Schedule M, none of such
Employees is on any other approved or statutory leave of absence.
(d) With respect to workers' compensation, the current assessment
rates for the Business are set forth in Schedule M and there are no current or
threatened penalty assessments affecting the Business or the Employees except as
set forth in Schedule M. All current assessments have been paid to date.
(e) Except as described on Schedule M, since November 30, 1997, there
has been no increase made or promised in the level or rates of wages, salaries,
commissions, bonuses and other compensation or remuneration paid to or accrued
for any of the Employees except annual salary increases in the ordinary course
of business.
(f) Schedule M.1 contains a complete and accurate list, as of the date
hereof, of all Employee Benefit Plans (as defined in Section 6.10) currently in
effect relating to the Employees or former Employees.
Section 2.19 Financial Information. Schedule N contains balance sheets of
---------------------
Seller at November 30, 1997, income statements of Seller for the year ended
November 30, 1997 and the statement of changes in financial position for the
year ended November 30, 1997 (the "Financial Statements"). The balance sheet of
Seller at November 30, 1997, the income statement of Seller for the year ended
November 30, 1997 and the statement of changes in financial position of Seller
for the year ended November 30, 1997 have been prepared in accordance with
generally accepted accounting principals consistently applied throughout the
period reported on, are correct and complete in all material respects, and
present fairly and accurately in all material respects the financial position of
Seller for the period reported upon.
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<PAGE>
Section 2.20 Books and Records. The Books and Records fairly and correctly set
-----------------
out and disclose in all material respects the results and the financial position
of the Business, and all financial transactions relating to the Business have
been accurately recorded in such Books and Records in all material respects.
There has been no change in the accounting policies applied by Seller Group to
the Business and the financial records thereof in the previous five fiscal years
of Seller.
Section 2.21 Liabilities. Seller has no liabilities related to the Business
-----------
(including, but not limited to, accounts payable) except as and to the extent:
(a) reflected in the Financial Statements; (b) incurred or arising in the
ordinary course of business after the date of preparation of the Financial
Statements; or (c) disclosed in this Agreement or any Exhibit or Schedule
hereto.
Section 2.22 Conflicts of Interest. Except as described on Schedule O, no
---------------------
shareholder, director or officer or to the Knowledge of Seller and the
Principals any employee of Seller or any affiliate of any of the foregoing
(including, without limitation, any Seller Group Member): (a) has any pecuniary
interest in any supplier or customer of the Business or in any other business
with which Seller conducts business or with which Seller is in competition; (b)
has any interest in the Purchased Assets; or (c) has any contractual or other
claim, express or implied, of any kind whatsoever against Seller in connection
with the Business or Purchased Assets.
Section 2.23 Actions Since Date of Financial Statements. Except as set forth
------------------------------------------
on Schedule P, since the date of the Financial Statements:
(a) there has been no material adverse change in the business, assets
or financial condition of the Business;
(b) Seller has not taken any action outside of the ordinary course of
business;
(c) Seller has not borrowed any money or become contingently liable
for any obligation or liability of others outside of the ordinary
course of business, other than in connection with the purchase of
shelving in the ordinary course of business;
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<PAGE>
(d) Seller has paid all of its debts and obligations as they became
due;
(e) Seller has not incurred any debt, liability or obligation of any
nature to any party except for obligations arising in the ordinary
course of business; and
(f) Seller has used its best efforts to preserve its business
organization intact and to preserve its relationships with its
customers, suppliers and others with whom it deals.
Section 2.24 Permits and Licences. Each Seller Group Member holds all
--------------------
licences, permits, consents, approvals, waivers and other authorizations which
are necessary for the operation of the Business (collectively, the "Permits"),
including, without limitation, all Permits issued by federal, provincial or
municipal governmental agencies. No Seller Group Member is in default, nor has
any Seller Group Member received any notice of any claim of default, with
respect to any of the Permits or any notice of any other claim or proceeding or
threatened proceeding relating to any of the Permits. All of the Permits are in
full force and effect.
Section 2.25 Compliance with Laws. The Business has been operated and the
--------------------
Purchased Assets used, in all material respects, in compliance with all
requirements of federal, provincial and municipal law, and all requirements of
all governmental bodies or agencies having jurisdiction over it, including all
necessary government authorizations and other authorizations required to carry
on the Business and to own, lease and operate the Purchased Assets in compliance
with such laws and there are no governmental authorizations which are material
to the conduct of the Business, other than those of a routine nature necessary
to carry on the business in the provinces where it is so carried on. Other than
the authorizations provided by the Canadian Security Intelligence Service
("CSIS"), the transactions provided for in this Agreement will not result in the
cancellation or the termination of any governmental authorization, and no
consent from or notice to any governmental agency is required as a result of the
transactions contemplated by this Agreement. No Seller Group Member has
received any notice from any federal, provincial or municipal authority or any
insurance or inspection body, that any of the properties, facilities, equipment
or business procedures or practices of the Business fails to comply with any
applicable law, ordinance, regulation, building or zoning law, or requirement of
any public authority or body. To the Knowledge of Seller and the Principals,
there are no regulations or legislation pending before any federal, provincial
or municipal governmental body or legislature which, if adopted, would have a
materially adverse effect on the Business or the Purchased Assets.
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Section 2.26 Suppliers and Customers. Schedule Q lists the twenty largest
-----------------------
customers by revenue in each of Montreal, Toronto and Calgary and the ten
largest suppliers by cost of Seller (or such additional customers or suppliers
of Seller which are sufficient to constitute 10 per cent or more of total sales
or purchases, as the case may be) for the fiscal year ended November 30, 1997,
and the aggregate amount which each customer was invoiced and each supplier was
paid during such period. Except as disclosed in Schedule Q, Seller has not
received notice of, nor, to the Knowledge of Seller and the Principals, is there
any intention on the part of any customer or supplier to cease doing business
with Seller or to modify or change in any material manner any existing
arrangement with Seller for the purchase or supply of any products or services.
To the Knowledge of Seller and the Principals, the relationship of Seller with
each of its principal suppliers and customers is satisfactory, and there are no
material unresolved disputes with any such supplier or customer. Prior to the
Closing Date, Seller shall cooperate with Purchaser in making or causing to be
made such reasonable inquiries of and written introductions to customers and
suppliers of the Business as Purchaser may reasonably deem necessary or
advisable.
Section 2.27 GST Registration. Each Seller Group Member (other than the
----------------
Principals) is, and in the case of Newco, will be at the Closing, a registrant
for the purposes of the Excise Tax Act (Canada) whose registration number is set
out in Schedule U.
Section 2.28 Residence of Seller. None of Seller, Sagarmatha, Gestion or Newco
-------------------
is a non-resident of Canada within the meaning of section 116 of the Income Tax
Act (Canada).
Section 2.29 Environmental Matters.
---------------------
(a) Each of Seller, the Principals, Sagarmatha and Gestion, in respect of
the Business, the Real Property and the Purchased Assets, has been and is in
compliance with all applicable federal, provincial and municipal laws, statutes,
ordinances, by-laws and regulations and orders, directives and decisions
rendered by and policies, instructions, guidelines and other guidance of any
ministry, department or administrative or regulatory agency ("Environmental
Laws") relating to the protection of the environment, occupational health and
safety or the manufacture, processing, distribution, use, treatment, storage,
disposal, discharge, packaging, transport or handling of any pollutants,
contaminants, chemicals,
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<PAGE>
deleterious substances, wastes (including, without limitation, subject wastes)
or industrial, toxic or hazardous wastes or substances ("Hazardous Substances").
(b) Each of Seller, the Principals, Sagarmatha and Gestion has obtained and
holds all licences, permits, approvals, certificates, registrations and other
authorizations under Environmental Laws (the "Environmental Permits") required
for the operation of the Business, all of which are identified and described in
Schedule R. Each Environmental Permit is valid, subsisting and in good standing
and Seller is not in default or breach of any Environmental Permit and no
proceeding is pending or threatened nor are there grounds to revoke or limit any
Environmental Permit.
(c) None of Seller, the Principals, Sagarmatha and Gestion, in connection
with the Business, has used or permitted to be used, except in compliance with
all Environmental Laws, the Real Property, to generate, manufacture, process,
distribute, use, treat, store, dispose of, transport or handle any Hazardous
Substance.
(d) To the Knowledge of Seller and the Principals, no building, structure
or improvement located on the Real Property is or ever has been, insulated with
urea formaldehyde insulation, nor to the Knowledge of Seller and the Principals
do such buildings or structures contain any aluminum wiring or friable (easily
crumbled or pulverized) asbestos or any other substance containing asbestos
(except as noted in the Environmental Audit (as defined herein)).
(e) None of Seller, the Principals, Sagarmatha and Gestion, in respect of
the Business, has ever received any notice of, or been prosecuted for an offence
alleging, non-compliance with any Environmental Laws, and neither Seller, the
Principals, Sagarmatha nor Gestion has ever settled any allegation of non-
compliance short of prosecution. There are no notices, orders or directions
relating to environmental matters requiring any containment, clean-up,
remediation or corrective action or work, repairs, construction or capital
expenditures to be made with respect to the Business.
(f) None of Seller, the Principals, Sagarmatha and Gestion has caused or
permitted, nor to the Knowledge of Seller and the Principals has there been any
release, emission, spill, disposition or discharge in any manner whatsoever, of
any Hazardous Substance on, in, around, from or in connection with the Real
Property (collectively, "Environmental Contamination"). All Hazardous
Substances and all other materials and substances used in whole or in part by
Seller Group in connection with or resulting from the Business have been
disposed of, treated and stored in compliance with all Environmental Laws.
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(g) None of Seller, the Principals, Sagarmatha and Gestion, in respect of
the Business, has ever received any notice that it is potentially responsible
for a federal, provincial, municipal or local clean-up site or corrective action
under any Environmental Laws. None of Seller, the Principals, Sagarmatha and
Gestion, in respect of the Business, has ever received any request for
information in connection with any federal, provincial, municipal or local
inquiries as to disposal sites.
(h) Seller has delivered to Purchaser true and complete copies of all
environmental audits, evaluations, assessments, studies or tests relating to the
Business of which Seller, the Principals, Sagarmatha and Gestion is aware.
Section 2.30 Taxes.
-----
(a) In this Agreement, "Tax" or "Taxes" means all taxes, charges, fees.
levies. imposts and other assessments, including all income, sales, use, goods
and services, value added, capital, capital gains, net worth, transfer, profits,
withholding, payroll, employer health, excise, real property and personal
property taxes, and any other taxes, custom duties, fees, assessments or similar
charges in the nature of a tax including Canada Pension Plan and provincial
pension plan contributions, unemployment insurance and employment insurance
payments and workers compensation premiums, together with any interest, fines
and penalties, imposed by any governmental agency (federal, provincial or
municipal), and whether or not disputed.
(b) There are no liens or encumbrances of any kind upon or in relation to
any of the Purchased Assets for any Taxes accruing due on or before the Closing
Date or in respect of any period ending on or before the Closing Date.
(c) There are no arrears nor any default in respect of the payment of any
Taxes payable in respect of the Business or the Purchased Assets which could
have an adverse effect on Purchaser and all such Taxes and other assessments due
and payable in respect of the Business and the Purchased Assets have been paid
or accrued for and no claim for additional Taxes or other assessments has been
made in respect of the Business and is currently outstanding.
Section 2.31 Insurance. Each Seller Group member has and will maintain until
---------
the Closing in full force and effect the insurance relating to the Business
described in Schedule S. No
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breach of any of the terms and conditions of any such policies has occurred.
Schedule S lists all claims under or in respect of such insurance policies
outstanding as of the date hereof.
Section 2.32 Brokerage Fees. No Seller Group Member has entered into any
--------------
agreement which would entitle any person to any valid claim against Purchaser
for a broker's commission, finder's fee or any like payment in respect of the
purchase and sale of the Purchased Assets or any other matters contemplated by
this Agreement.
Section 2.33 Full Disclosure. Neither this Agreement, including all Exhibits
---------------
and Schedules, nor any other financial statements, documents or instruments
delivered by Seller to Purchaser in connection with this Agreement and the
transactions contemplated by this Agreement, contains or will contain any untrue
statement of any material fact or omits or will omit to state any material fact
required to be stated to make such statement, document or instrument not
misleading. There has been no event, transaction or information which to the
Knowledge of Seller and the Principals has not been disclosed to Purchaser in
writing which could reasonably, be expected to have a material adverse effect on
the ongoing operation of the Business or any material part thereof, except for
matters which affect businesses similar to the Business generally.
Section 2.34 Knowledge. For the purposes of this Article II, it is
---------
acknowledged by the parties that "Knowledge of Seller and the Principals" shall
mean to the best of the knowledge of Ingram, Richardson and Al Samson after
appropriate inquiry of those representatives and employees of Seller Group who
ought reasonably to have knowledge of such matter and after confirmation of any
information in their possession.
Section 2.35 Docuguard. Purchaser has been advised by Seller that the
---------
Docuguard Shares and the rights and benefits of Seller arising as a result of
Seller's ownership interest in Docuguard may not be transferable and may
terminate upon giving effect to the transactions contemplated in this Agreement
and actions contemplated by this Agreement may result in Docuguard retaining the
right to use, in Hungary, certain of the Intellectual Property notwithstanding
any representations and warranties in this Agreement to the contrary.
----------------------------
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to Seller and the Principals
as follows and acknowledges that Seller and the Principals are relying on such
representations and warranties in connection with the sale of the Purchased
Assets:
Section 3.1 Status. Purchaser is a corporation duly organized, validly
------
existing and in good standing under the laws of the Province of Nova Scotia and
has full power and authority to own its properties and to carry on the business
as presently conducted by it. Purchaser is duly qualified to do business and is
in good standing in all other jurisdictions where the conduct of its business so
requires.
Section 3.2 Due Authorization. Purchaser has the corporate power, authority
-----------------
and capacity to enter into this Agreement and all other agreements and
instruments to be executed by it as contemplated by this Agreement and to carry
out its obligations under this Agreement and such other agreements and
instruments. The execution and delivery of this Agreement and such other
agreements and instruments and the completion of the transactions contemplated
by this Agreement and such other agreements and instruments have been duly
authorized by all necessary corporate action on the part of Purchaser, its
directors and its sole shareholder.
Section 3.3 Enforceability of Obligations. This Agreement constitutes a valid
-----------------------------
and binding obligation of Purchaser enforceable against Purchaser in accordance
with its terms subject, however, to limitations on enforcement imposed by
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of the rights of creditors or others and to the extent that equitable remedies
such as specific performance and injunctions are only available in the
discretion of the court from which they are sought.
Section 3.4 Absence of Conflicting Agreements. The execution, delivery and
---------------------------------
performance of this Agreement by Purchaser and the completion (with any required
consents and approvals and notices) of the transactions contemplated by this
Agreement do not and will not result in or constitute any of the following:
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(i) a default, breach or violation or an event that, with notice or
lapse of time or both, would be a default, breach or violation of
any of the terms, conditions or provisions of the articles or by-
laws of Purchaser or of any Contract to which Purchaser is a party
or bound or by which Purchaser or any of its assets or its
properties is bound or affected; or
(ii) the violation of any applicable law applicable to or affecting
Purchaser or any of its assets or its properties.
Section 3.5 Consents and Approvals. There is no requirement for Purchaser to
----------------------
make any filing with, give any notice to or obtain any licence, permit,
certificate, registration, authorization, consent or approval of, any government
or regulatory authority as a condition to the lawful consummation of the
transactions contemplated by this Agreement.
Section 3.6 Litigation. Purchaser is not a party to or, to Purchaser's best
----------
knowledge, threatened with, any suit, action, arbitration or other legal or
administrative proceeding which would adversely affect Purchasers' obligations
under this Agreement.
Section 3.7 GST Registration. Purchaser is a registrant for the purposes of
----------------
the Excise Tax Act (Canada) and Purchaser will, at the Closing, be a registrant
for the purposes of the Act Respecting the Quebec Sales Tax.
------------------------------
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ARTICLE 4
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
------------------------------------------
Section 4.1 Survival of Representations and Warranties of Seller and
--------------------------------------------------------
Principals. The representations and warranties of Seller and the Principals set
- ----------
forth in this Agreement or in any Exhibit or Schedule attached hereto are made
as of the date of this Agreement and shall be true, correct, complete and
accurate on and as of the Closing Date and at all times between the date of this
Agreement and the Closing Date. The representations and warranties of Seller
and the Principals set forth in this Agreement or in any Exhibit or Schedule
attached hereto shall survive the Closing Date and shall terminate on the second
anniversary of the Closing Date, except that:
(a) the representations and warranties set out in Sections 2.1 through 2.3
and Section 2.5 shall survive and continue in full force and effect,
without limitation of time;
(b) the representations and warranties as to environmental matters set
forth in Section 2.29 shall survive for a period of five years from
the Closing Date;
(c) the representations and warranties as to tax matters set forth in
Section 2.30 shall survive until the expiry of any applicable
limitation periods; and
(d) a claim for any breach of any of the representations and warranties
contained in this Agreement or in any agreement, instrument,
certificate or other document executed or delivered pursuant hereto
involving fraud or fraudulent misrepresentation may be made at any
time following the Closing Date, subject only to any applicable
limitation periods imposed by law.
Section 4.2 Survival of Representations and Warranties of Purchaser. The
-------------------------------------------------------
representations and warranties of Purchaser as set forth in this Agreement or in
any Exhibit or Schedule attached hereto are made as of the date of this
Agreement and shall be true, correct and accurate on and as of the Closing Date
and at all times between the date of this Agreement and the Closing Date. The
representations and warranties of Purchaser set forth in this Agreement shall
survive the Closing Date and shall terminate on the second anniversary of the
Closing Date, except that:
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(a) the representations and warranties set out in Sections 3.1 through 3.3
shall survive and continue in full force and effect without limitation
of time; and
(b) a claim for any breach of any of the representations and warranties
contained in this Agreement or in any agreement, instrument,
certificate or other document executed or delivered pursuant hereto
involving fraud or fraudulent misrepresentation may be made at any
time following the Closing Date, subject only to any applicable
limitation periods imposed by law.
Section 4.3 Covenants. The covenants of Purchaser and Seller Group set forth
---------
in this Agreement shall survive the completion of sale and purchase of the
Purchased Assets and, notwithstanding such completion, shall continue in full
force and effect for the benefit of Purchaser or Seller Group, as applicable, in
accordance with the terms thereof.
------------------------------
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ARTICLE 5
CONDUCT OF BUSINESS PENDING CLOSING
-----------------------------------
Section 5.1 Conduct of Business Pending Closing. Without in any way limiting
-----------------------------------
any other obligation of Seller Group hereunder, Seller agrees that between the
date hereof and the Closing Date (the "Interim Period"), Seller shall, or shall
cause any Selling Group Member, in connection with the Business:
(a) not take any action or omit to take any action which would cause any
of the representations and warranties of Seller contained in this
Agreement or in any Exhibit or Schedule to become untrue;
(b) conduct the Business in a good and diligent manner in the ordinary and
usual course of its business consistent with past practice;
(c) not enter into any contract, agreement, commitment or other
arrangement with any party, other than contracts in the ordinary
course of business, and not amend, modify or terminate any Corporation
Agreement, other than in the ordinary course of business.
(d) use its best efforts to preserve its business organization intact and
to preserve its relationships with customers, suppliers and others
with whom it deals;
(e) not reveal to any party, other than Purchaser or its authorized
representatives ("Agents"), or Seller Group's authorized
representatives, any of the business procedures and practices followed
by it in the conduct of the Business;
(f) keep the Real Property and Buildings occupied by it and all of its
equipment and tangible Personal Property in good operating repair,
reasonable wear and tear excepted, and perform all necessary repairs
and maintenance;
(g) not hire any additional employees in respect of the Business and not
authorize or implement any change in the terms of employment for any
Employee including any increase in compensation payable or the
benefits for any Employee, other than in the ordinary course of
business or as required under the Collective Agreement;
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<PAGE>
(h) promptly advise Purchaser of any material changes in the financial
condition, business, affairs or prospects of the Business or the
Purchased Assets, including, without limitation, any material change
in the terms of any Management Agreement or receipt by Seller of any
notice of termination or notice of material amendment from any other
party to the Management Agreements;
(i) comply with all provisions of any Corporation Agreement applicable to
it as well as with all applicable laws, rules and regulations; and
(j) not dispose of any Purchased Assets except in the ordinary course of
business, or terminate any Lease, Personal Property Lease or
Management Agreement, without Purchaser's prior written consent.
Section 5.2 Conduct of Business after Due Diligence Termination Date. Seller
--------------------------------------------------------
agrees that between the Due Diligence Termination Date and the Closing Date,
Seller shall, and shall cause any Seller Group Member, not to enter into any
contract, agreement, commitment or other arrangement with any party (other than
standard customer agreements in the ordinary course of business), and not amend,
modify or terminate any Corporation Agreement (other than Management Agreements
in the ordinary course of business), in each case without the prior written
consent of Purchaser.
Section 5.3 Risk of Loss. The Purchased Assets shall be at the risk of Seller
------------
until the Closing. Until the Closing, Seller shall maintain, or shall cause to
maintain, in force all the policies of property damage insurance under which any
of the Purchased Assets is insured. If before the Closing any of the Purchased
Assets are lost, damaged or destroyed and the loss, damage or destruction
constitutes a material adverse change in the Business, then:
(i) Purchaser may terminate this Agreement in accordance with the
provisions of Article IX; or
(ii) Purchaser may require Seller to assign to Purchaser, or cause to be
assigned to Purchaser, the proceeds of any insurance payable as a
result of the occurrence of such loss, damage or destruction, and
shall consummate the transactions contemplated by this Agreement.
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<PAGE>
Section 5.4 Exclusive Dealings. During the Interim Period, Seller shall not,
------------------
and shall cause each Seller Group Member, and their respective shareholders not
to, take any action, directly or indirectly, to encourage, initiate or engage in
discussions or negotiations with, or provide any information to any person,
other than Purchaser, its Agents and Seller's advisors, concerning any sale,
transfer, assignment, licence, merger or similar transaction involving Seller,
its shares or the Purchased Assets.
------------------------------
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ARTICLE 6
FURTHER COVENANTS AND AGREEMENTS
--------------------------------
Section 6.1 Due Diligence.
-------------
(a) Subject to Section 6.1(b), until the later of (i) 30 days following
the date of this Agreement, and (ii) 10 days following receipt by
Purchaser of the completed Schedules as contemplated in Section 6.2
(the "Due Diligence Termination Date"), Purchaser shall have the
right to conduct and complete its investigation of Seller Group,
the Business, the Employee Benefit Plans and the Purchased Assets,
and Purchaser, in its sole discretion, shall be satisfied in all
respects with the results of such investigation and, in its sole
discretion, shall have determined to proceed with the transactions
contemplated by this Agreement. If Purchaser determines not to
proceed with the transaction contemplated by this Agreement on or
prior to the Due Diligence Termination Date, this Agreement may be
terminated by Purchaser by delivering written notice thereof to
Seller Group on or before the Due Diligence Termination Date,
without any liability on the part of or recourse against Purchaser
or any shareholders, directors, officers of employees thereof.
(b) Notwithstanding Section 6.1(a), Purchaser shall have the right,
exercisable in its sole discretion within 10 days of receipt by
Purchaser of the Environmental Audits, to terminate this Agreement
without liability on the part of or recourse against Purchaser or
any shareholder, director, officer or employee thereof, if the
results of Environmental Audits delivered prior to the Closing are
not acceptable in all respects to Purchaser.
Section 6.2 Schedules and Exhibits. The parties hereto acknowledge that this
----------------------
Agreement is being executed by the parties prior to the preparation and delivery
by Seller of the Exhibits and Schedules contemplated herein. This Agreement
shall be read and interpreted as if such Exhibits and Schedules have been
attached and form part hereof so long as:
(a) Seller shall, or shall cause Seller Group, to prepare and deliver
to Purchaser within 21 days following the date of this Agreement
(the "Attachment Delivery
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<PAGE>
Date"), all Schedules contemplated herein, such Schedules to be in
form and substance satisfactory to Purchaser, acting in its sole
discretion; and
(b) on or prior to the Attachment Delivery Date, the parties shall have
agreed as to the form and substance of all Exhibits contemplated
herein, acting reasonably.
In the event that the Schedules have not been delivered by the Seller on or
prior to the Attachment Delivery Date, this Agreement may be terminated by the
Purchaser, without any liability on the part of or recourse against Purchaser or
Seller Group or any shareholders, directors, officers or employees thereof. In
the event that the Exhibits have not been mutually agreed to by the parties on
or prior to the Attachment Delivery Date, this Agreement may be terminated by
Purchaser or Seller Group, without any liability on the part of or recourse
against Purchaser or Seller Group, as the case may be, or any shareholders,
directors, officers or employees thereof.
Section 6.3 Access to Information.
---------------------
(a) Seller shall give, and shall cause to be given, to Purchaser and its
Agents access to the Real Property and the Purchased Assets and all documents
(including without limitation all Corporation Agreements), books and records of
any Selling Group Member relating to the current and past operations of the
Business (and the Employee Benefit Plans), and shall permit Purchaser and its
Agents to make copies thereof, and Seller shall permit Purchaser to interview
senior Employees during reasonable business hours, upon reasonable prior notice
and in the presence of a representative of Seller.
(b) Until the time of Closing and thereafter if the Closing does not take
place, the parties hereto shall keep confidential, unless compelled by judicial
or administrative process or, in the opinion of their respective counsel, by
other requirements of law or regulations, any information relating to the
business of any other party or their affiliates, obtained from such party or its
agents or representatives. If this Agreement is so terminated, promptly after
such termination, all documents, work papers and other written material obtained
from a party in connection with this Agreement and not theretofore made public
(including all copies thereof) shall be returned to the party which provided
such material.
(c) From and after the Closing, Seller shall, and shall cause Seller Group,
to keep confidential, unless compelled by judicial or administrative process or,
in the opinion of its
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<PAGE>
counsel, by other requirements of law or regulation, any information obtained
by, or known to, Seller Group or its agents in respect of the Business.
Section 6.4 Books and Records. At reasonable times (and at all times required
-----------------
by corporate or income tax law) after the Closing (a) Purchaser shall make
available to Seller for inspection and copying the Books and Records included in
the Purchased Assets to the extent reasonably required by Seller for tax,
financial reporting and other purposes and (b) Seller shall make available to
Purchaser for inspection and copying any of Seller's books and records relating
to the Business (and the Employee Benefit Plans) which are not included in the
Purchased Assets to the extent reasonably required by Purchaser for such
purposes. Neither Seller on the one hand nor Purchaser on the other hand will
dispose of any of such Books and Records without first offering them to the
other. All the Books and Records shall be kept within Canada and shall be
protected by Purchaser no less diligently than it protects its own books and
records.
Section 6.5 Cooperation. Purchaser and Seller agree (and Seller agrees to
-----------
cause any Seller Group Member) to execute and deliver all other instruments and
take all such other actions as either party may reasonably request from time to
time, before or after the Closing and without payment of further consideration,
to effectuate the transactions provided herein and to confer to Purchaser and
Seller the benefits intended by such transactions. The parties shall cooperate
fully with each other and with their respective counsel and accountants in
connection with any steps required to be taken as part of the respective
obligations under this Agreement. Without limiting anything herein to the
contrary, Seller shall make available to Purchaser, solely for the purposes of
permitting Purchaser to respond to inquiries regarding the Purchased Assets, the
activities of the Business and the Employees not employed by Purchaser,
representatives of Seller's electronic data processing, operations, sales,
personnel and quality assurance functions.
Section 6.6 Escrow Agreement. At Closing, Purchaser, Seller and a mutually
----------------
agreed upon escrow agent shall enter into the Escrow Agreement in substantially
the form of Exhibit A.
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Section 6.7 Employment of Employees.
-----------------------
(a) Hiring of Employees. Subject to Section 6.7(d), Purchaser shall offer
-------------------
employment to the Employees, effective as of the Closing Date, at the salary
levels (exclusive of any bonus or commission compensation) paid to such
Employees by Seller and with credit for the number of years of service with
Seller, in each case, as at the date hereof, and with such other employee
benefits as are then offered to the Purchaser's employees. For greater
certainty, Purchaser shall not be obligated to make payments to the Employees
(including, without limitation, Earl Lewis, Ron Letourneau, Ron Mason and Pierre
Matteau):
(i) in excess of the base salary paid by Seller to each such
Employee, or
(ii) arising as a result of this Agreement or the transactions
contemplated hereby, pursuant to any agreement or arrangement
between Seller and any such Employee.
(b) Collective Agreement. Purchaser agrees to succeed to the rights and
--------------------
obligations of Seller under the Collective Agreement to the extent that they
apply to the Employees employed in the bargaining unit described in the
Collective Agreement (the "Union Employees"), as required under the Collective
Agreement and pursuant to applicable laws.
(c) Hired Employees. Employees, including the Union Employees, who accept
---------------
employment with the Purchaser pursuant to Section 6.7(a) shall be referred to in
this Agreement as "Hired Employees".
(d) Ingram and Richardson. Purchaser shall offer employment to Richard
---------------------
Ingram and John Richardson, and each of Ingram and Richardson shall accept
Purchaser's offer of employment, on terms and conditions more particularly set
out in the employment agreement attached hereto as Exhibit D (the "Employment
Agreement").
(e) Seller's Obligations. Subject to Section 6.8, Seller shall bear and
--------------------
discharge any and all liability (i) in connection with any claim, grievance,
action or demand of any kind by, on behalf of or in respect of any Employee,
incurred as a result of an event that commenced or occurred on or before the
Closing, (ii) that arose before the Closing for severance pay, notice of
termination of employment or pay in lieu of such notice or damages for wrongful
dismissal, or (iii) that has accrued up to the Closing for salary, wages,
vacation pay, commissions, compensation and other employee benefits and any
other remuneration, and Seller shall indemnify and save harmless Purchaser from
and against any and all losses, damages,
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<PAGE>
expenses, liabilities, claims and demands whatsoever made or brought against
Purchaser by any person, association or trade union or by any governmental
agency which in any way pertains to or arises out of such liability including,
without limitation, any and all losses, damages, expenses, liabilities, claims
and demands whatsoever with respect to wages, severance pay, notice of
termination of employment or pay in lieu of such notice, damages for wrongful
dismissal or other employee benefits or claims, including vacation pay, and
including any interest, award, judgment or penalty relating thereto and any
costs or expenses incurred by Purchaser in defending any such claim or demand.
(f) Purchaser's Obligation. Subject to Section 6.8, Purchaser shall bear
----------------------
and discharge any and all liability in respect of Hired Employees (i) incurred
as a result of an event that commences or occurs after the Closing, or (ii) that
accrues from and after the Closing, and shall indemnify and save harmless Seller
with respect thereto.
Section 6.8 Severance Costs.
---------------
(a) Notwithstanding Sections 6.7(e) and 6.7(f), Seller and Purchaser agree
that they shall each be responsible for one-half of all costs, liabilities and
expenses (including, without limitation, severance and termination costs and
related legal and outplacement costs) of Purchaser or Seller associated with or
incurred as a result of the severance or termination, during the period
commencing on the Closing Date and terminating on the first anniversary of the
Closing Date, of the employment of (a) the employees of Purchaser and its
subsidiaries in its Canadian operations (including the Hired Employees) and (b)
the Employees other than the Hired Employees who do not accept employment with
Purchaser ("Severance Costs"). The Seller and the Principals jointly and
severally agree to reimburse Purchaser for and shall indemnify and hold harmless
Purchaser from and against 50% of the after-tax effect (in accordance with
Section 6.8(b)) of the aggregate amount of all Severance Costs paid by Purchaser
and Purchaser shall reimburse Seller Group for and shall indemnify and hold
harmless Seller Group from and against 50% of the after-tax effect of the net
amount of all Severance Cost paid by Seller Group. Notwithstanding the
foregoing, Seller shall not be responsible for its portion of the Severance
Costs attributable to the termination by Purchaser of those approximately 33
employees of Automated Record Centres Limited which Purchaser had identified as
employees it planned to dismiss prior to the date of this Agreement.
(b) To give effect to the provisions of Section 6.8(a), the party with
fewer Severance Costs shall pay to the party with greater Severance Costs an
amount equal to 50% of
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the after-tax effect of the difference in Severance Costs of the parties (the
"Difference"). For the purposes of this Section 6.8, "after-tax effect" shall
mean 91% of the Difference.
Section 6.9 Employer Health Tax. Seller shall, notwithstanding the Closing,
-------------------
continue to have sole responsibility and liability for the payment of tax under
the Employer Health Tax Act (Ontario) and any similar legislation in respect of
all remuneration paid to Employees in respect of the period ending on the
Closing Date whether or not such remuneration is paid by Seller or the Purchaser
and whether or not before or after the Closing Date.
Section 6.10 Employee Benefit Plans. Seller shall remain responsible for, and
----------------------
shall indemnify Purchaser from and against any liability in respect of, any
welfare, bonus, hospitalization insurance, medical benefit, dental benefit,
disability insurance, post-retirement life insurance, post-retirement medical
benefit, deferred compensation, profit-sharing, pension, retirement, severance
pay, stock option, employee stock purchase or any other similar plan,
arrangement or program ("Employee Benefit Plans") maintained or provided for the
benefit of the Employees or former Employees. Notwithstanding any provision
contained in this Agreement to the contrary: (i) Purchaser shall not assume, or
be responsible in any manner for any liabilities or obligations arising under or
as a result of any Employee Benefit Plan maintained or provided by Seller for
the benefit of Employees or former Employees of the Seller or in which Seller or
its Employees or former Employees participate; and (ii) subject to Section 6.8
and any indemnification given by Seller to Purchaser pursuant to this Section
6.10, Purchaser shall be responsible for any liabilities and obligations arising
under or as a result of any employee benefit plan maintained or provided by
Purchaser for the benefit of the employees of Purchaser. The parties agree
that, to the extent any existing Employee Benefit Plan, maintained by Seller for
the benefit of Union Employees or in which the Seller participates, are required
to be continued pursuant to the Collective Agreement, the parties will agree as
to the most effective means of transferring such plans to Purchaser together
with representations and related indemnities acceptable to the Purchaser, in its
sole discretion. Seller shall indemnify Purchaser from and against any
liabilities or obligations relating to such Employee Benefit Plans which arose
on or prior to, or accrued up to, the Closing Date. From and after the Closing
Date, Purchaser shall be responsible for the Employee Benefit Plans assumed by
Purchaser pursuant hereto.
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Section 6.11 Transfer Taxes. Purchaser shall be liable for and shall pay all
--------------
sales and transfer taxes, provincial taxes, federal taxes (including, for
greater certainty, federal and provincial sales taxes and goods and services
taxes), and all other taxes, duties or other like charges payable by Purchaser
upon and in connection with the conveyance and transfer of the Purchased Assets
by Seller Group to Purchaser and, for further certainty, excluding any income or
corporation taxes payable by Seller Group.
Section 6.12 Investment Canada Act. Purchaser shall file in a timely manner
---------------------
the notice required by the Investment Canada Act. Seller shall promptly provide
Purchaser with any information available to it for the notice to be filed by
Purchaser under the Investment Canada Act in connection with the transactions
contemplated hereby.
Section 6.13 Environmental Audit. Seller and Purchaser shall, at their equal
-------------------
expense, have retained an environmental consultant acceptable to Purchaser and
Seller to conduct Phase I environmental audits (the "Environmental Audit") of
the Owned Real Property and, in Purchaser's sole discretion, of the Leased Real
Property, in scope and on terms and conditions satisfactory to Seller and
Purchaser. At the Purchaser's sole direction, Purchaser may require Phase II
environmental audits of the Real Property based upon the results of the
Environmental Audits. The cost of any Phase II environmental audits shall also
be paid equally between Purchaser and Seller. To the extent the Environmental
Audits identify any Environmental Contamination or other environmental matter in
connection with the Real Property, the parties may agree as to a course of
environmental remediation acceptable to Purchaser and Seller, failing which,
either Purchaser or Seller may terminate this Agreement without any liability on
the part of or recourse against Purchaser or Seller Group or any shareholders,
directors, officers or employees thereof (except that Purchaser and Seller shall
continue to be responsible for their respective share of the expenses incurred
to complete the Environmental Audits.
Section 6.14 Compliance with Bulk Sales Legislation. Purchaser hereby waives
--------------------------------------
compliance by Seller with the requirements of any applicable provincial bulk
sales legislation in connection with purchase and sale of the Purchase Assets
including the bulk sale provisions of the Quebec Civil Code and the Bulk Sales
Act (Ontario).
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Section 6.15 Change of Name. Forthwith after the Closing Date, and in any
--------------
event within ten business days of the Closing Date, Seller Group shall take all
such action as may be necessary to change the corporate names of Seller Group to
names not including any Trademark Assets, including the names "Archivex" and
"Stacs". Seller shall deliver or cause to be delivered to Purchaser all
necessary withdrawals in form satisfactory to Purchaser's counsel of any
business names, styles or trade names registered in the name of Seller Group,
including the Trademark Assets.
Section 6.16 Performance by Seller. The Principals shall cause each Seller
---------------------
Group Member to perform and satisfy its obligations and covenants under the
terms of this Agreement and in addition to the provisions for indemnification
set out elsewhere in this Agreement, each of Ingram, Sagarmatha, Gestion and
Newco agrees, jointly and severally with Seller, to indemnify and save harmless
Purchaser from and against all claims, actions, suits, losses, costs, damages,
expenses and liabilities (including reasonable legal fees) for which any of
Seller, Ingram or Sagarmatha have agreed to indemnify Purchaser pursuant to the
Agreement. Each of Ingram, Sagarmatha, Gestion and Newco agrees that in the
event of a breach of any representation, warranty or covenant of any Seller
Group Member contained herein, each of Ingram, Sagarmatha, Gestion and Newco
shall jointly and severally be liable to Purchaser for such breach as though it
were the primary obligor with respect to any such representation, warranty or
covenant.
Section 6.17 Gestion 19-12 Ltee. Notwithstanding any provision to the contrary
------------------
contained herein, Purchaser shall have the option, exercisable upon written
notice to Seller at any time prior to the Due Diligence Termination Date, to
acquire on the Closing Date, and in lieu of the acquisition by Purchaser of the
Purchased Assets owned by Gestion all of the issued and outstanding shares in
the capital of Gestion, (the "Gestion Acquisition"), and the parties agree to do
all such things and execute all such agreements and other documents necessary to
give effect to he Gestion Acquisition.
Section 6.18 Accounts Receivable and Trade Payables.
--------------------------------------
(a) Purchaser shall cooperate with Seller and use its reasonable efforts
to assist Seller Group, at no cost to the Seller Group, in collecting
any accounts receivable of the Business not assigned to Purchaser,
which remain outstanding
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as at the Closing Date and which have not otherwise been collected by
Seller Group.
(b) Any payment made by an account debtor to Purchaser or Seller Group
(exclusive of any actual or deemed right of set-off by an account
debtor) in respect of:
(i) accounts receivable outstanding for less than 90 days from the
invoice date thereof, shall be deemed to have been paid with
respect to and shall be applied against the oldest portion of any
indebtedness owed by such account debtor, unless at the time of
payment such account debtor directs that the payment be applied
to a payment of a particular account receivable or it is
otherwise obvious that payment should be applied to a particular
account receivable;
(ii) accounts receivable outstanding for in excess of 90 days from the
invoice date thereof shall be deemed to have been paid with
respect to and shall be applied against any indebtedness owed by
such account debtor to Purchaser, unless at the time of payment
such account debtor directs that the payment be applied otherwise
than to an account receivable of Purchaser or it is otherwise
obvious that payment should be applied to a particular account
receivable.
(c) Seller Group shall pay all accounts payable of Seller Group, not
assumed by Purchaser, arising in connection with the Business which
are outstanding and payable by Seller Group, or which have accrued to
the account of Seller Group, as at the Closing.
Section 6.19 Non-Competition. To induce Purchaser to enter into this Agreement
---------------
and purchase the Purchased Assets, each Seller Group Member (by execution of
this Agreement) agrees as an independent covenant that, for a period of five
years following the Closing Date, none of the members of Seller Group, nor any
entity owned, controlling or controlled, directly or indirectly, by any Seller
Group Member, (a) shall engage in any business operation substantially similar
to the Business as the same is conducted on the Closing Date, either as an
owner, consultant, manager, associate, shareholder, employee, partner, agent,
principal or otherwise, within 250 miles of any location at which Purchaser
conducts any portion of its business as of the Closing Date (including those
locations acquired as part of the Purchased
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<PAGE>
Assets) or (b) shall solicit, induce, encourage or attempt to influence any
client, customer, employee, consultant, independent contractor or supplier of
Purchaser or any of its affiliates to cease to do business (or reduce the amount
of business) or terminate his or her employment with Purchaser or any of its
affiliates. Each Seller Group Member acknowledges and agrees that the
restrictions contained in this Section 6.19 are reasonable and necessary to
protect the legitimate interests of Purchaser and agrees that under the
circumstances of the transactions contemplated by this Agreement, such
restrictions are given as an integral and essential part of the transactions
contemplated by this Agreement and are necessary in order to protect and
maintain the business, assets and goodwill acquired by Purchaser in connection
with the transactions contemplated by this Agreement, and that any violation of
this Section 6.19 will result in irreparable injury to Purchaser and that money
damages would not provide an adequate remedy to Purchaser, and, therefore,
Purchaser shall be entitled to preliminary and permanent injunctive relief in
any court of competent jurisdiction and to an equitable accounting of all
earnings, profits and other benefits arising from such violation, which rights
shall be cumulative and in addition to any other rights or remedies to which
Purchaser may be entitled. If any portion of the covenants or agreements
contained in this Section 6.19 or the application thereof is held to be invalid
or unenforceable, then the other portions of such covenants or agreements or the
application thereof shall not be affected and shall be given full force and
effect without regard to the invalid or unenforceable portions. If any covenant
or agreement herein is held to be unenforceable because of the area covered, the
duration thereof, or the scope thereof, then the court making such determination
shall have the power to reduce the area and/or duration and/or limit the scope
thereof, and the covenant or agreement shall then be enforceable in its reduced
form. Each Seller Group Member agrees to waive all defences to the strict
enforcement of this Section 6.19 by Purchaser. Notwithstanding the foregoing,
Richardson shall not be responsible for any actions of any other Seller Group
Member contrary to the provisions hereof and the other Seller Group Members
shall not be responsible for the actions of Richardson contrary to the
provisions hereof.
Section 6.20 Docuguard. Seller shall use its best efforts to effect the
---------
transfer to Purchaser of the Docuguard Shares and any and all economic benefit
accruing to Seller in connection with Docuguard unless Purchaser determines,
based upon its due diligence review, and with notice to Seller on or prior to
the Due Diligence Termination, that Purchaser does not wish to acquire the
Docuguard Shares and that, notwithstanding Section 1.1(a)(xiii), the Docuguard
Shares shall not constitute a part of the Purchased Assets.
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Section 6.21 Shelving. Purchaser shall pay to the Seller Group all costs and
--------
expenses relating to the purchase by Seller Group of shelving units delivered to
Seller subsequent to January 31, 1998 and prior to Closing, more particularly
described in Schedule T, to a maximum of $426,000.
------------------------------
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ARTICLE 7
CONDITIONS TO OBLIGATIONS OF PURCHASER
--------------------------------------
The obligations of Purchaser to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, on or prior to
the Closing Date, of each of the following conditions, any or all of which
Purchaser may waive in its sole discretion:
Section 7.1 Representations and Warranties. Each of the representations and
------------------------------
warranties of Seller and the Principals set forth in this Agreement and any
Exhibit or Schedule hereto shall be true and correct as if made on and as of the
Closing Date except as such representations may be affected by events or
transactions expressly permitted by this Agreement.
Section 7.2 Performance of Agreements. Seller shall have performed and
-------------------------
complied with, or caused any Seller Group Member to perform or comply with, all
of the covenants and agreements of any Seller Group Member contained in this
Agreement which are required to be performed or complied with on or prior to the
Closing Date.
Section 7.3 Due Diligence Investigations. Purchaser shall have conducted and
----------------------------
completed its due diligence investigations as contemplated in Section 6.1 hereof
to its full and complete satisfaction. Purchaser shall be deemed to be
satisfied with the results of its due diligence investigation if no notice to
the contrary is delivered to Seller Group on or before the Due Diligence
Termination Date.
Section 7.4 Exhibits and Schedules. The Schedules and Exhibits shall have been
----------------------
prepared and delivered in accordance with Section 6.2 hereof.
Section 7.5 Board Approval. Purchaser shall have obtained approval of the
--------------
board of directors of Pierce Leahy Corp., its U.S. parent corporation for the
transactions contemplated by this Agreement on or before the Due Diligence
Termination Date. In the event that the board of directors of Pierce Leahy
Corp. have not approved the transactions contemplated in
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this Agreement on or prior to the Due Diligence Termination Date, this Agreement
may be terminated by Purchaser by delivery of written notice thereof to Seller
Group within 5 days after the Due Diligence Termination Date without any
liability on the part of or recourse against Purchaser or any shareholders,
directors, officers or employees thereof.
Section 7.6 No Material Adverse Change. During the Interim Period, there shall
--------------------------
not have been any material adverse change in the Purchased Assets (in the
aggregate), results of operations or condition of the Business (financial or
otherwise).
Section 7.7 No Actions, Etc. No action, suit, proceeding or investigation by
----------------
or before any court, administrative agency or other governmental authority shall
have been instituted or threatened, the effect of which would restrain, prohibit
or invalidate the transactions contemplated by this Agreement or affect the
right of Purchaser to own or control, after the Closing, the Purchased Assets or
to operate the Business.
Section 7.8 Bankers' Approval. Purchaser shall have obtained from its bankers,
-----------------
on or before the Due Diligence Termination Date, their written consent and
approval to the transactions subject to this Agreement and Purchaser covenants
to use its reasonable best efforts to obtain such approval. In the event that
approval of Purchaser's bankers is not obtained on or prior to the Due Diligence
Termination Date, this Agreement may be terminated by Purchaser by delivering
written notice thereof to Seller Group within 5 days after the Due Diligence
Termination Date without any liability on the part of or recourse against
Purchaser or any shareholders, directors, officers or employees thereof.
Section 7.9 Permits. Seller shall have used its best efforts to obtain any
-------
consents from, or provided notice to, any federal, provincial or municipal
government or governmental agency as may be required to transfer any such
Permits as are transferable to Purchaser.
Section 7.10 Consents; Acknowledgement of Lessor. All consents of all third
-----------------------------------
parties required to consummate the transactions provided for in this Agreement
shall have been obtained (including, if applicable, any consents required under
the Competition Act (Canada) and the Investment Canada Act),and Purchaser shall
have received, with respect to the Leased Real Property, from each lessor an
estoppel certificate, and each lessor's acknowledgement
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that the applicable Lease may be assumed by Purchaser, all in form and content
acceptable to Purchaser. Without limiting the generality of the foregoing, and
subject to Section 1.1(c), Seller shall have obtained or cause to be obtained
all consents, approvals, licenses, permits or waivers which are required to
transfer the Corporation Agreements to Purchaser pursuant hereto.
Section 7.11 Liens. Seller shall have paid, satisfied and discharged all Liens
-----
applicable to the Purchased Assets including, without limitation, the Liens in
favour of The Toronto Dominion Bank, RoyNat Inc. and Gilbey Canada Inc., and
other than the permitted Liens identified on Schedule E.
Section 7.12 Receipt of Environmental Audit. The Environmental Audits of the
------------------------------
Real Property (together with any Phase II environmental audits to be performed
in accordance herewith) shall have been completed, the results of which shall be
acceptable in all respects to Purchaser, in its sole discretion, such
determination to be made within 10 days of receipt by the Purchaser of final
audit reports for all the properties.
Section 7.13 Reorganization. The reorganization of the Business in the manner
--------------
contemplated in Exhibit F (the "Reorganization") shall have been completed
without any adverse Tax consequences to the Business, the Purchased Assets or
Purchaser.
Section 7.14 Owned Real Property. Seller shall have delivered or caused
-------------------
Sagarmatha and Gestion to deliver to Purchaser appropriate declarations of title
and possession relating to the Owned Real Property, in form and substance
satisfactory to Purchaser and Purchaser's counsel, together with a legal title
opinion of Seller's counsel for the Owned Real Property in the Province of
Quebec in a form satisfactory to Purchaser and Purchaser's counsel and a legal
title opinion of Purchaser's counsel to Owned Real Property outside the Province
of Quebec.
Section 7.15 Deliveries. All documents required to be delivered by any Seller
----------
Group Member at or prior to the Closing Date shall have been delivered to
Purchaser at Closing.
------------------------------
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ARTICLE 8
CONDITIONS TO OBLIGATIONS OF SELLER
-----------------------------------
The obligations of Seller (and any applicable Seller Group Member) to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any or all of which Seller may waive in its sole discretion:
Section 8.1 Representations and Warranties. Each of the representations and
------------------------------
warranties of Purchaser set forth in this Agreement and any Exhibit or Schedule
hereto shall be true and correct as if made on and as of the Closing Date.
Section 8.2 Performance of Agreements. Purchaser shall have performed and
-------------------------
complied with all of its covenants and agreements contained in this Agreement
which are required to be performed or complied with on or prior to the Closing
Date.
Section 8.3 No Material Adverse Change. During the period from the date
--------------------------
hereof to the Closing Date there shall not have been any material adverse change
in the ability of Purchaser to perform its obligations under this Agreement.
Section 8.4 No Actions, Etc.. No action, suit, proceeding or investigation by
----------------
or before any court, administrative agency or other governmental authority shall
have been instituted or threatened, the effect of which would restrain, prohibit
or invalidate the transactions contemplated by this Agreement or affect the
right of Purchaser to own or control, after the Closing, the Purchased Assets or
operate the Business.
Section 8.5 Exhibits. The Exhibits shall have been prepared and delivered in
--------
accordance with Section 6.2 hereof.
Section 8.6 Deliveries. All documents required to be delivered by Purchaser at
----------
or prior to Closing shall have been delivered to Seller at Closing.
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------------------------------
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ARTICLE 9
TERMINATION
-----------
Section 9.1 Termination. This Agreement may be terminated, and the
-----------
transactions contemplated hereby may be abandoned, by written notice promptly
given to the other parties hereto, at any time prior to the Closing Date:
(a) by mutual written consent of the Purchaser and Seller;
(b) by either Purchaser on the one hand or Seller on the other hand if
there shall have been a material breach of any representation,
warranty, covenant or agreement on the part of the other set forth in
this Agreement;
(c) by either Purchaser or Seller if any permanent injunction or other
order of a court or competent authority or government agency which
prevents the consummation of the transaction shall have become final
and not appealable;
(d) by either Purchaser or Seller, if the transaction shall not have been
consummated on or before April 30, 1998;
(e) by Seller if any of the conditions specified in Article VIII has not
been met or waived by Seller at any such time as such conditions can
no longer be satisfied;
(f) by Purchaser if any of the conditions specified in Article VII has not
been met or waived by Purchaser at any such time as such conditions
can no longer be satisfied;
(g) by Purchaser in accordance with Sections 6.1, 6.2, 7.5 and 7.8; or
(h) by Seller Group in accordance with Section 6.2.; or
(i) by either Purchaser or Seller in accordance with Section 6.13
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Section 9.2 Status of Agreement after Termination. Upon any termination of
-------------------------------------
this Agreement pursuant to Section 9.1, this Agreement shall be void and have no
effect, without any liability on the part of any party hereto or any
shareholders, directors or officers thereof; provided, however, such termination
shall not affect the liability of any party for the breach of any provision of
this Agreement. Notwithstanding the foregoing, the parties acknowledge and
agree that the respective obligations of the parties set out under Section
6.3(b) shall survive termination of this Agreement and shall continue in full
force and effect for the respective benefit of the parties hereto.
------------------------------
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ARTICLE 10
CLOSING
-------
Section 10.1 Seller's Deliveries. At the Closing, Seller shall deliver, or
-------------------
cause a Seller Group Member to deliver, to Purchaser:
(a) a general conveyance and assumption of liabilities agreement
substantially in the form of Exhibit F duly executed by Seller,
together with such other bills of sale or instruments of conveyance,
assignment or transfer to be executed by such other Seller Group
Members as Purchaser may require;
(b) all duly executed deeds, documents of title, conveyances, assurances,
transfers, assignments, consents and approvals to the assignment of
the Owned Real Property, along with any other documents necessary to
sell, transfer, assign, and convey the Owned Real Property to
Purchaser, all such documents being in registrable or recordable form
as may be reasonably required by Purchaser's counsel;
(c) a certificate signed by the President of Seller and the Principals,
dated the Closing Date, substantially in the form of Exhibit G,
confirming: (i) the truth and correctness of all of the
representations and warranties of Seller and the Principals contained
in this Agreement as of Closing Date and as of all times between the
date hereof and the Closing Date; (ii) all agreements and covenants of
Seller Group required to have been complied with have been complied
with; and (iii) that all necessary corporate action has been taken by
the Seller Group to authorize the consummation of the transactions
contemplated by this Agreement;
(d) a certificate signed by the Secretary or other officer of each Seller
Group Member party hereto, dated the Closing Date, substantially in
the form of Exhibit H, attaching the constating documents and by-laws
of such Seller Group Member, the corporate resolutions of such Seller
Group Member authorizing the execution, delivery and performance by
such Seller Group Member of this Agreement and the certificate of
status of such Seller Group Member;
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(e) certificates evidencing the payment of all taxes collectable or
payable by Seller in respect of the Business under provincial retail
sales tax legislation of each province in which the Purchased Assets
are located (where applicable);
(f) keys to the Real Property and to all automobiles and vehicles included
in the Purchased Assets;
(g) all documents referred to in Section 1.5;
(h) the Escrow Agreement, substantially in the form of Exhibit A, duly
executed by Seller;
(i) Employment Agreements between Purchaser and each of Ingram and
Richardson, substantially in form of Exhibit D, duly executed by each
of Ingram and Richardson;
(j) a Non-Competition Agreement executed by Ingram;
(k) an opinion of Seller's counsel, dated the Closing Date, in form and
content reasonably acceptable to Purchaser, substantially in the form
of Exhibit I;
(l) any revised Schedules to the Agreement as contemplated herein;
(m) an executed lease estoppel and subordination and non-disturbance
agreements to which reference is made in Section 7.10;
(n) executed consents and acknowledgement of each lessor to which
reference is made in Section 7.10; and
(o) all deeds of conveyance, bills of sale, assurances, transfers,
assignments, consents, and such other agreements, documents and
instruments as may be reasonably required by Purchaser to complete the
transactions provided for in this Agreement.
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Section 10.2 Purchaser's Deliveries. At the Closing, Purchaser shall deliver
----------------------
or cause to be delivered to Seller:
(a) a general conveyance and assumption of liabilities agreement
substantially in the form of Exhibit F duly executed by Purchaser;
(b) the Purchase Price in the form and manner provided for in Section 1.2
hereof and payment to Ingram as contemplated by the Non-Competition
Agreement;
(c) a certificate signed by the President of Purchaser, dated the Closing
Date, substantially in the form of Exhibit J, confirming: (i) the
truth and correctness of all of the representations and warranties of
Purchaser contained in this Agreement as of the Closing Date and as of
all times between the date hereof and the Closing Date; (ii) that all
agreements and covenants of Purchaser required to have been complied
with have been complied with; and (iii) that all necessary corporate
action by Purchaser has been taken to authorize the consummation of
the transactions contemplated by the Agreement;
(d) a certificate signed by the Secretary or other officer of Purchaser,
dated the Closing Date, substantially in the form of Exhibit K,
attaching the constating documents and by-laws of Purchaser, the
corporate resolutions of Purchaser authorizing the execution, delivery
and performance by Purchaser of this Agreement and the certificate of
status of Purchaser;
(e) the Escrow Agreement, substantially in the form of Exhibit A, duly
executed by Purchaser;
(f) the Non-Competition Agreement;
(g) Employment Agreements between Purchaser and each of Ingram and
Richardson, substantially in form of Exhibit D, duly executed by
Purchaser;
(h) all documents referred to in Section 1.5; and
(i) an opinion of Purchaser's counsel, dated the Closing Date, in form and
content reasonably acceptable to Seller, substantially in the form of
Exhibit L.
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Section 10.3 Prorations. All taxes, assessments, utilities and other similar
----------
expenses on or relating to the Purchased Assets shall be prorated between the
parties hereto as of the Closing unless otherwise agreed to by Purchaser and
Seller; and in the event any such taxes or other expenses are not then
ascertainable, such proration shall be made on the basis of the most recently
ascertainable estimates of such taxes or other expenses. All rentals, deposits,
advances, periodic payments and other amounts paid or to be paid by Seller under
the Corporation Agreements shall be prorated between Seller and Purchaser as of
the Closing unless otherwise agreed to by Purchaser and Seller. Amounts due
each party hereto as a result of the application of this Section 10.3 shall be
offset against each other and the resulting balance shall be promptly paid by
one party to the other. If any statement or invoice necessary to make the
foregoing determination has not yet been received and the amount due thereunder
is not otherwise ascertainable, then proration and payment therefor shall be
defined until such statement or invoice has been received.
Section 10.4 Parties to Bear Own Expenses. Whether or not the transactions
----------------------------
contemplated by this Agreement are consummated and except as otherwise provided
for herein, Purchaser and Seller shall each bear their respective expenses
relating to or arising out of this Agreement, including, but not limited to,
fees for lawyers, accountants and other advisors.
------------------------------
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ARTICLE 11
INDEMNIFICATION
---------------
Section 11.1 Indemnification by Seller. In addition to the provisions for
-------------------------
indemnification set out elsewhere in this Agreement, Seller, Ingram and
Sagarmatha agree to jointly and severally indemnify and save harmless Purchaser
from all losses, claims, damages, liabilities, deficiencies, costs and expenses
(including without limitation all reasonable legal fees) ("Losses") suffered or
incurred by Purchaser as a result of or arising out of or in connection with:
(a) any breach by Seller or Principals or any inaccuracy of any
representation or warranty of Seller or the Principals contained in
this Agreement or in any agreement, instrument, certificate or other
document delivered pursuant hereto;
(b) any breach or non-performance by a Seller Group Member of any covenant
to be performed by it contained in this Agreement or in any agreement,
instrument, certificate or other document delivered pursuant hereto;
(c) any error contained in any statement, report, certificate or other
document or instrument delivered to Purchaser pursuant to this
Agreement or contained in any Schedules;
(d) the waiver by Purchaser of compliance with the provisions of
provincial bulk sale legislation in connection with the completion of
the sale of the Purchased Assets pursuant to this Agreement;
(e) any cost, expense or liability which Purchaser or its directors,
officers, agents and employees incur or suffer by reason of the
Reorganization;
(f) any and all liabilities, obligations, indebtedness or debts (including
without limitation, liabilities for any and all Taxes) of any nature
whatsoever, whether accrued, absolute, contingent or otherwise
incurred or arising as a result of the Reorganization (including any
liabilities, obligations, indebtedness or debt which, but for the
Reorganization, would not have been a liability, obligation,
indebtedness or debt of Seller Group or the Business and any other
expenses related thereto);
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<PAGE>
(g) any legal action commenced either before or after the Closing by or
against any Seller Group Member relating to the Business or the
Purchased Assets, which legal action relates to events which occurred
prior to the Closing;
(h) any claim by a third party relating to services performed by or
actions taken or failed to be taken by Seller Group in connection with
the Business prior to the time of the Closing or any instant or
occurrence that occurred prior to the time of the Closing
(notwithstanding that the damage therefrom may be suffered on or after
the Closing Date); and
(i) all other debts or liabilities whatsoever (whether accrued, absolute,
contingent or otherwise) of the Business existing at the Closing,
including, without limitation, any liabilities for federal,
provincial, sales, excise, income, corporate or any other taxes of the
Business for any period up to and including the Closing, other than
Assumed Liabilities.
Section 11.2 Environmental Indemnification. Notwithstanding any disclosure by
-----------------------------
Seller Group or any knowledge of Purchaser (including, without limitation, the
Environmental Audits prepared in connection with the transactions contemplated
hereby) as to any Environmental Contamination or breach of Environmental Law,
Seller, Ingram and Sagarmatha agree to jointly and severally indemnify, and save
harmless each of Purchaser, its directors, officers, employees and agents and
any successor to Purchaser's interest in all or any part of the assets of the
Business (including, without limitation, persons to whom this indemnity is
assigned under Section 12.6) and all directors, officers, employees and agents
of such successors (collectively, all of the foregoing are referred to as the
"Purchaser Related Indemnified Parties") from all Losses suffered or incurred by
any such Purchaser Related Indemnified Party as a result of or arising directly
or indirectly out of or in connection with any one or more of the following (the
"Environmental Indemnity"):
(a) the failure of Seller Group to comply with Environmental Laws
respecting the Real Property, the operation of the Business or the
Purchased Assets;
(b) with respect to the Owned Real Property, the failure of any
predecessor in title to Sagarmatha and Gestion to comply with
Environmental Laws;
(c) any Environmental Contamination existing on or prior to the Closing
Date relating to the Business, the Purchased Assets or the Real
Property;
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<PAGE>
(d) any Environmental Contamination relating to the Leased Real Property
caused or permitted, to the extent and for the portion that such
Environmental Contamination was so caused or permitted, by Seller
Group or any agent, officer, employee or other person over whom any
Seller Group Member exercises control or for whom any Seller Group
Member is responsible at law, existing on or prior to the Closing
Date;
(e) any Environmental Contamination or breach of Environmental Laws
relating to the Real Property, the Purchased Assets or the operation
of the Business existing after the Closing Date, to the extent and for
the portion caused by or as a result of a fault, defect, process or
activity which existed or commenced prior to the Closing Date;
(f) any breach by Seller of, or any inaccuracy of, any representation or
warranty of Seller contained in Section 2.29;
(g) any requirement imposed by a governmental authority to change, improve
or modify the processes of the Business, the Real Property or the
Purchased Assets or the manner in which the Business is conducted
immediately prior to the Closing so as to bring the same into a state
of compliance with Environmental Laws in effect at the Closing,
including the requirement for the Business to have any Environmental
Permit which was necessary for the lawful operation of the Business as
operated immediately prior to the Closing (collectively, all of such
Environmental Permits are referred to as the "Missing Permits")
including, without limitation, any activities of the Purchaser Related
Indemnified Parties in connection with either or both of the
following:
(i) obtaining or attempting to obtain the Missing Permits, or
(ii) satisfying or attempting to satisfy any requirement imposed by a
governmental authority as preconditions to the issuance of any
one or more of the Missing Permits or as conditions in the
Missing Permits to change, improve or modify the processes of the
Business or the Purchased Assets, the Leased Property or the
manner in which the Business is conducted; and
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<PAGE>
(h) any breach or non-performance by a Seller Group Member of any covenant
to be performed by it relating to an environmental matter which is
contained in this Agreement.
Section 11.3 Limitation on Environmental Indemnity.
-------------------------------------
(a) Subject to Section 11.3(b), the indemnity obligations of Seller, Ingram and
Sagarmatha contemplated in Section 11.2 shall continue in full force and
effect for the benefit of Purchaser and Purchaser Related Indemnified
Parties for a period commencing on the Closing Date and ending on the fifth
anniversary of the Closing Date.
(b) Notwithstanding Section 11.3(a), to the extent the Environmental Audits
(and Phase II environmental audits) reveal any Environmental Contamination
relating to the Real Property, the parties agree that the indemnity
obligations of Seller, Ingram and Sagarmatha set out in Section 11.2 shall
continue in respect thereof for so long as is agreed to by Purchaser and
Seller, acting reasonably, and accordingly, such indemnity obligations
shall not be subject to the five year limitation set out in Section
11.3(b).
Section 11.4 Indemnification by Purchaser. In addition to the provisions for
----------------------------
indemnification set out elsewhere in this Agreement, Purchaser agrees to
indemnify and save harmless Seller and the Principals from all Losses suffered
or incurred by Seller and the Principals as a result of or arising directly or
indirectly out of or in connection with:
(a) any breach by Purchaser of or any inaccuracy of any representation or
warranty of Purchaser contained in this Agreement or in any agreement,
instrument, certificate or other document delivered pursuant hereto;
(b) any breach or non-performance by Purchaser of any covenant to be
performed by it which is contained in this Agreement or in any
agreement, instrument, certificate or other document delivered
pursuant hereto;
(c) any of the Assumed Liabilities; and
(d) any liabilities or obligations of the Business incurred after the
Closing.
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<PAGE>
Section 11.5 Application of Escrow Amount. From time to time after the Closing
----------------------------
Date, and for so long as the Escrow Amount is subject to the terms of the Escrow
Agreement, Purchaser shall be entitled to satisfy the full amount of any
indemnity claim hereunder validly made against Seller or the Principals pursuant
to the indemnity granted by Seller and the Principals to Purchaser under this
Article XI, by making a demand for payment out of the Escrow Amount, such demand
and payment to be made in compliance with the terms of the Escrow Agreement.
Section 11.6 Basket. Notwithstanding the foregoing, no party hereto shall have
------
any liability for indemnification pursuant to Sections 11.1(a), 11.1(c),
11.11(i) or 11.4(a) for breaches of representations and warranties set out
herein, unless and until the accumulated aggregate amount of Losses of such
party arising from breaches of representations and warranties hereunder exceeds
$100,000 (before any adjustment for taxes as contemplated in Section 11.8),
following which all such accumulated Losses and all further Losses of such party
shall be recoverable as provided in this Agreement.
Section 11.7 Notice of Claim. In the event that a party (the "Indemnified
---------------
Party") shall become aware of any claim, proceeding or other matter (a "Claim")
in respect of which another party (the "Indemnifying Party") agreed to indemnify
the Indemnified Party pursuant to this Agreement, the Indemnified Party shall
give written notice thereof to the Indemnifying Party. Such notice shall
specify whether the claim arises as a result of a claim by a third person
against the Indemnified Party (a "Third Party Claim") or whether the Claim does
not so arise (a "Direct Claim"), and shall also specify with reasonable
particularity (to the extent that the information is available) the factual
basis for the Claim and the amount of the Claim, if known.
Section 11.8 Adjustment for Tax Effect. To the extent that a party (the
-------------------------
"Indemnifying Party") becomes liable to pay any amount for which any other
person (the "Indemnified Party") can claim indemnification hereunder, and such
amount is deductible by the Indemnified Party for income tax purposes, the
Indemnifying Party shall, notwithstanding any other provision hereof, be
obligated to pay to the Indemnified Party only the loss which the Indemnified
Party would suffer or actually suffered after having regard to the effect of
such deductions.
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<PAGE>
Section 11.9 Direct Claims. With respect to any Direct Claim, following
-------------
receipt of notice from the Indemnified Party of the Claim, the Indemnifying
Party shall have 60 days to make such investigation of the Claim as is
considered necessary or desirable. For the purpose of such investigation, the
Indemnified Party shall make available to the Indemnifying Party the information
relied upon by the Indemnified Party to substantiate the Claim, together with
all such other information as the Indemnifying Party may reasonably request. If
both parties agree at or prior to the expiration of such 60-day period (or any
mutually agreed upon extension thereof) to the validity and amount of such
Claim, the Indemnifying Party shall immediately pay to the Indemnified Party the
full agreed upon amount of the claim, failing which the matter shall be
determined by a court of competent jurisdiction.
Section 11.10 Indemnification Procedure
-------------------------
(a) In the case of claims or demands made by a third party with respect to
which indemnification is sought, the party seeking indemnification
shall give prompt written notice to the other party of any such claims
or demands made upon it, provided that in the event of a failure to
give such notice, such failure shall not preclude the party seeking
indemnification to obtain such indemnification but its right to
indemnification shall be reduced to the extent that the delay
prejudiced the defence of the claim or demand or increased the amount
of liability or cost of defence.
(b) A party given notice of a claim or demand in respect of which
indemnification is sought (hereinafter referred to as the
"Indemnifying Party" in this Section) by the other party (hereinafter
referred to as the "Indemnified Party" in this Section) shall have the
right, by notice to the Indemnified Party given not later than 30 days
after receipt of the notice described in Section 11.10(a) to assume
the control of the defense, compromise or settlement of the claim or
demand, provided that such assumption shall, by its terms, be without
cost to the Indemnified Party and provided the Indemnifying Party
acknowledges and agrees in writing its obligation to indemnify the
Indemnified Party in accordance with the terms contained herein in
respect of that claim or demand.
(c) Upon the assumption of control of any claim or demand by the
Indemnifying Party as set out in Section 11.10(b), the Indemnifying
Party shall diligently proceed with the defence, compromise or
settlement of the claim or demand at its sole expense, including, if
necessary, employment of counsel reasonably
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<PAGE>
satisfactory to the Indemnified Party and, in connection therewith,
the Indemnified Party shall cooperate fully, but at the expense of the
Indemnifying Party with respect to any out-of-pocket expenses
incurred, to make available to the Indemnifying Party all pertinent
information and witnesses under the Indemnified Party's control, make
such assignments and take such other steps as in the opinion of
counsel for the Indemnifying Party are reasonably necessary to enable
the Indemnifying Party to conduct such defence. The Indemnified Party
shall also have the right to participate in the negotiation,
settlement or defence of any claim or demand at its own expense. The
Indemnifying Party shall have the right to settle or compromise any
claim or demand, acting reasonably, provided that it first obtains
releases in favour of, and at no cost to, the Indemnified Party which
are acceptable to the Indemnified Party, acting reasonably. If the
Indemnifying Party has assumed control of any claim or demand in
accordance herewith, the Indemnified Party shall not be entitled to
settle or compromise such claim or demand without the prior written
approval of the Indemnifying Party, acting reasonably.
(d) The final determination of any claim or demand pursuant to this
Section, including all related costs and expenses, will be binding and
conclusive upon the parties as to the validity or invalidity, as the
case may be of such claim or demand against the Indemnifying Party
hereunder.
(e) Should the Indemnifying Party fail to give notice to the Indemnified
Party as provided in Section 11.2(b), the Indemnified Party shall be
entitled to make such settlement of the claim or demand as in its sole
discretion may appear advisable, and such settlement or any other
final determination of the claim or demand shall be binding upon the
Indemnifying Party.
Section 11.11 Duty to Mitigate. Nothing in this Agreement shall in any way
----------------
restrict or limit the general obligation at law of an Indemnified Party to
mitigate Losses which it may suffer or incur by reason of the breach by an
Indemnifying Party of any representation, warranty or covenant of the
Indemnifying Party hereunder. If any Loss can be reduced by any recovery,
settlement or otherwise under or pursuant to any insurance coverage, or pursuant
to any claim, recovery, settlement or payment by or against any other person,
the Indemnified Party shall take all appropriate steps to enforce such recovery,
settlement or payment.
------------------------------
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<PAGE>
ARTICLE 12
GENERAL
-------
Section 12.1 Headings and Table of Contents. The division of this Agreement
------------------------------
into Articles and Sections, the insertion of headings, and the provision of any
table of contents are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
Section 12.2 Number and Gender. Unless the context requires otherwise, words
-----------------
importing the singular include the plural and vice versa and words importing
gender include all genders.
Section 12.3 Currency and Payment Obligations. Except as otherwise expressly
--------------------------------
provided in this Agreement:
(a) all dollar amounts referred to in this Agreement are stated in
Canadian Dollars; and
(b) any payment contemplated by this Agreement shall be made by cash,
certified cheque, wire transfer or any other method that provides
immediately available funds.
Section 12.4 Statute References. Any reference in this Agreement to any
------------------
statute or any section thereof shall, unless otherwise expressly stated, be
deemed to be a reference to such statute or section as amended, restated or re-
enacted from time to time.
Section 12.5 Section and Schedule References. Unless the context requires
-------------------------------
otherwise, references in this Agreement to Sections, Exhibits or Schedules are
to Sections, Exhibits or Schedules of this Agreement.
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<PAGE>
Section 12.6 Assignability of Environmental Indemnity. Purchaser (including
----------------------------------------
any Assignee as defined below) may, at any time and from time to time, assign
all or any part of the benefit of the Environmental Indemnity to any purchaser
of, or lender to, all or any part of the Business or purchaser of any of the
Purchased Assets used prior hereto, now or hereafter in the Business or assignee
or purchaser of Purchaser's interest in the Real Property or a party thereof
(any such purchaser or purchasers, assignees or lenders being referred to as an
"Assignee") by delivering a notice in writing to Seller and the Principals
setting out Purchaser's intention to assign all or part of the benefit of the
Environmental Indemnity and the identity of the person or persons to which the
assignment is to be made. Upon any such assignment, Seller and the Principals
shall be bound to indemnify the person or persons named in such notice to the
extent of the assignment of the environmental Indemnity as if such person or
persons were a party to this Agreement as Purchaser. No such assignment shall
relieve Seller and the Principals of the continuing obligation to indemnify
under the Environmental Indemnity and such obligations shall continue unaffected
by the assignment.
Section 12.7 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be sent by certified mail, postage prepaid, return receipt
requested; by an overnight express courier services that provides written
confirmation of delivery; or by facsimile with confirmation, addressed as
follows:
If to Seller: Archivex Inc.
c/o Richard Ingram
22 Ramezay Avenue
Westmount, Quebec
H3Y 3J6
Fax: (514) 937-5613
Attention: Richard Ingram
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<PAGE>
With a copy (which shall not constitute notice) to:
Mendelsohn, Rosentzveig, Shacter
27e et. 1000 rue Sherbrooke O.
Montreal, Quebec
H3A 3G4
Fax: (514) 987-1213
Attention: Max Mendelsohn
If to Purchaser:
Pierce Leahy Command Company
c/o Pierce Leahy Corp.
631 Park Avenue
King of Prussia, PA
19406 U.S.A.
Fax: (610) 992-8200
Attention: Vice-President
With a copy (which shall not constitute notice) to:
Cozen & O'Connor
The Atrium
1900 Market Street
Philadelphia, PA
19103
Fax: (212) 665-2013
Attention: Richard Busis
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<PAGE>
and a copy (which shall not constitute notice) to:
Blake, Cassels & Graydon
Box 25, Commerce Court West
Toronto, Ontario
M5L 1A9
Fax: (416) 863-2653
Attention: Frank Guarascio
Any party may change its address for receiving notice by giving notice
of a new address in the manner provided herein. Any notice so given shall be
deemed to be delivered on the fifth (5th) business day after the same is
deposited in the United States or Canada mail (as the case may be) on the next
business day if sent by overnight courier, or on the same business day if sent
by facsimile before the close of business, or the next day, if sent by facsimile
after the close of business.
Section 12.8 Entire Agreement. This Agreement, together with Exhibits and
----------------
Schedules attached hereto and the confidentiality agreement delivered by
Purchaser to Seller dated February 29, 1996, constitutes the entire agreement
between the parties pertaining to this subject matter and supersedes all prior
or contemporaneous agreements and understandings of the parties relating to the
same. This Agreement may be amended only in writing signed by both parties.
Section 12.9 Time of Essence. Time shall be of the essence of this Agreement.
---------------
Section 12.10 Severability. If any provision of this Agreement is determined
------------
by a court of competent jurisdiction to be invalid, illegal or unenforceable in
any respect, such determination shall not impair or affect the validity,
legality or enforceability of the remaining provisions hereof, and each
provision is hereby declared to be separate, severable and distinct.
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<PAGE>
Section 12.11 Governing Law. This Agreement shall be construed, interpreted
-------------
and enforced in accordance with, and the respective rights and obligations of
the parties shall be governed by, the laws of the Province of Ontario and the
federal laws of Canada applicable therein, and each party hereby irrevocably and
unconditionally submits to the non-exclusive jurisdiction of the courts of such
province and all courts competent to hear appeals therefrom.
Section 12.12 Amendment and Waiver. No amendment or waiver of any provision of
--------------------
this Agreement shall be binding on any party unless consented to in writing by
such party. No waiver of any provision of this Agreement shall constitute a
waiver of any other provision, nor shall any waiver constitute a continuing
waiver unless otherwise expressly provided.
Section 12.13 Further Assurances. Each of the parties hereto shall with
------------------
reasonable diligence do all things and provide all reasonable assurances as may
be required to complete the transactions as contemplated by this Agreement, and
each of such parties shall provide such further documents or instruments
required by any other party as may be reasonably necessary or desirable to give
effect to this Agreement and to carry out its provisions, whether before or
after the Closing.
Section 12.14 Assignability; Binding Effect. This Agreement may not be
-----------------------------
assigned by any party hereto without the prior written consent of the other
parties provided that:
(a) this Agreement and any rights or obligations hereunder may be assigned
by any party without the consent of the others to an affiliate of the
party assigning, provided that such affiliate enters into a written
agreement with the other parties to be bound by the provisions of this
Agreement in all respects and to the same extent as the party
assigning is bound and provided that the party assigning shall
continue to be bound by all the obligations hereunder as if such
assignment had not occurred and perform such obligations to the extent
that such affiliate fails to do so; and
(b) after the Closing, this Agreement and any rights or obligations
hereunder may be assigned by Purchaser, without the consent of the
other parties hereto, to a purchaser of the Business, provided that
Purchaser will continue to be bound by the terms of this Agreement.
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<PAGE>
Section 12.15 Language. The parties have required that this Agreement and all
--------
deeds, documents and notices relating to this Agreement be drawn up in the
English language. Les parties aux presentes ont exige que le present contrat et
tous autres contrats, documents ou avis afferents aux presentes soient rediges
en langue anglaise.
Section 12.16 Counterpart Execution. This Agreement may be executed in any
---------------------
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first above written.
ARCHIVEX INC.
By: /s/ Richard Ingram
---------------------------------
Name: Richard Ingram
Title: Chairman
By: /s/ John Richardson
--------------------------------
Name: John Richardson
Title: President
)
/s/ J.A. Samson ) /s/ Richard Ingram
- ----------------- ) ------------------------------------
WITNESS ) RICHARD INGRAM
)
)
/s/ J.A. Samson ) /s/ John Richardson
- ----------------- ) ------------------------------------
WITNESS ) JOHN RICHARDSON
)
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<PAGE>
SAGARMATHA CAPITAL INC.
By: /s/ Richard Ingram
--------------------------------
Name: Richard Ingram
Title: President
By:
-----------------------------------
Name:
Title:
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<PAGE>
GESTION 19-12 LTEE.
By: /s/ Richard Ingram
------------------------------------
Name: Richard Ingram
Title: Chairman
By: /s/ John Richardson
------------------------------------
Name:
Title:
3371751 CANADA INC.
By: /s/ Richard Ingram
------------------------------------
Name: Richard Ingram
Title: Chairman
By:
------------------------------------
Name:
Title:
PIERCE LEAHY COMMAND COMPANY
By: /s/ J. Peter Pierce
------------------------------------
Name: J. Peter Pierce
Title: President - CEO
By: /s/ Joseph P. Linaugh
------------------------------------
Name: Joseph P. Linaugh
Title: Vice President - Treasurer
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<PAGE>
Exhibit 10.2
AMENDING AGREEMENT
THIS AMENDING AGREEMENT dated as of April 7, 1998 among ARCHIVEX INC.,
RICHARD INGRAM, JOHN RICHARDSON, SAGARMATHA CAPITAL INC., GESTION 19-12 LTEE.,
3371751 CANADA INC. (collectively, the "Sellers"), PIERCE LEAHY COMMAND COMPANY
("Pierce Leahy") and ARCHIVEX LIMITED ("Arch Ltd.")
W H E R E A S:
- --------------
A. By agreement dated February 4, 1998 (the "Purchase Agreement") among
the Sellers, and Pierce Leahy, Pierce Leahy agreed to purchase and the Sellers
agreed to sell or cause to be sold, substantially all of the assets, property
and undertaking of the Sellers pertaining to or used in connection with the
business of records storage and management of documents and records (the
"Business");
B. Arch Ltd. desires to purchase all of the assets, property and
undertaking of the Sellers used in connection with the Business and located at
the premises more particularly identified on Schedule A hereto (the "Montreal
Properties");
C. To accomplish the foregoing, the parties hereto have agreed that the
Purchase Agreement be amended in the manner set forth herein.
NOW THEREFORE in consideration of the mutual covenants and agreements
herein contained (and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged), the parties agree as follows:
1. Definitions. All words and expressions defined in the Purchase
-----------
Agreement shall have the same meanings when used herein, except to the extent
that such terms are defined or modified in this Agreement or the context
otherwise requires. In addition, whenever used in this Agreement:
"this Agreement" means this amending Agreement, as the same may be
--------------
amended, supplemented, restated or otherwise modified from time to
time, and the words "hereof", "herein" and "hereunder" and words of
------ ------ ---------
similar import when used in this Agreement shall refer to this
amending Agreement as a whole and not to any particular provision of
this amending Agreement; and
"Montreal Assets" means those Purchased Assets located at, on, in, or
---------------
otherwise associated or connected with the Montreal Properties,
including, without
<PAGE>
limitation, the management agreements providing for the storage and
management of documents and records at the Montreal Properties.
2. Interpretation.
--------------
(1) References to the Purchase Agreement shall include amendments thereto from
time to time, including the amendments made by this Agreement.
(2) References to Articles, Sections, Exhibits and Schedules of an agreement
shall be deemed to refer to Articles, Sections, Exhibits and Schedules of
the Purchase Agreement, unless otherwise expressly stated.
(3) References to "Purchased Assets" shall, (i) as it relates to Arch Ltd.,
mean the Montreal Assets, and (ii) as it relates to Pierce Leahy, mean the
Purchased Assets, other than the Montreal Assets (the "Remaining Assets").
(4) References to "Purchaser" in the Purchase Agreement shall mean (i) Arch
Ltd., as purchaser of the Montreal Assets, and (ii) Pierce Leahy, as purchaser
of the Remaining Assets.
(5) Each of the Sellers and Pierce Leahy acknowledge and confirm that certain
rights and obligations under the Purchase Agreement shall enure to the
benefit of Arch Ltd. to the extent contemplated herein, as if Arch Ltd. had
originally executed and delivered the Purchase Agreement.
3. Amendments to the Purchase Agreement. The Purchase Agreement is
------------------------------------
hereby amended as follows:
Purchase and Sale of Assets
- ---------------------------
(1) by adding, immediately after "Section 1.1(b))," in the 9th line of Section
1.1(a), the following:
"subject to and in accordance with the asset allocation more
particularly identified in Section 1.1(c),";
(2) by redesignating Section 1.1(c) as Section 1.1(d) and adding the
following new Section 1.1(c):
"(c) Allocation of Assets. In accordance with Section 1.1(a):
--------------------
-2-
<PAGE>
(i) Seller hereby agrees to sell, assign, convey, transfer and
deliver to Arch Ltd., or cause to be sold, assigned, conveyed,
transferred and delivered to Arch Ltd., and Arch Ltd. hereby
agrees to purchase and acquire as of and with effect from the
Closing Date, the Montreal Assets; and
(ii) Seller hereby agrees to sell, assign, convey, transfer and
deliver to Pierce Leahy, or cause to be sold, assigned, conveyed,
transferred and delivered to Pierce Leahy, and Pierce Leahy
hereby agrees to purchase and acquire as of and with effect from
the Closing Date, all of the Purchased Assets, other than the
Montreal Assets.";
Purchase Price
- --------------
(3) by deleting Section 1.2(a) and Section 1.2(b)(i) and substituting the
following:
"(a) Purchase Price. The aggregate purchase price payable by Pierce
--------------
Leahy and Arch Ltd. to the Seller for the Purchased Assets shall be
Cdn.$90,000,000 less the Non-Competition Consideration (see Section
1.3 below)(the "Purchase Price").
(b) Payment of Purchase Price. The Purchase Price shall be paid and
-------------------------
satisfied by Pierce Leahy and Arch Ltd. as follows:
(i) at Closing, the aggregate sum of Cdn. $81,500,000, less the Non-
Competition Consideration (see Section 1.3 below), shall be paid
by certified cheque or wire transfer to Seller Group or as Seller
Group otherwise directs (provided such direction is not
inconsistent with the allocation of the Purchase Price set out in
Exhibit B), such sum to be satisfied by Arch Ltd. and Pierce
Leahy, respectively, in accordance with the following:
Arch Ltd. $54,290,773
Pierce Leahy $27,209,227; and"
(4) by deleting the word "Purchaser" in the 1st line of Section 1.2(b)(ii)
and substituting the word "Pierce Leahy" and by adding, immediately
after the words "(the "Escrow Amount")" in the 1st line of Section
1.2(b)(ii), the words ", on behalf of Seller Group,";
-3-
<PAGE>
GST Election
- ------------
(5) by adding, immediately after the word "Closing Date" in the 9th line of
Section 1.5, the following:
"Purchaser shall indemnify and hold Seller Group harmless in respect
of any Goods and Services Tax and Quebec Sale Tax, as well as
penalties, interests and other amounts which may be assessed against
any Seller Group Member under the Excise Tax Act (Canada) or An Act
respecting Quebec Sales Tax (Quebec) as a result of the transactions
contemplated pursuant to this Agreement not being eligible for any of
the elections.";
Closing
- -------
(6) by deleting the words "the day which is fifteen days following the Due
Diligence Termination Date (as defined herein)" in the 3rd and 4th lines of
Section 1.6 and substituting the words "April 7, 1998";
Representations and Warranties of Seller and Principals
- -------------------------------------------------------
(7) by adding, immediately after Section 2.18(f), the following:
"(g) Schedule M.2 contains a complete and accurate list, as of the
date hereof, of all Employees employed in the bargaining unit
described in the Collective Agreement (the "Union Employees").
(h) All of the Employee Benefit Plans in which current or former
Union Employees participate or in which they or their dependants are
eligible to participate (the "Union Employee Benefit Plans") have been
established, registered, invested and administered, in all respects,
in accordance with all applicable laws, regulations, orders or other
legislative, administrative or judicial promulgations ("Applicable
Laws").
(i) All obligations regarding the Union Employee Benefit Plans have
been satisfied and there are no outstanding defaults or violations by
any party thereto.
(j) Seller has reserved the right, subject to the Collective
Agreement, to amend, modify or terminate each Union Employee Benefit
Plan, subject to such approvals required by Applicable Laws.
-4-
<PAGE>
(k) None of the Union Employee Benefit Plans, nor any related funding
medium thereunder, is subject to any pending investigation,
examination or other proceeding, action or claim initiated by a
governmental agency or body, or by an other party, and there exists no
state of facts which after notice or lapse of time or both could
reasonably be expected to give rise to any such investigation,
examination or other proceeding, claim or action or to affect the
registration of any of the Union Employee Benefit Plans.
(l) All contributions or premiums required to be made by the Seller
under the terms of the Union Employee Benefit Plans or by Applicable
Laws have been made in a timely fashion in accordance with Applicable
Laws and the Seller does not have any liability with respect to any of
the Union Employee Benefit Plans and contributions or premiums are to
be paid on an accrual basis for the period up to Closing even though
not otherwise required to be made until a later date in respect of a
period that includes Closing.
(m) No amendments have been made to the Union Employee Benefit Plans
and except as provided in the Collective Agreement no improvements or
amendments to the Union Employee Benefit Plans have been promised and
no improvements or amendments will be made or promised.
(n) Seller has delivered to Arch Ltd. true, correct and complete
copies of all of the Union Employee Benefit Plans as amended as of the
date hereof together with all related documentation (e.g funding
agreements, funding and financial information, plan summaries,
booklets and personnel manuals).
(o) No insurance policy or other contract or agreement affecting the
Union Employee Benefit Plans requires or permits a retroactive
increase in premiums or payments due thereunder.
(p) The level of insurance reserves under each insured Union Employee
Benefit Plan is reasonable and sufficient to provide for all incurred
but unincorporated claims.
(q) With the exception of the group registered retirement savings
plan provided under the Collective Agreement, none of the Union
Employee Benefit Plans provides benefits to retired employees."
-5-
<PAGE>
(8) by addition a new Section 2.36 as follows:
"Section 2.36 Shelving Co.
------------
(a) 100 common shares in the capital of Shelving Co. (as defined in
Section 6.23) have been duly issued and are outstanding as fully paid
and non-assessable.
(b) Seller is the registered and beneficial owner of all the issued
and outstanding shares in the capital of Shelving Co. with good and
marketable title thereto free and clear of all liens. No person other
than Pierce Leahy has any agreement, option, right or privilege
capable of becoming an agreement for the purchase from Seller of any
of the shares in the capital of Shelving Co.
(c) There is no agreement, warrant or option existing pursuant to
which Shelving Co. is or might be required to issue additional shares
of Shelving Co.
(d) The sole asset of Shelving Co. is a 100% interest in the tangible
personal property used in connection with the operation of the
Business in the Province of Ontario.
(e) Shelving Co. does not have any liabilities, obligations or
indebtedness (whether accrued, absolute, contingent or otherwise)
other than federal goods and services taxes and provincial sales taxes
incurred in connection with the purchase of the assets identified in
Section 2.36(d) and legal fees incurred in connection with its
incorporation."
Representations and Warranties of Pierce Leahy and Arch Ltd.
- ------------------------------------------------------------
(9) by deleting all references to the word "Purchaser" in Article 3 and
substituting in each case the words "Pierce Leahy";
(10) by adding, immediately after Article 3, Article 3A entitled
"REPRESENTATIONS AND WARRANTIES OF ARCH LTD." which shall provide as
follows:
"Arch Ltd. hereby represents and warrants to Seller and the Principals
as follows and acknowledges that Seller and the Principals are relying
on such representations and warranties in connection with the sale of
the Montreal Assets:
-6-
<PAGE>
Section 3.1A Status. Arch Ltd. is a corporation duly organized,
------
validly existing and in good standing under the federal laws of Canada
and has full power and authority to own its properties and to carry on
the business as presently conducted by it. Arch Ltd. is duly qualified
to do business and is in good standing in all other jurisdictions
where the conduct of its business so requires.
Section 3.2A Due Authorization. Arch Ltd. has the corporate power,
-----------------
authority and capacity to enter into this Agreement and all other
agreements and instruments to be executed by it as contemplated by
this Agreement and to carry out its obligations under this Agreement
and such other agreements and instruments. The execution and delivery
of this Agreement and such other agreements and instruments and the
completion of the transactions contemplated by this Agreement and such
other agreements and instruments have been duly authorized by all
necessary corporate action on the part of Arch Ltd., its directors and
its sole shareholder.
Section 3.3A Enforceability of Obligations. This Agreement
-----------------------------
constitutes a valid and binding obligation of Arch Ltd. enforceable
against Arch Ltd. in accordance with its terms subject, however, to
limitations on enforcement imposed by bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of the rights
of creditors or others and to the extent that equitable remedies such
as specific performance and injunctions are only available in the
discretion of the court from which they are sought.
Section 3.4A GST Registration. Arch Ltd. will, effective at the
----------------
Closing, be a registrant for the purposes of the Excise Tax Act
(Canada) and the Act Respecting the Quebec Sales Tax.";
Survival of Representations and Warranties
- ------------------------------------------
(11) by adding, immediately after the words "Sections 3.1 through 3.3" in
the 1st line of Section 4.2(a), the words "and Sections 3.1A through
3.3A";
Employee Covenants
- ------------------
(12) by adding, immediately after the word "Employees" in the 2nd line of
Section 6.7(a), the words "other than Union Employees";
(13) by deleting Section 6.7(b) and substituting the following:
-7-
<PAGE>
"(b) Collective Agreement. Arch Ltd. agrees to succeed to the rights
--------------------
and obligations of Seller under the Collective Agreement, subject to
Section 6.10, to the extent that they apply to the Union Employees, as
required under the Collective Agreement and pursuant to applicable
laws.";
(14) by deleting Section 6.7(c) and substituting the following:
"(c) Hired Employees. Employees, excluding the Union Employees, who
---------------
accept employment with Pierce Leahy pursuant to Section 6.7(a) shall
be referred to in this Agreement as "Non-Montreal Hired Employees".
Employees, excluding the Union Employees, who accept employment with
Arch Ltd. pursuant to Section 6.7(a) shall be referred to in this
Agreement as "Montreal Hired Employees". The Non-Montreal Hired
Employees and the Montreal Hired Employees shall be collectively
referred to herein as "Hired Employees". Union Employees who are
employed by Arch Ltd. pursuant to Section 6.7(b) shall be referred to
in this Agreement as "Transferred Union Employees".";
(15) by deleting the words "more particularly set out in the employment
agreement attached hereto as Exhibit D (the "Employment Agreement")" in the
3rd and 4th lines of Section 6.7(d) and substituting the following;
"mutually acceptable to Pierce Leahy and each of Ingram and
Richardson.";
(16) by adding, immediately after the word "thereto" in the 4th line of
Section 6.7(f), the following:
"Subject to Section 6.8, Arch Ltd. shall bear and discharge any and
all liability in respect of Transferred Union Employees (i) incurred
as a result of an event that commences or occurs after the Closing, or
(ii) that accrues from and after the Closing, and Arch Ltd. shall
indemnify and save harmless Seller with respect thereto.";
Severance Costs
- ---------------
(17) by deleting Section 6.8 (a) and substituting the following:
"(a) Notwithstanding Sections 6.7(e) and 6.7(f), Seller, Pierce Leahy
and Arch Ltd. agree as follows:
-8-
<PAGE>
(i) Seller and Pierce Leahy shall each be responsible for one-
half of all costs, liabilities and expenses (including,
without limitation, severance and termination costs and
related legal and outplacement costs) of Seller or Pierce
Leahy associated with or incurred as a result of the
severance or termination, during the period commencing on
the Closing Date and terminating on the first anniversary of
the Closing Date, of the employment of (1) the employees of
Pierce Leahy and its subsidiaries in its Canadian
operations, including the Non-Montreal Hired Employees but
excluding the Union Employees and the Montreal Hired
Employees, and (2) the Employees, other than the Employees
employed at the Montreal Properties, who do not accept
employment with Pierce Leahy (such costs in the aggregate
shall be referred to herein as "Non-Montreal Severance
Costs").
(ii) Seller and Arch Ltd. shall each be responsible for one-half
of all costs, liabilities and expenses (including, without
limitation, severance and termination costs and related
legal and outplacement costs) of Seller or Arch Ltd.
associated with or incurred as a result of the severance or
termination, during the period commencing on the Closing
Date and terminating on the first anniversary of the Closing
Date, of the employment of (1) the employees of Arch Ltd.,
including the Montreal Hired Employees and the Transferred
Union Employees, and (2) the Employees, other than the
Employees employed at the non-Montreal Properties, who do
not accept employment with Arch Ltd. (such costs in the
aggregate shall be referred to herein as "Montreal Severance
Costs").
The Seller and the Principals jointly and severally agree to
reimburse Pierce Leahy or Arch Ltd., as applicable, for and shall
indemnify and hold harmless Pierce Leahy and Arch Ltd. from and
against 50% of the after-tax effect (in accordance with Section
6.8(b)) of the aggregate amount of all Non-Montreal Severance Costs
and Montreal Severance Costs (collectively, the "Severance Costs")
paid by Pierce Leahy and Arch Ltd., respectively, and Pierce Leahy and
Arch Ltd., as applicable, shall reimburse Seller Group for and shall
indemnify and hold harmless Seller Group from and against 50% of the
after-tax effect of the net amount of all Non-Montreal Severance Cost
and Montreal Severance Costs paid by Seller Group. Notwithstanding
anything contained in this Section 6.8, Seller and the Principals
shall not be responsible
-9-
<PAGE>
for their portion of the Severance Costs attributable to the
termination by Pierce Leahy of those approximately 33 employees of
Automated Record Centres Limited which Pierce Leahy had identified as
employees it planned to dismiss prior to the date of this Agreement.";
Employee Agreement
- ------------------
(18) by deleting Section 6.10 and substituting the following:
"Section 6.10 Employee Benefit Plans. Except as provided in this
----------------------
Section 6.10, Seller shall remain responsible for, and shall indemnify
Pierce Leahy and Arch Ltd. from and against any liability in respect
of, any welfare, bonus, hospitalization insurance, medical benefit,
dental benefit, disability insurance, post-retirement life insurance,
post-retirement medical benefit, deferred compensation, profit-
sharing, pension, retirement, severance pay, stock option, employee
stock purchase or any other similar plan, arrangement or program
("Employee Benefit Plans") maintained or provided for the benefit of
the Employees or former Employees. Notwithstanding any provision
contained in this Agreement to the contrary: (i) Pierce Leahy shall
not assume, or be responsible in any manner for any liabilities or
obligations arising under or as a result of any Employee Benefit Plan
maintained or provided by Seller for the benefit of Employees or
former Employees of the Seller or in which Seller or its Employees or
former Employees participate; and (ii) subject to Section 6.8 and any
indemnification given by Seller to Pierce Leahy pursuant to this
Section 6.10, Pierce Leahy shall be responsible for any liabilities
and obligations arising under or as a result of any employee benefit
plan maintained or provided by Pierce Leahy for the benefit of the
employees of Pierce Leahy. Seller shall indemnify Pierce Leahy from
and against any liabilities or obligations relating to such Employee
Benefit Plans which arose on or prior to, or accrued up to, the
Closing Date. Arch Ltd. agrees to provide to the Transferred Union
Employees, effective as and from the Closing Date, the employee
benefit and retirement income coverages required under the Collective
Agreement including, without limitation, the group registered
retirement savings plan and group insurance plan provided under the
Collective Agreement. From and after the Closing Date, Arch Ltd.
shall be responsible for the Employee Benefit Plans assumed by it
pursuant to the Collective Agreement. Seller shall indemnify Arch
Ltd. from and against any liabilities or obligations relating to such
Employee Benefit Plans which arose on or prior to, or accrued up to,
the Closing Date.";
Ontario Shelving
- ----------------
-10-
<PAGE>
(19) by adding a new Section 6.23 as follows:
"Section 6.23 Transfer of Shelving.
--------------------
(a) Prior to Closing, Seller shall incorporate a federal company
("Shelving Co.") as a wholly-owned subsidiary of Seller and shall
transfer or cause to be transferred to Shelving Co. all of the
tangible personal property used in connection with the operation of
the Business in the Province of Ontario.
(b) On Closing, and subject to the terms and conditions of the
Purchase Agreement, Seller shall sell to Pierce Leahy and Pierce Leahy
shall purchase from Seller all the issued and outstanding shares in
the capital of Shelving Co. (the "Shelving Shares"), which shares
shall constitute a portion of the Purchased Assets. The share
certificates representing the Shelving Shares shall be fully
transferable on the books of Shelving Co. and endorsed in blank for
transfer in a manner satisfactory to the Purchaser's solicitors;
(c) Purchaser shall be liable for, and shall pay all sales and
transfer taxes, including federal and provincial sales taxes and goods
and services taxes, payable by Archivex or Shelving Co. in connection
with the conveyance and transfer of the tangible personal property by
Archivex to Shelving Co.";
Inforef Project
- ---------------
(20) by adding a new Section 6.24 as follows:
"Section 6.24 Inforef Project. Effective as of Closing, Purchaser
----------------
shall obtain the rights and assume the obligations of Seller under and
pursuant to the Inforef Project with the Minister of Justice (Quebec).
In connection therewith, Purchaser may receive certain refund payments
from the Minister of Justice in accordance with the terms of the
Inforef Project and as more particularly set out in Schedule V.
Purchaser acknowledges that the Seller shall be entitled to receive
the aggregate amount identified as "AR" in Schedule V from the
Purchaser, the payment of which shall be satisfied by way of post-
Closing adjustments agreed to by the parties in accordance with this
Agreement. In addition, if any amount identified under the headings
"Honor" and "Advance" in Schedule V are received by Purchaser after
Closing, Purchaser shall receive any such payments in trust for the
benefit of Seller and pay such amounts to Seller upon receipt thereof
from the Ministry of Justice."
Closing Deliveries
- ------------------
-11-
<PAGE>
(21) by adding, immediately after the word Seller in the second line of
Section 10.1(h), the words ",the Principals, Sagarmatha, Gestion and Newco";
(22) by deleting Section 10.1(i) and substituting the following:
"(i) the certificates representing the Shelving Shares to be delivered
in accordance with Section 6.23;";
(23) by deleting Section 10.2(g);
General Indemnity
- -----------------
(24) by adding the following new Section 11.1(j):
"(j) subject to Sections 6.23(c) and 2.36(e), any and all debts and
liabilities (whether accrued, absolute, contingent or otherwise)
of Shelving Co. incurred or suffered by Pierce Leahy by reason
of the acquisition of the Shelving Shares.";
Environmental Indemnity
- -----------------------
(25) by redesignating Section 11.2 as Section 11.2(a) and adding new
Sections 11.2(b) and (c) as follows:
"(b) Without limiting the generality of Section 11.2(a), Seller,
Ingram and Sagarmatha agree to jointly and severally indemnify
the Purchaser Related Indemnified Parties for all remediation of
any environmental condition pertaining to the Owned Real
Properties which remediation is necessary to (i) bring the Owned
Real Properties into full conformity with all applicable
Environmental Laws as they exist as of the date hereof, and (ii)
remediate any Environmental Contamination which poses a
significant adverse health risk to the Receptor. For the
purposes of this Section 11.2(b), "Receptor" shall mean any
person negatively impacted by the presence of any Hazardous
Substance located on or originating from the Owned Real
Properties.
(c) In respect of the information contained in the Phase II
environmental audits completed by Conestoga-Rovers Associates
("CRA") in April, 1998 pertaining to the Owned Real Property at
5015 Fisher Street, St. Laurent, Quebec, 3500 St. Jacques Street,
Montreal, Quebec and 4005 and 4035 Richelieu Street, Montreal,
Quebec (together, the "Phase
-12-
<PAGE>
II Environmental Audits") Seller Group and Purchaser shall as
soon as is practicable following Closing jointly retain a member
of the Quebec bar specializing in Environmental Law to review the
Environmental Audits and Phase II Environmental Audits and shall,
with advice from CRA (or other qualified environmental engineers)
as required, provide an opinion to the Seller Group and the
Purchaser (with a copy to their respective legal counsel)
identifying the Environmental Remediation required pursuant to
Section 11.2 (b) ("Environmental Remediation"). The Seller Group
shall, as soon as is practicable following receipt of the opinion
letter, retain CRA, or another qualified environmental engineer
agreed upon by the parties acting reasonably, to complete the
Environmental Remediation to the satisfaction of the Purchaser
acting reasonably. The cost of the Environmental Remediation
shall be borne exclusively by the Seller Group."
(26) by deleting clause 11.3(b) and replacing it with the following:
"(b) Notwithstanding Section 11.3(a), to the extent that the
Environmental Audits and Phase II Environmental Audits reveal any
Environmental Contamination relating to the Owned Real Property,
the parties agree that the indemnity obligations of Seller,
Ingram and Sagarmatha set out in Section 11.2 shall continue in
respect thereof for ten (10) years."
(27) by adding, immediately after the word "Agreement" in the 7th line of
Section 11.6, the following:
"For the purposes of this Section 11.6, the Losses of Pierce Leahy and
Arch Ltd. shall be considered collectively when determining whether
the amount of such Losses exceeds $100,000."; and
General
- -------
(28) by deleting the word "Purchaser" in the 2nd line of Section 12.8 and
substituting the word "Pierce Leahy".
4. Confirmation of Purchase Agreement. Except as amended by this
----------------------------------
Agreement, the Purchase Agreement is hereby confirmed as being in full force and
effect.
5. Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the Province of Ontario and the laws of Canada
applicable therein.
-13-
<PAGE>
6. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
PIERCE LEAHY COMMAND COMPANY
By: /s/ Joseph P. Linaugh
-------------------------
Name:
Title:
By: /s/ J. Peter Pierce
-------------------------
Name:
Title:
ARCHIVEX LIMITED
By: /s/ Joseph P. Linaugh
-------------------------
Name:
Title:
By: /s/ J. Peter Pierce
-------------------------
Name:
Title:
ARCHIVEX INC.
By: /s/ Richard Ingram
-------------------------
Name:
Title:
By: /s/ John Richardson
-------------------------
Name:
Title:
-14-
<PAGE>
/s/ /s/ Richard Ingram
- --------------------------- ---------------------------
Witness RICHARD INGRAM
/s/ /s/ John Richardson
- --------------------------- ---------------------------
Witness JOHN RICHARDSON
SAGARMATHA CAPITAL INC.
By: /s/ Richard Ingram
-------------------------
Name:
Title:
GESTION 19-12 LTEE.
By: /s/ Richard Ingram
--------------------------
Name:
Title:
By: /s/ John Richardson
-------------------------
Name:
Title:
3371751 CANADA INC.
By: /s/ Richard Ingram
-------------------------
Name:
Title:
By: /s/ John Richardson
-------------------------
Name:
Title:
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in the Registration Statement (Form 8-K) of Pierce
Leahy Corp., of our report dated January 13, 1998 (except as to note 11 which is
as of February 4, 1998) to the shareholders of Archivex Inc. of the following
financial statements:
Consolidated balance sheets as a November 30, 1997 and 1996.
Consolidated statements of earnings, retained earnings and cash flows for each
of the years ended November 30, 1997, 1996 and 1995.
Chartered Accountants
Montreal, Quebec
April 17, 1998
