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REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PIERCE LEAHY CORP.
(Exact name of Registrant as specified in its charter)
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PENNSYLVANIA 4226 23-2588479
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification Number)
incorporation or organization) Classification Code
Number)
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631 PARK AVENUE
KING OF PRUSSIA, PENNSYLVANIA 19406
(610) 992-8200
(Address, including zip code, and telephone number, including area code, of the
registrants' principal executive offices)
DOUGLAS B. HUNTLEY
631 PARK AVENUE
KING OF PRUSSIA, PENNSYLVANIA 19406
(610) 992-8200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
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RICHARD J. BUSIS, ESQUIRE SUSAN FOREST BARRETT, ESQUIRE
COZEN AND O'CONNOR SULLIVAN & WORCESTER LLP
1900 MARKET STREET ONE POST OFFICE SQUARE
PHILADELPHIA, PENNSYLVANIA 19103 BOSTON, MASSACHUSETTS 02109
(215) 665-2000 (617) 338-2800
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effectiveness of this Registration Statement and the
effective time of the merger of Iron Mountain Incorporated with and into the
Registrant as described in the Agreement and Plan of Merger dated as of
October 20, 1999.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / / _________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / _________
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
AGGREGATE PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE(2) FEE(2)
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Common Stock, $.01 par value................ 36,000,000 N/A $1,113,750,000 $309,622.50
</TABLE>
(1) The maximum number of shares of Pierce Leahy common stock issuable in
connection with the Iron Mountain merger in exchange for Iron Mountain
common stock is based on the number of shares of Iron Mountain common stock
outstanding on November 19, 1999.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c) of the Securities Act, based on
the market value of the shares of Iron Mountain common stock to be received
by Pierce Leahy in the merger, as established by the average of the high and
low sales prices of Iron Mountain common stock on November 19, 1999, which
was $30.9375.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED NOVEMBER 24, 1999
THE INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS NOT
COMPLETE AND MAY BE CHANGED. WE MAY NOT ISSUE THE SECURITIES DESCRIBED IN THIS
JOINT PROXY STATEMENT/PROSPECTUS UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS JOINT PROXY
STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
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INSERT PIERCE LEAHY LOGO HERE INSERT IRON MOUNTAIN LOGO HERE
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MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Iron Mountain Incorporated and Pierce Leahy Corp.
approved a merger agreement that will result in the merger of Iron Mountain with
and into Pierce Leahy, with Pierce Leahy being the surviving corporation. As
part of the merger, Pierce Leahy will change its name to Iron Mountain
Incorporated ("New Iron Mountain").
We believe that the combined companies will be able to create substantially
more shareholder value than could be achieved by the companies individually.
The economic effect of the merger will be that each currently outstanding
share of Pierce Leahy common stock will be equivalent to 1.1 shares of New Iron
Mountain common stock. This effect will be accomplished by Pierce Leahy's
paying, prior to the merger, a stock dividend of one share of Pierce Leahy
common stock for each ten shares then outstanding. The shares of Pierce Leahy
common stock outstanding after the dividend will remain shares of New Iron
Mountain common stock. In addition, each share of Iron Mountain common stock
will become one share of New Iron Mountain common stock. Based on the number of
shares of Pierce Leahy and Iron Mountain common stock currently outstanding,
giving effect to the stock dividend, the current shareholders of Pierce Leahy
will own approximately 35% of New Iron Mountain and the current stockholders of
Iron Mountain will own approximately 65% of New Iron Mountain.
Pierce Leahy common stock is currently listed on the New York Stock Exchange
under the symbol "PLH," and Iron Mountain common stock is currently listed on
the NYSE under the symbol "IRM." After the merger, New Iron Mountain common
stock will be listed on the NYSE under the symbol "IRM."
We are asking shareholders of Pierce Leahy and Iron Mountain to approve the
merger agreement. In addition, we are asking shareholders of Pierce Leahy to
elect eleven directors to serve as the initial Board of Directors of New Iron
Mountain.
We cannot complete the merger unless the shareholders of both companies
approve it and the shareholders of Pierce Leahy also elect the nominated
directors.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend your meeting,
please take the time to vote on the proposal(s) submitted at your meeting by
completing, signing, dating and mailing the enclosed proxy card to us.
The dates, times and places of the meetings are as follows:
For Iron Mountain stockholders:
, 2000 at 10:00 a.m. local time
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For Pierce Leahy shareholders:
, 2000 at 10:00 a.m. local time
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J. Peter Pierce C. Richard Reese
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
PIERCE LEAHY CORP. OFFICER
OF IRON MOUNTAIN INCORPORATED
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WE URGE OUR SHAREHOLDERS TO CONSIDER THOSE MATTERS SET FORTH IN "RISK
FACTORS" BEGINNING ON PAGE 10 OF THIS JOINT PROXY STATEMENT/PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SHARES TO BE ISSUED UNDER THIS
JOINT PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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Joint proxy statement/prospectus dated , and first mailed to
shareholders on or about .
<PAGE>
IMPORTANT INFORMATION NOT INCLUDED IN THIS
JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus incorporates important business and
financial information about Iron Mountain and Pierce Leahy that is not included
in or delivered with this document. We have listed the documents containing this
information that we have filed with the Securities and Exchange Commission
beginning on page 101. These documents are available to you without charge upon
written or oral request. In order to obtain these documents, you may visit the
SEC's website at http://www.sec.gov or contact the following:
FOR IRON MOUNTAIN DOCUMENTS:
Iron Mountain Incorporated
745 Atlantic Avenue
Boston, Massachusetts 02111
Attention: John F. Kenny, Jr., Executive Vice President and Chief Financial
Officer
Telephone Number: (617) 535-4766
FOR PIERCE LEAHY DOCUMENTS:
Pierce Leahy Corp.
631 Park Avenue
King of Prussia, Pennsylvania 19406
Attention: Douglas B. Huntley, Vice President and Chief Financial Officer
Telephone Number: (610) 992-8200
WE MUST RECEIVE YOUR REQUEST FOR DOCUMENTS NO LATER THAN TO ENSURE
THAT YOU RECEIVE THE DOCUMENTS IN TIME FOR YOUR SHAREHOLDERS MEETING.
<PAGE>
IRON MOUNTAIN INCORPORATED
745 ATLANTIC AVENUE
BOSTON, MASSACHUSETTS 02111
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Iron Mountain Incorporated will hold a special meeting of stockholders at
on , 2000 at 10:00 a.m. local time for the following
purposes:
(1) To approve an Agreement and Plan of Merger by and between Iron
Mountain and Pierce Leahy Corp. dated as of October 20, 1999, pursuant to
which Iron Mountain will be merged with and into Pierce Leahy, with Pierce
Leahy continuing as the surviving corporation and immediately changing its
name to Iron Mountain Incorporated; and
(2) To transact such other business as may properly come before the
meeting.
Attached to this notice is a joint proxy statement/prospectus relating to
the proposal to be considered at the meeting, as well as a copy of the merger
agreement and other important documents.
Iron Mountain's Board of Directors has fixed the close of business on
, as the record date for the determination of stockholders
entitled to receive notice of and to vote at the meeting. Shares of common stock
are the only securities of Iron Mountain whose holders are entitled to vote on
the merger agreement and any other proposals properly brought before the
meeting. We will make available for inspection by any stockholder a list of
stockholders entitled to receive notice of and to vote at the meeting, during
ordinary business hours, at our principal executive offices, located at 745
Atlantic Avenue, Boston, Massachusetts 02111 for ten days prior to the meeting.
Your vote is important regardless of the number of shares you own. We
request that you complete, sign, date and return the enclosed proxy card without
delay in the enclosed postage-paid return envelope, even if you now plan to
attend the meeting. If you sign, date and mail your proxy card without
indicating how you wish to vote, we will vote your proxy in favor of the merger.
If you fail to return your proxy card, or if you fail to sign your proxy card,
the effect will be a vote against the merger unless you attend the meeting and
vote in person for the merger.
By Order of the Board of Directors,
Jas. Murray Howe, Secretary
Boston, Massachusetts
____________, ______
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PIERCE LEAHY CORP.
631 PARK AVENUE
KING OF PRUSSIA, PENNSYLVANIA 19406
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A special meeting of the shareholders of Pierce Leahy Corp. will be held at
10:00 a.m., on , 2000 at , , Pennsylvania,
for the following purposes:
(1) To approve an Agreement and Plan of Merger by and between Iron
Mountain Incorporated and Pierce Leahy dated as of October 20, 1999,
pursuant to which Iron Mountain will be merged with and into Pierce Leahy,
Pierce Leahy will issue shares of its common stock and it will amend and
restate its articles of incorporation and bylaws, including changing its
name to Iron Mountain Incorporated;
(2) To elect a new Board of Directors to take office upon completion of
the merger; and
(3) To transact such other business as may properly come before the
meeting.
Please note that the election of directors is contingent upon and will
become effective only upon the closing of the merger with Iron Mountain.
Attached to this notice is a joint proxy statement/prospectus relating to
the proposals to be considered at the meeting, as well as a copy of the merger
agreement and other important documents.
Pierce Leahy's Board of Directors has fixed the close of business on ,
as the record date for the determination of shareholders entitled to
receive this notice and the joint proxy statement/ prospectus and to vote at the
meeting. Only shareholders of record at the close of business on that date are
entitled to receive notice of and to vote at the meeting and any adjournment or
postponement thereof. In the event that the meeting is adjourned for one or more
periods aggregating at least 15 days due to the absence of a quorum, those
shareholders entitled to vote who attend the adjourned meeting, although
otherwise less than a quorum, shall constitute a quorum for the purpose of
acting upon any matter set forth in this notice.
Your vote is important, regardless of the number of shares you own. We urge
you, even if you plan to attend the meeting, to complete, sign, date and return
the enclosed proxy card without delay in the enclosed postage-paid return
envelope, even if you now plan to attend the meeting. You may revoke your proxy
at any time prior to its exercise. Any shareholder present at the meeting may
revoke his or her proxy and vote personally on each proposal brought before the
meeting.
By Order of the Board of Directors,
Joseph P. Linaugh, Secretary
King of Prussia, Pennsylvania
____________, ______
<PAGE>
TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE
MERGER.............................. 1
SUMMARY............................... 2
RISK FACTORS.......................... 10
Risk Factors Related to the
Merger:........................... 10
Failure to integrate operations
following the merger could
reduce our future results of
operations...................... 10
Failure to achieve expected cost
savings and unanticipated costs
relating to the merger could
adversely affect our results of
operations...................... 10
New Iron Mountain may not be able
to enter into a new credit
facility........................ 11
Our performance may decline if key
individuals leave New Iron
Mountain........................ 11
Interests of officers and
directors in the merger......... 11
Risk Factors Related to New Iron
Mountain:......................... 11
Because of the risks associated
with acquisitions, we may be
unable to continue our growth
strategy in the future.......... 11
International expansion may pose
additional risks resulting from
foreign regulations and foreign
markets......................... 11
Our substantial indebtedness could
adversely affect our financial
health.......................... 12
We have a history of experiencing
net losses applicable to our
common shareholders as our
primary financial objective is
to increase our EBITDA.......... 12
Restrictions imposed by terms of
our indebtedness may adversely
affect our ability to pursue our
acquisition strategy............ 13
We face competition for customers
and acquisition
opportunities................... 13
Our customers may shift from paper
storage to alternative
technologies that require less
physical space.................. 13
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PAGE
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Uninsured losses or damages to our
storage facilities or the
records stored in those
facilities could be detrimental
to our business operations
and/or financial condition...... 14
Because various laws may impose
liability on owners and
operators of real estate for a
variety of environmental
problems, regardless of fault,
we could be potentially liable
for environmental costs
attributable to the properties
we own or lease................. 14
THE MEETINGS AND VOTING............... 16
Matters Relating to the Meetings.... 16
Proxies............................. 18
Other Business; Adjournments........ 19
THE MERGER............................ 20
Background of the Merger............ 20
Iron Mountain's Reasons for the
Merger; Recommendation of the Iron
Mountain Board.................... 22
Pierce Leahy's Reasons for the
Merger; Recommendations of the
Pierce Leahy Board................ 24
Opinion of Iron Mountain's Financial
Advisor........................... 26
Opinion of Pierce Leahy's Financial
Advisor........................... 31
Interests of Officers and Directors
in the Merger..................... 35
Pierce Leahy Shareholders'
Agreement......................... 36
Iron Mountain Voting Agreement...... 38
Accounting Treatment................ 38
No Appraisal or Dissenters'
Rights............................ 39
Stock Exchange Listing of New Iron
Mountain's Common Stock........... 39
Registrar and Transfer Agent for New
Iron Mountain's Common Stock...... 39
THE MERGER AGREEMENT.................. 40
General............................. 40
Merger Consideration................ 40
Conversion of Options............... 40
Exchange of Stock Certificates...... 41
Representations and Warranties...... 41
Material Covenants.................. 41
Conditions to Complete the Merger... 43
Termination and Expenses............ 45
</TABLE>
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Amendment or Waiver................. 47
Corporate Governance................ 47
Restrictions on Resales by
Affiliates
and Registration Rights........... 48
THE COMPANIES......................... 49
Iron Mountain Incorporated.......... 49
Pierce Leahy Corp................... 49
New Iron Mountain................... 49
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES........................ 50
Consequences to Pierce Leahy and its
Shareholders...................... 51
Consequences to Iron Mountain and
its Stockholders.................. 52
IRON MOUNTAIN INCORPORATED SELECTED
CONSOLIDATED FINANCIAL AND OPERATING
INFORMATION......................... 53
PIERCE LEAHY CORP. SELECTED
CONSOLIDATED FINANCIAL AND OPERATING
INFORMATION......................... 55
COMPARATIVE PER COMMON SHARE DATA..... 57
NEW IRON MOUNTAIN PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS... 58
IRON MOUNTAIN INCORPORATED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.......................... 67
PIERCE LEAHY CORP. PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS... 78
COMPARATIVE PER SHARE MARKET PRICE AND
DIVIDEND INFORMATION................ 85
AMENDED AND RESTATED ARTICLES OF
INCORPORATION AND BYLAWS OF NEW IRON
MOUNTAIN............................ 86
ELECTION OF DIRECTORS OF NEW IRON
MOUNTAIN............................ 87
Required Vote and Recommendation.... 87
</TABLE>
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Nominees for Director and Executive
Officers of New Iron Mountain..... 88
Information Regarding Nominees for
Election as Directors............. 88
Information Regarding Executive
Officers.......................... 90
The Board of Directors and its
Committees........................ 90
Director Compensation............... 91
COMPARISON OF RIGHTS OF SHAREHOLDERS
OF IRON MOUNTAIN AND NEW IRON
MOUNTAIN............................ 92
FORWARD-LOOKING STATEMENTS............ 98
LEGAL MATTERS......................... 99
EXPERTS............................... 99
WHERE YOU CAN FIND MORE INFORMATION... 101
Pierce Leahy SEC Filings............ 102
Iron Mountain SEC Filings........... 102
FUTURE SHAREHOLDER PROPOSALS OF NEW
IRON MOUNTAIN....................... 104
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS.......................... F-1
ANNEX A AGREEMENT AND PLAN OF
MERGER.............................. A-1
ANNEX B PIERCE LEAHY SHAREHOLDERS'
AGREEMENT........................... B-1
ANNEX C IRON MOUNTAIN VOTING
AGREEMENT........................... C-1
ANNEX D AMENDED AND RESTATED ARTICLES
OF INCORPORATION OF IRON MOUNTAIN
INCORPORATED........................ D-1
ANNEX E AMENDED AND RESTATED BYLAWS OF
IRON MOUNTAIN INCORPORATED.......... E-1
ANNEX F OPINION OF BEAR, STEARNS & CO.
INC................................. F-1
ANNEX G OPINION OF FIRST UNION
SECURITIES, INC..................... G-1
</TABLE>
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHEN AND WHERE ARE THE SHAREHOLDER MEETINGS?
A: The Iron Mountain stockholders meeting will take place on , 2000
in Boston, Massachusetts. The Pierce Leahy shareholders meeting will take place
on , 2000 in , Pennsylvania. The address and time of each
meeting is specified on the cover page.
Q: WHAT WILL HAPPEN AT THE SHAREHOLDER MEETINGS?
A: At the Iron Mountain meeting, stockholders will vote on a proposal to approve
the merger agreement. At the Pierce Leahy meeting, shareholders will vote on
proposals to approve the merger agreement, including the issuance of shares in
the merger and the amended and restated articles of incorporation and bylaws,
and to elect a new Board of Directors.
Q: WHAT DO I NEED TO DO NOW?
A: Complete, sign, date and mail your proxy card in the enclosed return envelope
so that your shares may be represented at your meeting. To ensure that we obtain
your vote, please deliver your proxy as instructed on your proxy card even if
you currently plan to attend your meeting in person.
Q: CAN I CHANGE MY VOTE?
A: Yes. To change your vote, send in a later-dated, signed proxy card to your
company's secretary at the address under "Summary--The Companies." Or, you can
attend your meeting in person and vote. You may also revoke your proxy by
sending a notice of revocation to your company's secretary.
Q: IF MY SHARES ARE HELD BY MY BROKER IN "STREET NAME," WILL MY BROKER VOTE MY
SHARES FOR ME?
A: No. If you do not provide your broker with instructions on how to vote your
shares, your broker will not be permitted to vote them. You should therefore
provide your broker with instructions on how to vote your shares. Please check
the voting form used by your broker to see if it offers telephone or internet
voting.
For the Iron Mountain stockholders meeting, broker non-votes and abstentions
have the same effect as votes against the merger proposal.
For the Pierce Leahy shareholders meeting, abstentions will be counted for
determining whether a quorum is present but will not be counted for the purpose
of determining approval of the proposals. Broker non-votes will not be counted
for determining whether a quorum is present or whether the proposals are
approved. As a result, broker non-votes will affect the determination of whether
a quorum is present but will have no effect on the approval of the proposals if
a quorum is present.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. If the merger is completed, we will send you written instructions for
exchanging your stock certificates.
Q: WHO DO I CALL IF I HAVE QUESTIONS ABOUT THE MEETINGS OR THE MERGER?
A: Iron Mountain stockholders may call Investor Relations at (617) 535-4766.
Pierce Leahy shareholders may call Investor Relations at (610) 992-8200.
1
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS. THIS SUMMARY IS NOT COMPLETE AND DOES NOT CONTAIN ALL OF
THE INFORMATION THAT YOU SHOULD CONSIDER BEFORE VOTING. YOU SHOULD READ THE
ENTIRE JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY AND THE DOCUMENTS TO WHICH WE
HAVE REFERRED YOU IN "WHERE YOU CAN FIND MORE INFORMATION" BEGINNING ON PAGE
101. "WE," "US" AND "OUR" REFER TO EITHER IRON MOUNTAIN AND PIERCE LEAHY
SPEAKING JOINTLY PRIOR TO THE MERGER OR NEW IRON MOUNTAIN AFTER THE MERGER.
THE COMPANIES
IRON MOUNTAIN
745 Atlantic Avenue
Boston, Massachusetts 02111
(617) 535-4766
Iron Mountain is the world's largest records and information management
services company, as measured by its revenues. It is an international,
full-service provider of records and information management services, enabling
its over 70,000 customer accounts to outsource these functions. It has a
diversified customer base that includes more than half of the Fortune 500. Iron
Mountain provides storage for all major media, including paper, which is the
dominant form of records storage, and magnetic media, including computer tapes.
Its principal services provided to its storage customers include courier pick-up
and delivery, filing, retrieval and destruction of records, database management,
customized reporting and disaster recovery support. It also sells storage
materials, including cardboard boxes and magnetic media, and provides
consulting, facilities management and other outsourcing services.
PIERCE LEAHY
631 Park Avenue
King of Prussia, Pennsylvania 19406
(610) 992-8200
Pierce Leahy is the largest hardcopy records management company in North
America, as measured by its cubic feet of records currently under management. It
is an international full-service provider of records management and related
services, enabling its over 45,000 customer accounts to outsource their data and
records management functions. It offers storage for all major media, including
paper, computer tapes, optical disks, microfilm, videotapes and X-rays. In
addition, it provides next day or same day records retrieval and delivery,
allowing customers prompt access to all stored material. Pierce Leahy also
offers other data management services, including customer records management
programs, imaging services and records management consulting services and
marketing literature storage and fulfillment services.
OUR RECOMMENDATIONS TO SHAREHOLDERS
TO IRON MOUNTAIN STOCKHOLDERS:
The Iron Mountain Board believes that the merger is advisable, fair to you
and in your best interest and unanimously recommends that you vote "FOR" the
proposal to approve the merger agreement.
To review the Iron Mountain Board's reasons for the merger in greater
detail, as well as related uncertainties, see pages 22 through 24.
TO PIERCE LEAHY SHAREHOLDERS:
The Pierce Leahy Board believes that the merger is advisable, fair to you
and in your best interest and unanimously recommends that you vote "FOR" the
proposal to approve the merger agreement, including the issuance of shares in
the merger and the amended and restated articles of incorporation and bylaws
provided for in the merger agreement (the "merger proposal"). The Pierce Leahy
Board also recommends that you vote "FOR" the election of the nominated
directors to take office upon completion of the merger.
To review the Pierce Leahy Board's reasons for the merger in greater detail,
see pages 24 through 26. For information regarding the nominated directors, see
pages 88 through 90.
2
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SHAREHOLDER VOTES REQUIRED
FOR IRON MOUNTAIN STOCKHOLDERS:
Approval of the merger agreement requires the vote of at least a majority of
the outstanding shares of Iron Mountain common stock entitled to vote.
As of [the record date]:
- a total of shares of Iron Mountain common stock were outstanding
and eligible to be voted at the Iron Mountain meeting;
- directors and executive officers of Iron Mountain and their affiliates
controlled the voting of approximately 8,944,909 shares of Iron Mountain
common stock, representing approximately 25% of the outstanding shares of
Iron Mountain common stock; and
- directors of Iron Mountain who direct the voting of approximately 25% of
the outstanding Iron Mountain common stock have agreed in a voting
agreement to vote these shares in favor of the merger agreement.
FOR PIERCE LEAHY SHAREHOLDERS:
Approval of the merger proposal requires approval by a majority of votes
cast at the meeting, provided that the total votes cast on the proposal
represents over 50% in interest of all securities entitled to vote on the
proposal. In the election of directors, the requisite number of persons in each
class of directors receiving the highest number of votes cast shall be elected.
Each of the Pierce Leahy proposals is contingent on the approval of the other
proposal, and the election of directors will become effective only upon the
closing of the merger.
As of [the record date]:
- a total of shares of Pierce Leahy common stock were outstanding
and eligible to be voted at the Pierce Leahy meeting;
- directors and executive officers of Pierce Leahy and their affiliates
controlled the voting of approximately 39% of the outstanding shares of
Pierce Leahy common stock; and
- members of the extended Pierce family and related trusts who collectively
direct the voting of approximately 39% of the outstanding Pierce Leahy
common stock have agreed in a shareholders' agreement to vote these shares
in favor of the merger proposal and the election of the nominated
directors.
THE MERGER
WHAT IRON MOUNTAIN STOCKHOLDERS AND OPTIONHOLDERS WILL OWN AFTER THE MERGER
After the merger, Iron Mountain stockholders and optionholders will hold the
same number of shares of common stock and options to purchase common stock as
they currently hold, except they will be shares of common stock and options to
purchase common stock of New Iron Mountain. This conversion of shares from Iron
Mountain to New Iron Mountain will occur automatically upon the closing of the
merger. Stockholders will receive instructions on how to exchange their
certificates shortly thereafter. Based on the number of shares of common stock
outstanding of each company as of November 15, 1999, Iron Mountain stockholders
will own approximately 65% of the outstanding common stock of New Iron Mountain
after the merger.
WHAT PIERCE LEAHY SHAREHOLDERS AND OPTIONHOLDERS WILL OWN AFTER THE MERGER
After the merger, each outstanding share of Pierce Leahy common stock and
each outstanding option to purchase Pierce Leahy common stock will remain
outstanding. Prior to the closing of the merger, the Pierce Leahy Board intends
to pay a stock dividend in an amount equal to one-tenth of a share for each
share of Pierce Leahy common stock then outstanding. As a result, after the
merger Pierce Leahy shareholders will own 1.1 shares of New Iron Mountain common
stock for each share of Pierce Leahy common stock currently owned. Based on
these assumptions and the number of shares of common stock outstanding of each
company as of November 15, 1999, Pierce Leahy
3
<PAGE>
shareholders will own approximately 35% of the outstanding common stock of New
Iron Mountain after the merger. Outstanding options to purchase Pierce Leahy
common stock will be adjusted to give effect to the stock dividend. Pierce Leahy
shareholders will receive instructions on how to exchange their stock
certificates shortly after completion of the merger.
CONDITIONS TO COMPLETE THE MERGER (SEE PAGE 43)
A number of conditions must be satisfied before the merger is completed,
including the following:
- the stockholders of Iron Mountain approve the merger agreement and the
shareholders of Pierce Leahy approve the merger proposal and elect the
nominated directors;
- the NYSE approves the listing of New Iron Mountain common stock issued in
the merger;
- Iron Mountain and Pierce Leahy receive legal opinions to the effect that
the merger agreement constitutes a tax-free plan of reorganization; and
- no adverse change from the condition of either Iron Mountain or Pierce
Leahy reflected in their Quarterly Reports on Form 10-Q for the quarter
ended June 30, 1999 has occurred and is continuing.
REGULATORY APPROVALS HAVE BEEN RECEIVED
Completion of the merger could not occur until we received regulatory
approval for the transaction. The parties satisfied their obligation under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") to provide
specified materials and information for review by the Antitrust Division of the
Department of Justice and the Federal Trade Commission. The applicable waiting
period under the HSR Act has expired.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 45)
Iron Mountain and Pierce Leahy may mutually agree to terminate the merger
agreement before the merger has been completed. Either Iron Mountain or Pierce
Leahy may terminate the merger agreement if any of the following occurs:
- a court or other governmental authority unconditionally prohibits the
merger;
- the required shareholder approvals are not obtained;
- the other party breaches any of its representations, warranties or
covenants contained in the merger agreement, and the breach has a material
consequence and is not cured within a specified time period;
- the merger has not been completed by April 30, 2000;
- before its shareholder vote, the Board of Directors of either company
withdraws its recommendation to the shareholders that they vote in favor
of the merger; or
- the other party enters into a competing transaction.
TERMINATION FEES (SEE PAGE 46)
Pierce Leahy must pay Iron Mountain a termination fee of $35 million if:
- Iron Mountain or Pierce Leahy terminates the merger agreement because the
Pierce Leahy Board withdraws or modifies its recommendation of the merger
or recommends any competing transaction;
- Iron Mountain terminates the merger agreement as a result of Pierce
Leahy's entering into a competing transaction;
- Iron Mountain or Pierce Leahy terminates the merger agreement upon a
failure to receive the required shareholder approvals and:
(1) the Pierce Leahy Board withdraws or materially changes its
recommendation of the merger
4
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before the Pierce Leahy shareholder meeting; or
(2) a third party proposes a competing transaction involving Pierce
Leahy, which is not withdrawn before the Pierce Leahy shareholder
meeting, and within one year after the meeting Pierce Leahy enters
into an agreement with respect to that competing transaction.
Iron Mountain must pay Pierce Leahy a termination fee of $35 million if:
- Iron Mountain or Pierce Leahy terminates the merger agreement because the
Iron Mountain Board withdraws or modifies its recommendation of the merger
or recommends any transaction resulting in a change of control of Iron
Mountain;
- Pierce Leahy terminates the merger agreement as a result of Iron
Mountain's entering into a transaction resulting in a change of control of
Iron Mountain;
- Iron Mountain or Pierce Leahy terminates the merger agreement upon a
failure to receive the required shareholder approvals and:
(1) the Iron Mountain Board withdraws or materially changes its
recommendation of the merger before the Iron Mountain stockholder
meeting; or
(2) a third party proposes a transaction resulting in a change of
control of Iron Mountain, which is not withdrawn before the Iron
Mountain stockholder meeting, and within one year after the meeting
Iron Mountain enters into an agreement with respect to that
proposal.
PIERCE LEAHY SHAREHOLDERS' AGREEMENT (SEE PAGE 37)
Certain members of the Pierce family and related trusts entered into a
shareholders' agreement that limits their ability to transfer their shares of
Pierce Leahy common stock before the merger and their shares of New Iron
Mountain common stock for a specified period after the merger. The agreement
also limits their ability to exert control over New Iron Mountain, including by
proxy solicitations and tender offers, for a specified period after the merger.
In addition, these shareholders have agreed to vote in favor of the approval of
the merger proposal and the election of the nominated directors.
IRON MOUNTAIN VOTING AGREEMENT (SEE PAGE 38)
Some directors of Iron Mountain entered into a voting agreement that limits
their ability to transfer shares of Iron Mountain common stock before the
merger. In addition, these stockholders agreed to vote in favor of the adoption
of the merger agreement.
BOARD OF DIRECTORS AND MANAGEMENT OF NEW IRON MOUNTAIN FOLLOWING THE MERGER (SEE
PAGE 87)
In connection with the merger, the Pierce Leahy Board will increase its size
from seven directors to eleven directors. The initial Board of Directors of New
Iron Mountain will consist of the nine members of the Iron Mountain Board prior
to the merger, along with J. Peter Pierce and another designee of Pierce Leahy.
See "Election of Directors of New Iron Mountain."
After the merger, the top executive officers of Iron Mountain will be the
top executive officers of New Iron Mountain, except that J. Peter Pierce will be
the President of New Iron Mountain and David S. Wendell will be the Senior Vice
President of New Iron Mountain and will vacate the office of Chief Operating
Officer. Leo W. Pierce, Sr. will be appointed as the Chairman Emeritus of New
Iron Mountain, a nonvoting position.
NO FEDERAL INCOME TAX ON SHARES RECEIVED IN THE MERGER (SEE PAGE 50)
The receipt of New Iron Mountain shares in exchange for Iron Mountain shares
in the merger will be tax-free to Iron Mountain stockholders.
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No gain or loss will be recognized by Pierce Leahy or its shareholders as a
result of the merger.
ACCOUNTING TREATMENT (SEE PAGE 38)
As the stockholders of Iron Mountain will own approximately 65% of the
shares of New Iron Mountain common stock upon completion of the merger, the
merger will be accounted for as a reverse acquisition, and Iron Mountain will be
treated as the acquiring company for accounting purposes.
BEAR STEARNS SAYS THE EXCHANGE RATIO OF 1.1 TO 1.0 WAS FAIR TO IRON MOUNTAIN
STOCKHOLDERS (SEE PAGE 26)
On October 20, 1999, Bear Stearns delivered its written opinion to the Iron
Mountain Board that, as of that date, the merger consideration, which results in
the equivalent of a fixed exchange ratio of 1.1 shares of Iron Mountain common
stock for each outstanding share of Pierce Leahy common stock, was fair, from a
financial point of view, to the stockholders of Iron Mountain.
The full text of the Bear Stearns opinion is attached as Annex F to this
joint proxy statement/prospectus. Iron Mountain stockholders are urged to read
the Bear Stearns opinion carefully in its entirety for descriptions of the
principal assumptions made, general procedures followed, matters considered and
limitations on the review undertaken. The Bear Stearns opinion addresses only
whether the merger consideration was fair, from a financial point of view, to
the stockholders of Iron Mountain and does not constitute a recommendation to
the Iron Mountain Board of Directors or to any stockholder of Iron Mountain as
to whether or not they should vote to recommend or approve the merger agreement.
This summary of the Bear Stearns opinion is qualified in its entirety by
reference to the full text of the Bear Stearns opinion.
FIRST UNION SECURITIES, INC. SAYS THE CONSIDERATION TO BE RECEIVED BY PIERCE
LEAHY SHAREHOLDERS WAS FAIR (SEE PAGE 31)
On October 20, 1999, First Union delivered its written opinion to the Pierce
Leahy Board that, as of that date, the consideration to be paid to the
shareholders of Pierce Leahy pursuant to the merger, which results in an implied
exchange ratio of 1.1 shares of Iron Mountain common stock for each outstanding
share of Pierce Leahy common stock, was fair to the Pierce Leahy shareholders
from a financial point of view.
The full text of the First Union opinion is attached as Annex G to this
joint proxy statement/prospectus. Pierce Leahy shareholders are urged to read
the First Union opinion carefully in its entirety for descriptions of the
principal assumptions made, general procedures followed, matters considered and
limitations on the review undertaken. The First Union opinion addresses only
whether the merger consideration to be paid to the Pierce Leahy shareholders was
fair to the Pierce Leahy shareholders, from a financial point of view, and does
not constitute a recommendation to the Pierce Leahy Board of Directors or to any
shareholder of Pierce Leahy as to whether or not they should vote to recommend
or approve the merger agreement. This summary of the First Union opinion is
qualified in its entirety by reference to the full text of the First Union
opinion.
OTHER INTERESTS OF OFFICERS AND DIRECTORS OF IRON MOUNTAIN AND PIERCE LEAHY IN
THE MERGER (SEE PAGE 35)
A number of the officers and directors of Iron Mountain and Pierce Leahy
have interests in the merger that are different from those of the Iron Mountain
and Pierce Leahy shareholders. Shareholders should consider these other
interests when evaluating the Iron Mountain and Pierce Leahy Boards of
Directors' recommendations.
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NO APPRAISAL OR DISSENTERS' RIGHTS (SEE PAGE 39)
Under Delaware and Pennsylvania law, neither Iron Mountain stockholders nor
Pierce Leahy shareholders have appraisal rights or dissenters' rights.
NEW IRON MOUNTAIN'S SHARES TO BE LISTED ON THE NYSE UNDER THE SYMBOL "IRM" (SEE
PAGE 39)
New Iron Mountain will list the shares of common stock to be issued in
connection with the merger on the NYSE. New Iron Mountain will adopt Iron
Mountain's trading symbol of "IRM."
COMPARATIVE PER SHARE
MARKET PRICE INFORMATION
The common stock of both Iron Mountain and Pierce Leahy is listed on the
NYSE. On October 20, 1999, the last full trading day before the announcement of
the signing of the merger agreement, the last reported sale prices per share of
Iron Mountain and Pierce Leahy common stock were $30.44 and $25.81. On
, the most recent practicable date prior to the printing of this joint
proxy statement/prospectus, the last reported sale prices per share of Iron
Mountain and Pierce Leahy common stock were $ and $ .
RISK FACTORS (SEE PAGE 10)
You should carefully consider all of the information in this joint proxy
statement/ prospectus. In particular, you should evaluate the specific risks set
forth under "Risk Factors" for a discussion of risks related to the merger and
New Iron Mountain.
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IRON MOUNTAIN INCORPORATED
SUMMARY HISTORICAL AND PRO FORMA INFORMATION
(IN THOUSANDS)
The following table contains certain summary financial information with
respect to Iron Mountain. You should read this information in conjunction with
Iron Mountain's financial statements, Iron Mountain's selected financial and
operating information, Iron Mountain's "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and New Iron Mountain's pro forma
financial statements included or incorporated by reference in this joint proxy
statement/prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998 NINE MONTHS ENDED SEPTEMBER 30,
------------------------ ---------------------------------
PRO FORMA
HISTORICAL NEW IRON
HISTORICAL PRO FORMA IRON MOUNTAIN MOUNTAIN(1)
IRON NEW IRON ------------------- -----------
MOUNTAIN MOUNTAIN(1) 1998 1999 1999
---------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Total Revenues............................... $383,961 $794,686 $281,064 $378,043 $661,729
-------- -------- -------- -------- --------
Operating Expenses (excluding
depreciation).............................. 287,980 591,373 211,246 284,022 487,734
Depreciation and Amortization................ 48,301 111,838 35,591 46,214 86,083
-------- -------- -------- -------- --------
Total Operating Expenses................... 336,281 703,211 246,837 330,236 573,817
-------- -------- -------- -------- --------
Operating Income............................. 47,680 91,475 34,227 47,807 87,912
Loss from Continuing Operations.............. $ (3,167) $(34,996) $ (1,959) $ (644) $ (1,111)
======== ======== ======== ======== ========
Weighted Average Common Shares Outstanding--
Basic and Diluted.......................... 27,470 53,663 26,848 32,641 54,183
======== ======== ======== ======== ========
OTHER DATA:
EBITDA from Continuing Operations(2)......... $ 95,981 $203,313 $ 69,818 $ 94,021 $173,995
======== ======== ======== ======== ========
EBITDA from Continuing Operations as a
Percentage of Total Revenues............... 25.0% 25.6% 24.8% 24.9% 26.3%
Adjusted Pro Forma EBITDA from Continuing
Operations(3).............................. $228,313 $186,895
======== ========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
---------------------------------
IRON MOUNTAIN NEW IRON MOUNTAIN
HISTORICAL PRO FORMA(4)
------------- -----------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and Cash Equivalents................................... $ 3,472 $ 5,502
Total Assets................................................ 1,287,924 2,436,637
Total Debt.................................................. 603,063 1,204,295
Stockholders' Equity........................................ 484,155 951,885
</TABLE>
- ------------------------
(1) Gives effect to: (a) the merger with Pierce Leahy; (b) the 1998 and 1999
acquisitions completed by Iron Mountain and Pierce Leahy through October 31,
1999; and (c) financing transactions of Iron Mountain and Pierce Leahy.
Certain 1999 acquisitions have been excluded as the impact of these
acquisitions would not be material.
(2) Based on Iron Mountain's experience in the records and information
management services industry, Iron Mountain believes that earnings before
interest, taxes, depreciation, amortization, extraordinary items and other
income (including foreign currency exchange) ("EBITDA") is an important tool
for measuring the performance of records and information management services
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companies (including potential acquisitions) in several areas, such as
liquidity, operating performance and leverage. In addition, lenders use
EBITDA in evaluating records and information management services companies,
and substantially all of our financing agreements contain covenants in which
EBITDA is used as a measure of financial performance. However, you should
not consider EBITDA to be a substitute for operating or net income (as
determined in accordance with generally accepted accounting principles
("GAAP")) as an indicator of our performance or for cash flow from
operations (as determined in accordance with GAAP) as a measure of
liquidity.
(3) Represents pro forma EBITDA from continuing operations for the year ended
December 31, 1998 and the nine months ended September 30, 1999 after giving
effect to identified cost savings of $25.0 million and $12.9 million,
respectively, that we believe would have been realized if the merger with
Pierce Leahy and the 1998 and 1999 acquisitions completed by Iron Mountain
and Pierce Leahy through October 31, 1999 had been fully integrated as of
January 1, 1998. Of the $25.0 million of identified cost savings for the
year ended December 31, 1998, $15.0 million relates to the merger with
Pierce Leahy. Of the $12.9 million of identified cost saving for the nine
months ended September 30, 1999, $11.3 million relates to the merger with
Pierce Leahy. See New Iron Mountain, Iron Mountain and Pierce Leahy pro
forma financial statements.
(4) Gives effect to the merger with Pierce Leahy, the redemption of preferred
stock by Pierce Leahy, Iron Mountain's acquisition of Midtown Professional
Records Centre, Inc. and the acquisition of Stortext (Holdings) Ltd. by
Britannia Data Management, as if each had occurred or been consolidated as
of September 30, 1999.
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN DETERMINING HOW
TO VOTE, IN ADDITION TO THE OTHER INFORMATION IN THIS JOINT PROXY
STATEMENT/PROSPECTUS.
RISK FACTORS RELATED TO THE MERGER:
FAILURE TO INTEGRATE OPERATIONS FOLLOWING THE MERGER COULD REDUCE OUR FUTURE
RESULTS OF OPERATIONS.
The integration of the operations of Iron Mountain and Pierce Leahy will
present a significant challenge to management. Iron Mountain has operated on a
more decentralized model, and Pierce Leahy has operated on a more centralized
model. The process of integrating the cultures, operating systems, procedures
and information technologies may involve unforeseen difficulties and may require
a disproportionate amount of our management's attention and our financial and
other resources. We can give no assurance that we will be able to integrate and
manage these operations effectively or maintain or improve the historical
financial performance of Iron Mountain and Pierce Leahy. The failure to
successfully integrate these operating systems and procedures and technologies
could have a material adverse effect on the results of operations of New Iron
Mountain.
FAILURE TO ACHIEVE EXPECTED COST SAVINGS AND UNANTICIPATED COSTS RELATING TO THE
MERGER COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
Iron Mountain and Pierce Leahy are currently formulating their plan to
integrate the two companies. The goal is to adopt the best practices of both
companies to create a new, combined organization that is stronger and more
efficient than either of the two stand-alone companies. Our estimate of annual
cost savings is $15 million, which we believe will be realized within three
years after the merger. These savings will primarily result from:
- elimination of redundant corporate expenses;
- more efficient operations and utilization of real estate; and
- reduction of workforce primarily through attrition.
However, unanticipated future operating expenses or other adverse developments
could reduce or delay realization of these cost savings and materially affect
the results of operations of New Iron Mountain.
New Iron Mountain will incur costs and make investments throughout the
integration process, including those necessary to achieve the expected cost
savings. Because a detailed integration plan has not yet been completed,
managment cannot reasonably quantify these integration costs. These expenditures
will include:
- expenses for deployment of Iron Mountain's logo, trade names and service
marks;
- information technology investments and conversion expenses; and
- severance payments and relocation costs for certain terminated and
transferred employees.
Depending upon the details of the ultimate integration plan and the exact nature
and timing of the integration costs, these costs will be accounted for as:
- purchase accounting reserves;
- restructuring charges;
- operating expenses; and/or
- capital expenditures.
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NEW IRON MOUNTAIN MAY NOT BE ABLE TO ENTER INTO A NEW CREDIT FACILITY.
Iron Mountain and Pierce Leahy each have separate credit agreements which
require their lenders' consent to the merger. In lieu of obtaining consents, New
Iron Mountain expects to enter into a new credit facility in connection with the
merger in an available amount sufficient to repay indebtedness under Iron
Mountain's and Pierce Leahy's credit agreements and to provide additional
borrowing capacity after the merger. The lenders have not committed to consent
to the merger or refinance at this time. We can give no assurance that New Iron
Mountain will be able to establish a new credit facility on commercially
reasonable terms.
OUR PERFORMANCE MAY DECLINE IF KEY INDIVIDUALS LEAVE NEW IRON MOUNTAIN.
The success of New Iron Mountain will depend on the services of certain key
personnel, including C. Richard Reese and J. Peter Pierce. The loss of the
services of any of these key persons could have a material adverse effect on the
successful integration of Iron Mountain and Pierce Leahy and the results of
operations of New Iron Mountain. J. Peter Pierce and New Iron Mountain will
enter into an employment agreement upon the closing of the merger. We do not
have employment agreements with any of our other executive officers. We can
provide no assurance that we will be able to retain our other executive
officers.
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER.
A number of the officers and directors of Iron Mountain and Pierce Leahy
have interests in the merger that are different from, or in addition to, yours
as a stockholder of Iron Mountain or a shareholder of Pierce Leahy. For a
description of these interests, see "Interests of Officers and Directors in the
Merger."
RISK FACTORS RELATED TO NEW IRON MOUNTAIN:
BECAUSE OF THE RISKS ASSOCIATED WITH ACQUISITIONS, WE MAY BE UNABLE TO CONTINUE
OUR GROWTH STRATEGY IN THE FUTURE.
As part of Iron Mountain's and Pierce Leahy's growth strategies, each
company has acquired, and New Iron Mountain expects to acquire in the future,
records and information management services businesses and related businesses.
This growth strategy involves risks, and we may be unable to pursue this
strategy in the future. For example, we may be unable to:
- identify suitable companies to acquire; or
- incur additional debt necessary to acquire suitable companies if we are
unable to pay the purchase price out of working capital, common stock or
other equity securities.
The success of any completed acquisition depends in part on our ability to
integrate the acquired company. The process of integrating acquired businesses
may involve unforeseen difficulties and may require a disproportionate amount of
our management's attention and our financial and other resources.
Our operating results may fluctuate substantially from quarter to quarter
due to the size, timing and integration of future acquisitions. As a result,
operating results for any quarter may not indicate the results that may be
achieved for any subsequent fiscal quarter or for a full fiscal year.
INTERNATIONAL EXPANSION MAY POSE ADDITIONAL RISKS RESULTING FROM FOREIGN
REGULATIONS AND FOREIGN MARKETS.
Iron Mountain's and Pierce Leahy's growth strategies involve expanding
operations into international markets, and New Iron Mountain expects to continue
this expansion. Europe and Latin
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America are each company's primary areas of focus for international expansion at
this time. We have both entered into joint ventures and have acquired all or a
majority of the equity in companies operating in these areas and are actively
pursuing additional opportunities. International operations are subject to
numerous risks, including the impact of foreign government regulations,
political uncertainties, differences in business practices and foreign currency
fluctuations. In particular, Pierce Leahy's net income has been significantly
affected by fluctuations in the Canadian dollar associated with its 8 1/8%
Senior Notes.
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH.
Each of Iron Mountain and Pierce Leahy has, and we anticipate that New Iron
Mountain will continue to have, a significant amount of indebtedness. Our
substantial indebtedness could have important consequences to you. For example,
it could:
- make us more sensitive to adverse economic conditions than some of our
competitors with less debt;
- limit our ability to fund future working capital, acquisitions, capital
expenditures and other general corporate requirements; and
- limit our flexibility in planning for, or reacting to, changes in our
business and the records and information management services industry.
We expect to continue to borrow under existing and future credit
arrangements in order to finance future acquisitions and for general corporate
purposes. If new debt is added to our current levels, the related risks that we
now face could intensify.
We cannot assure you that our business will generate sufficient cash flow
from operations, that currently anticipated cost savings will be realized on
schedule or that future borrowings will be available to us under our existing
and future credit arrangements in an amount sufficient to enable us to pay our
indebtedness or to fund our other liquidity needs. We may need to refinance all
or a portion of our indebtedness on or before maturity. We cannot assure you
that we will be able to refinance any of our indebtedness on commercially
reasonable terms or at all.
WE HAVE A HISTORY OF EXPERIENCING NET LOSSES APPLICABLE TO OUR COMMON
SHAREHOLDERS AS OUR PRIMARY FINANCIAL OBJECTIVE IS TO INCREASE OUR EBITDA.
Each of us has a history of experiencing net losses applicable to common
shareholders. These net losses are attributable primarily to significant
non-cash charges and interest expense associated with our growth strategies,
namely:
- depreciation expenses associated with the expansion of storage capacity;
and
- goodwill amortization associated with acquisitions accounted for under the
purchase method.
Our primary financial objective has been, and we expect that New Iron
Mountain's primary financial objective will be, to increase EBITDA, which is a
source of funds to service indebtedness and for investment in continued internal
growth and growth through acquisitions, rather than net income. Having an
objective of increasing EBITDA may negatively affect other measures of our
financial performance, such as net income. In addition, execution of our growth
strategy could result in future net losses due to increased interest expense
associated with borrowings and increased depreciation and amortization expenses.
12
<PAGE>
RESTRICTIONS IMPOSED BY TERMS OF OUR INDEBTEDNESS MAY ADVERSELY AFFECT OUR
ABILITY TO PURSUE OUR ACQUISITION STRATEGY.
We expect that our new credit facility will contain similar restrictive
covenants, financial ratios and financial conditions to those contained in the
existing Iron Mountain and Pierce Leahy credit agreements. Our existing credit
agreements and indentures contain, and we expect the new credit facility to
contain, covenants restricting or limiting our ability to, among other things:
- incur additional indebtedness;
- pay dividends or make other restricted payments;
- make asset dispositions;
- permit liens; and
- make certain investments.
These restrictions may adversely affect our ability to pursue our acquisition
and other growth strategies.
WE FACE COMPETITION FOR CUSTOMERS AND ACQUISITION OPPORTUNITIES.
We both compete, and New Iron Mountain will compete, with our current and
potential customers' internal records and information management services
capabilities. We can provide no assurance that these organizations will begin or
continue to use an outside company such as New Iron Mountain for their future
records and information management services.
We both presently compete with multiple records and information management
services providers in all geographic areas where we operate, and New Iron
Mountain will face the same competition. We believe that competition for
customers is based on price, reputation for reliability, quality of service and
scope and scale of technology and that we generally compete effectively based on
these factors. As a result of this competition, the records and information
management services industry could experience downward pricing pressures.
Iron Mountain and Pierce Leahy also compete for companies to acquire, and
New Iron Mountain will also compete for acquisitions. Some of our competitors
possess greater financial and other resources than we do. If any such competitor
were to devote additional resources to the records and information management
services business and such acquisition candidates, or focus its strategy on our
markets, our results of operations could be adversely affected.
OUR CUSTOMERS MAY SHIFT FROM PAPER STORAGE TO ALTERNATIVE TECHNOLOGIES THAT
REQUIRE LESS PHYSICAL SPACE.
New Iron Mountain will derive most of its revenues from the storage of paper
documents and related services. This storage requires significant physical
space. Alternative storage technologies exist, many of which require
significantly less space than paper. These technologies include computer media,
microform, CD-ROM and optical disk. To date, none of these technologies has
replaced paper as the principal means for storing information. However, we can
provide no assurance that our customers will continue to store most of their
records in paper format. A significant shift by our customers to storage of data
through non-paper based technologies, whether now existing or developed in the
future, could adversely affect our business.
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UNINSURED LOSSES OR DAMAGES TO OUR STORAGE FACILITIES OR THE RECORDS STORED IN
THOSE FACILITIES COULD BE DETRIMENTAL TO OUR BUSINESS OPERATIONS AND/OR
FINANCIAL CONDITION.
We each maintain comprehensive liability, fire, flood, earthquake, where
appropriate, and extended coverage insurance with respect to the properties that
we own or lease, to the extent such insurance is available on commercially
reasonable terms, with customary limits and deductibles. New Iron Mountain will
continue to maintain such insurance. New Iron Mountain may be unable to obtain
full coverage on a cost-effective basis for some casualties, such as
earthquakes, or may be unable to obtain any insurance for certain losses, such
as losses from riots.
In March 1997, three fires extensively damaged one and destroyed another of
Iron Mountain's records and information management services facilities in South
Brunswick Township, New Jersey. Some of Iron Mountain's customers or their
insurance carriers have asserted claims or filed lawsuits against Iron Mountain
as a consequence of the destruction of or damage to their records due to the
fires. Iron Mountain cannot predict the outcome of these claims and proceedings.
Based on our present assessment of the situation, after consultation with Iron
Mountain's legal counsel, we do not believe that the outcome of these claims and
lawsuits will have a material adverse effect on New Iron Mountain's financial
condition or results of operations, although we can provide no assurance.
In the future, should uninsured losses or damages occur, we could lose both
our investment in and anticipated profits and cash flow from the affected
property and may continue to be responsible for any leasehold obligation,
mortgage indebtedness or other obligations related to such property.
BECAUSE VARIOUS LAWS MAY IMPOSE LIABILITY ON OWNERS AND OPERATORS OF REAL ESTATE
FOR A VARIETY OF ENVIRONMENTAL PROBLEMS, REGARDLESS OF FAULT, WE COULD BE
POTENTIALLY LIABLE FOR ENVIRONMENTAL COSTS ATTRIBUTABLE TO THE PROPERTIES WE OWN
OR LEASE.
Various environmental laws impose liability on an owner of real estate for
the costs of investigation and cleanup of soil and groundwater contaminated by
certain hazardous substances or wastes or petroleum products. These laws also
impose liability on lessees conducting operations on contaminated real estate.
Some of these environmental laws impose cleanup liability without regard to
whether the owner or operator of the real estate or operations knew of or was
responsible for the contamination. Moreover, some of these laws impose liability
whether or not operations at the property have been discontinued or title to the
property has been transferred. Third parties may make claims against the owner
or operator of contaminated real estate based on damages and costs resulting
from off-site migration of the contamination. Accordingly, the presence of
contamination or the failure to properly clean up contaminated property may:
- adversely affect our ability to sell, rent or use the property as
collateral; or
- subject us to third party claims.
Certain environmental laws also govern asbestos-containing materials. These
laws may impose liability for release of asbestos-containing materials and may
enable third parties to sue owners or operators of real estate for personal
injury associated with exposure to these substances. Although we believe that
future costs related to any removal or encapsulation of asbestos-containing
materials at our facilities will not be material, we can make no such
assurances.
In addition, some of our current and formerly owned or operated properties
were previously used for industrial or other purposes that involved the use or
storage of hazardous substances or petroleum products or the generation and
disposal of hazardous wastes. In some instances these properties included the
operation of underground storage tanks. We may be potentially liable for
environmental costs like those discussed above.
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We have from time to time conducted limited environmental investigations and
remedial activities at some of our former and current facilities, but we have
not undertaken an in-depth environmental review of all of our properties.
Environmental conditions for which we might be liable may exist at our
properties or at properties that we may acquire in the future. In addition,
future regulatory action and environmental laws may impose costs for
environmental compliance that do not exist today.
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THE MEETINGS AND VOTING
The Iron Mountain Board is using this document to solicit proxies from the
Iron Mountain stockholders for use at the Iron Mountain meeting. The Pierce
Leahy Board is also using this joint proxy statement/prospectus to solicit
proxies from the Pierce Leahy shareholders for use at the Pierce Leahy meeting.
We are first mailing this joint proxy statement/prospectus and accompanying form
of proxy to Iron Mountain stockholders and Pierce Leahy shareholders on or about
, .
MATTERS RELATING TO THE MEETINGS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
PIERCE LEAHY MEETING IRON MOUNTAIN MEETING
<C> <S> <C>
- -------------------------------------------------------------------------------------------------
TIME AND PLACE: , 2000 , 2000
10:00 a.m. (local time) 10:00 a.m. (local time)
- -------------------------------------------------------------------------------------------------
PURPOSE OF MEETING IS TO VOTE - the approval of the merger - the approval of the merger
ON THE FOLLOWING ITEMS: proposal agreement
- the election of a new Board - such other matters as may
of Directors to serve upon the properly come before the
closing of the merger meeting, including the
- such other matters as may approval of any adjournment
properly come before the of the meeting
meeting, including the
approval of any adjournment
of the meeting
- -------------------------------------------------------------------------------------------------
RECORD DATE: The record date for shares The record date for shares
entitled to vote is , . entitled to vote is , .
- -------------------------------------------------------------------------------------------------
OUTSTANDING SHARES HELD ON As of the record date, there As of the record date, there
RECORD DATE: were outstanding shares of were outstanding shares of Iron
Pierce Leahy common stock. Mountain common stock.
- -------------------------------------------------------------------------------------------------
SHARES ENTITLED TO VOTE: Pierce Leahy common stock held Iron Mountain common stock held
at the close of business on the at the close of business on the
record date, , . record date, , .
Each share of Pierce Leahy Each share of Iron Mountain
common stock that you own common stock that you own
entitles you to one vote. entitles you to one vote.
- -------------------------------------------------------------------------------------------------
QUORUM REQUIREMENT: A quorum of shareholders is A quorum of stockholders is
necessary to hold a valid necessary to hold a valid
meeting. meeting.
- -------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
PIERCE LEAHY MEETING IRON MOUNTAIN MEETING
<C> <S> <C>
- -------------------------------------------------------------------------------------------------
The presence in person or by The presence in person or by
proxy at the meeting of proxy at the meeting of holders
shareholders entitled to cast of a majority of the shares of
at least a majority of the Iron Mountain common stock
votes that all shareholders are entitled to vote at the meeting
entitled to cast at the meeting is a quorum. Abstentions and
constitutes a quorum. broker "non-votes" count as
Abstentions count as present present for establishing a
for establishing a quorum quorum.
whereas broker "non-votes" do A broker non-vote occurs on an
not count as present for item when a broker is not
establishing a quorum. permitted to vote on that item
A broker non-vote occurs on an without instruction from the
item when a broker is not beneficial owner of the shares
permitted to vote on that item and no instruction is given.
without instruction from the
beneficial owner of the shares
and no instruction is given.
- -------------------------------------------------------------------------------------------------
PROPOSAL AND VOTE NECESSARY FOR MERGER PROPOSAL. Under MERGER PROPOSAL. Approval of
APPROVAL*: Pennsylvania law, approval of the merger agreement requires
the merger proposal requires the affirmative vote of at
the affirmative vote of a least a majority of the
majority of the votes cast at outstanding shares of Iron
the meeting. Under Pennsylvania Mountain common stock.
law, abstentions and broker Abstentions and broker
non-votes will not be counted non-votes have the same effect
in determining whether the as votes against the proposal.
merger proposal is approved.
However, in order to have the
shares issued in the merger
listed on the NYSE, NYSE rules
require approval of the merger
proposal by a majority of votes
cast at the meeting, provided
that the total votes cast on
the proposal represent over 50%
in interest of all securities
entitled to vote on the
proposal.
ELECTION OF DIRECTORS. In the
election of directors, the
requisite number of persons in
each class of director
receiving the highest
- -------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
PIERCE LEAHY MEETING IRON MOUNTAIN MEETING
<C> <S> <C>
- -------------------------------------------------------------------------------------------------
number of votes cast will be
elected. For purposes of
determining the number of votes
cast, only those cast "FOR" or
"AGAINST" are included, and any
abstentions or broker non-votes
will not count in making that
determination.
Each of the Pierce Leahy
proposals is conditioned upon
approval of the other proposal,
and the election of directors
will only become effective upon
the closing of the merger.
- -------------------------------------------------------------------------------------------------
VOTING AGREEMENTS: Certain members of the Pierce Certain Iron Mountain directors
family and related trusts have and their affiliates have
entered into a shareholders' entered into a voting agreement
agreement by which they have by which they have agreed,
agreed, among other things, to among other things, to vote
vote the shares of Pierce Leahy their shares of Iron Mountain
common stock for which they common stock in favor of the
direct the voting in favor of proposal listed above. These
the proposals listed above. stockholders hold approximately
These shareholders control the 8,783,270 shares of Iron
voting of 6,605,222 shares of Mountain common stock,
Pierce Leahy common stock, representing approximately 25%
representing approximately 39% of the shares of Iron Mountain
of the shares of Pierce Leahy common stock outstanding as of
common stock outstanding as of the record date.
the record date.
- -------------------------------------------------------------------------------------------------
*UNDER NYSE RULES, IF YOUR BROKER HOLDS YOUR SHARES IN ITS NAME, YOUR BROKER MAY NOT VOTE YOUR
SHARES WITH RESPECT TO THE MATTERS CONSIDERED AT THE SPECIAL MEETINGS ABSENT INSTRUCTIONS FROM
YOU.
- -------------------------------------------------------------------------------------------------
</TABLE>
PROXIES
VOTING YOUR PROXY. You may vote in person at your meeting or by proxy. We
recommend you vote by proxy even if you plan to attend your meeting. You can
always change your vote at the meeting.
Voting instructions are included on your proxy card. If you properly give
your proxy and submit it to us in time to vote, one of the individuals named as
your proxy will vote your shares as you have directed. You may vote for or
against the proposals submitted at your meeting or abstain from voting.
HOW TO VOTE BY PROXY. Complete, sign, date and return your proxy card in
the enclosed envelope.
18
<PAGE>
If you submit your proxy but do not make specific choices, your proxy will
follow the Board's recommendations and vote your shares as follows:
PIERCE LEAHY
- "FOR" the Pierce Leahy merger proposal
- "FOR" the Pierce Leahy Board's nominees for director
- In its discretion as to any other business as may properly come before the
Pierce Leahy meeting, including the approval of any adjournment of the
meeting
IRON MOUNTAIN
- "FOR" the Iron Mountain merger proposal
- In its discretion as to any other business as may properly come before the
Iron Mountain meeting, including the approval of any adjournment of the
meeting
REVOKING YOUR PROXY. You may revoke your proxy before it is voted by:
- submitting a new proxy with a later date;
- notifying your company's secretary in writing before the meeting that you
have revoked your proxy; or
- voting in person at the meeting.
VOTING IN PERSON. If you plan to attend a meeting and wish to vote in
person, we will give you a ballot at the meeting. However, if your shares are
held in the name of your broker, bank or other nominee, you must bring an
account statement or letter from the nominee indicating that you are the
beneficial owner of the shares on the record date.
PEOPLE WITH DISABILITIES. We can provide reasonable assistance to help you
participate in the meeting if you notify us about your disability and your plan
to attend. Please call or write the secretary of your company at least two weeks
before your meeting at the number or address under "Summary--The Companies."
PROXY SOLICITATION. We will pay our own costs of soliciting proxies. In
addition to soliciting proxies by mail, our directors, officers and employees
may solicit proxies. No additional compensation, except for reimbursement of
reasonable out-of-pocket expenses, will be paid to these people. Each company
will also reimburse brokerage houses, fiduciaries, nominees and others for their
out-of-pocket expenses in forwarding proxy materials to beneficial owners. The
extent to which these proxy soliciting efforts will be necessary depends
entirely upon how promptly proxies are submitted. You should send in your proxy
by mail without delay.
Do not send in any stock certificates with your proxy cards. The exchange
agent will mail transmittal forms with instructions for the surrender of stock
certificates to you as soon as practicable after the completion of the merger.
OTHER BUSINESS; ADJOURNMENTS
We are not currently aware of any other business to be acted upon at either
meeting. If, however, other matters are properly brought before either meeting
or any adjourned meeting, your proxies will have discretion to vote or act on
those matters according to their best judgment, including to adjourn the
meeting. Under the bylaws of each company, shareholders may not raise any
additional business at either of the meetings.
Adjournments may be made for the purpose of, among other things, soliciting
additional proxies. Any adjournment may be made from time to time by approval of
the holders of shares representing a majority of the votes present in person or
by proxy at the meeting. Neither Iron Mountain nor Pierce Leahy currently
intends to seek an adjournment of its meeting.
19
<PAGE>
THE MERGER
BACKGROUND OF THE MERGER
As part of their growth strategy to enhance shareholder value, both Iron
Mountain and Pierce Leahy regularly consider opportunities for acquisitions and
joint ventures.
In the summer of 1998, C. Richard Reese, the Chairman of the Board and Chief
Executive Officer of Iron Mountain, held several exploratory meetings with J.
Peter Pierce, the President and Chief Executive Officer of Pierce Leahy,
regarding the possibility of the two companies engaging in a business
combination. During these meetings, Messrs. Reese and Pierce discussed the
possible composition of the Board and senior management of the proposed combined
company and, in general terms, the form and amount of consideration Iron
Mountain would be willing to pay to the Pierce Leahy shareholders in the
potential business combination. In July 1998, the Pierce Leahy Board determined
that unless valuation was within an acceptable range, it did not believe the
combination was in the best interest of the Pierce Leahy shareholders and,
therefore, instructed management to concentrate on the merger consideration
rather than the other terms of a possible combination. Further discussions
between the parties did not result in proposed terms which were acceptable to
Iron Mountain or Pierce Leahy. As a result, these preliminary discussions ended
in the summer of 1998.
In June 1999, Messrs. Reese and Pierce met again to discuss a potential
business combination between Iron Mountain and Pierce Leahy. During this period,
Iron Mountain conducted preliminary legal due diligence of Pierce Leahy based
upon Pierce Leahy's public filings with the SEC. On September 1, 1999,
Mr. Reese and a representative of Bear, Stearns & Co. Inc. presented Mr. Pierce
with a preliminary indication of interest pertaining to a possible merger of
Pierce Leahy and Iron Mountain. On September 13, 1999, Mr. Reese,
representatives of Bear Stearns, Mr. Pierce, another representative of Pierce
Leahy and one of Pierce Leahy's financial advisors met to respond to Iron
Mountain's preliminary indication of interest and to continue discussions
pertaining to a potential business combination.
At a regular meeting of Iron Mountain's Board held on September 16, 1999,
Mr. Reese advised the Board on the status of discussions with Pierce Leahy. A
representative of Bear Stearns was present at the meeting and discussed
financial issues relating to Iron Mountain's preliminary indication of interest
and other financial issues relating to the potential business combination. The
Iron Mountain Board discussed the objectives to be achieved by entering into a
transaction with Pierce Leahy, including those described under "--Iron
Mountain's Reasons for the Merger; Recommendation of the Iron Mountain Board."
The Board directed Mr. Reese to continue discussions with Pierce Leahy.
On September 28, 1999, Messrs. Reese and Pierce met at the New York office
of Bear Stearns to continue discussions concerning a potential business
combination. After this meeting, Iron Mountain engaged Sullivan & Worcester LLP,
its legal advisor, to commence drafting of a merger agreement and related
documents.
On October 1, 1999, the Pierce Leahy Board held a special meeting to discuss
a possible merger with Iron Mountain. Mr. Pierce reported to the Board on his
discussions with Mr. Reese and the contours of a possible transaction. At the
meeting, the Board formally engaged its financial advisors, received legal
advice regarding the proposed transaction and authorized continued discussions
regarding a possible business combination.
On October 1, 1999, the Iron Mountain Board held a special meeting to
discuss the status of discussions with Pierce Leahy. At this meeting, the Board
directed the company's officers to continue discussions with Pierce Leahy. On
this date Iron Mountain delivered to Pierce Leahy drafts of a merger agreement,
a shareholders' agreement pursuant to which members of the Pierce family would
agree to, among other things, vote for the merger and the related transactions
and a voting agreement pursuant
20
<PAGE>
to which major stockholders of Iron Mountain would agree to, among other things,
vote for the merger and the related transactions.
On October 4, 1999, Iron Mountain and Pierce Leahy executed a mutual
confidentiality agreement and agreed to exchange non-public information. From
October 4, 1999 to October 20, 1999, the parties and their respective advisors
negotiated the provisions of the merger agreement and the related documents,
including an employment agreement between New Iron Mountain and J. Peter Pierce.
During this period, representatives of the parties also undertook reciprocal due
diligence investigations and in that connection exchanged and discussed
business, legal and financial information relating to each company. They also
discussed the potential near- and long-term benefits achievable from a merger
between the two companies, as well as the synergies that might be achieved by
the combined company. During this period, Messrs. Reese and Pierce and other
officers of the companies discussed the composition of the Board and senior
management of the combined company and the roles of Messrs. Reese and Pierce as
well as other senior management of the two companies in the combined company. In
particular, on October 16 and 17, 1999, Messrs. Reese and Pierce and other
senior management of Iron Mountain and Pierce Leahy met in Chicago to discuss
the organizational structure of the combined company, including in particular
the organization of the hard copy storage operations.
At a special meeting of the Pierce Leahy Board on October 6, 1999, Pierce
Leahy's senior management and legal counsel updated the Board on the discussions
with Iron Mountain. The Board discussed, among other things, the role that
Mr. Pierce would play in the combined company. Since it appeared that management
and the board of directors of the combined company would be controlled by Iron
Mountain, the Pierce Leahy Board determined that it was important to Pierce
Leahy and its shareholders to have the combined company enter into an employment
agreement with Mr. Pierce. The Board determined that Mr. Pierce's oversight of
the hard copy storage operations of the combined company was an important
element in the Board's decision to proceed with the discussions regarding a
merger. Accordingly, the Board directed Pierce Leahy's counsel to negotiate with
Iron Mountain an employment agreement for Mr. Pierce.
At an October 8, 1999 special meeting to consider the merger, the Iron
Mountain Board received a financial presentation from Bear Stearns, which
included financial information relating to Pierce Leahy and a number of
financial analyses (which are more fully described under "--Opinion of Iron
Mountain's Financial Advisor). The Iron Mountain Board then received a
presentation from Sullivan & Worcester LLP on the terms and conditions of the
merger agreement, the Pierce Leahy shareholders' agreement and the Iron Mountain
voting agreement, drafts of which had been delivered to the directors in advance
of the meeting. The Iron Mountain Board discussed the issues presented by
management and the financial and legal advisors, including the factors discussed
under "--Iron Mountain's Reasons for the Merger; Recommendation of the Iron
Mountain Board."
The Pierce Leahy Board held another special meeting on October 11, 1999 at
which Pierce Leahy's counsel and management updated the Board on the status of
negotiations with Iron Mountain as well as the due diligence investigation.
Counsel reviewed with the Board the merger agreement and related documents, all
of which had been circulated to the Board prior to the meeting. After discussion
of the transaction and related documents, First Union made a presentation to the
Board regarding its analysis of the proposed merger and its fairness to the
shareholders of Pierce Leahy from a financial point of view. First Union orally
informed the Board that as of that date, it believed that the consideration to
be received by the Pierce Leahy shareholders in the merger was fair, from a
financial point of view. The Board had a discussion with its financial and legal
advisors regarding the proposed transaction and authorized management and
counsel to continue negotiations.
At an October 12, 1999 special meeting to consider the merger, the Iron
Mountain Board received from management an update on the status of negotiations
with, and the due diligence investigation of, Pierce Leahy.
21
<PAGE>
At a special Pierce Leahy Board of Directors meeting on October 12, 1999,
Mr. Pierce informed the Board that discussions were continuing with Iron
Mountain about the structure of the operation of the combined company, including
in particular the structure of the hard copy storage operations. The Board
agreed that an understanding with Iron Mountain on the operating structure of
the combined company was critical and instructed management to continue
discussions on these structural issues and report back to the Board.
At special meetings of the Pierce Leahy Board on October 16 and 19, 1999,
management and counsel updated the Board on the status of the discussions with
Iron Mountain regarding the merger agreement and related documents as well as
the issues surrounding the organization and operations of the combined company.
Mr. Pierce reported to the Board that Pierce Leahy management was comfortable
with the proposed organizational structure for the combined company.
The Iron Mountain Board met again on October 20, 1999 to review the status
of the negotiations and the current terms of the merger agreement and the
related agreements, including the proposed employment agreement with J. Peter
Pierce. Representatives from Sullivan & Worcester updated the board on changes
made to the agreements since the October 8, 1999 Board meeting and the terms of
the employment agreement. A representative of Bear Stearns informed the Board
that Bear Stearns was prepared to issue its opinion that the merger
consideration, which results in the equivalent of a fixed exchange ratio of 1.1
shares of Iron Mountain common stock for each share of Pierce Leahy common
stock, was fair, from a financial point of view, to Iron Mountain's
stockholders. After considering these presentations, the Iron Mountain Board of
Directors unanimously approved the merger, the merger agreement and the related
documents and the transactions contemplated thereby and voted to recommend that
Iron Mountain's stockholders approve the Iron Mountain proposals.
On October 20, 1999, the Pierce Leahy Board also held a special meeting.
Counsel reviewed with the Board the merger agreement and each of the related
agreements and discussed the changes that had been made. In addition, First
Union orally and in writing delivered its opinion to the Board that the
consideration to be received by the Pierce Leahy shareholders in the merger was
fair, from a financial point of view. After considering these presentations, the
Pierce Leahy Board unanimously approved the merger agreement and related
documents and the transactions contemplated in those documents and voted to
recommend to the Pierce Leahy shareholders that they approve the merger
agreement and related transactions.
Following the close of the market on October 20, 1999, Iron Mountain and
Pierce Leahy signed the merger agreement, the Pierce Leahy shareholders'
agreement and the Iron Mountain voting agreement. In addition, those Iron
Mountain stockholders party to the Iron Mountain voting agreement signed it and
Leo Pierce, Sr. and J. Peter Pierce signed the Pierce Leahy shareholders'
agreement.
IRON MOUNTAIN'S REASONS FOR THE MERGER; RECOMMENDATION OF THE IRON MOUNTAIN
BOARD
In reaching its determination that the merger agreement and the transactions
contemplated thereby are advisable and its recommendation that Iron Mountain's
stockholders vote for the approval of the merger agreement, the Iron Mountain
Board consulted with Iron Mountain's management, as well as its financial and
legal advisors, and considered a number of factors. The material factors
considered by the Iron Mountain Board in reaching the foregoing determination
and recommendation, all of which the Iron Mountain Board deemed favorable, are
described below.
- NEW IRON MOUNTAIN: BUSINESS; CONDITIONS; AND PROSPECTS. The Iron Mountain
Board reviewed information relating to the financial performance, business
operations and prospects of Iron Mountain and Pierce Leahy and pro forma
information for New Iron Mountain. These factors, together with the
greater financial flexibility and greater total capitalization of New Iron
Mountain, should enable New Iron Mountain to achieve its long-range goals,
including global
22
<PAGE>
expansion and expansion into additional complementary services lines, more
easily and with less risk than Iron Mountain could achieve without the
merger.
- GREATER FINANCIAL FLEXIBILITY. The Iron Mountain Board believes that the
greater size and enhanced financial flexibility resulting from the merger
should allow New Iron Mountain to pursue a more aggressive and flexible
business plan than could be pursued by Iron Mountain as a stand-alone
company. The Iron Mountain Board believes that the more favorable access
to capital markets generally enjoyed by larger companies would place New
Iron Mountain in a stronger position to satisfy the financial needs of its
customers, respond to changes affecting the records and information
management services industry and compete effectively with competitors that
may possess greater financial resources than those of Iron Mountain.
- GREATER TOTAL MARKET CAPITALIZATION. The total market capitalization of
New Iron Mountain as a result of the merger will represent a substantial
increase over Iron Mountain's total market capitalization prior to the
merger. The Iron Mountain Board believes that the increased total market
capitalization of New Iron Mountain should provide enhanced liquidity for
shareholders and should enhance its appeal among investors.
- ANTICIPATED SYNERGIES AND COST SAVINGS. The Iron Mountain Board believes
that Iron Mountain and its stockholders should realize the benefits of
significant synergies and ongoing operational cost savings.
- IMPROVED COMBINED BUSINESS CAPABILITIES. Because New Iron Mountain will be
positioned to implement the best management practices of each of Iron
Mountain and Pierce Leahy, the Iron Mountain Board expects that the merger
will enhance its expertise in providing records and information management
services. Also, the addition of experienced management from Pierce Leahy
will strengthen Iron Mountain's management team, enhancing its ability to
continue its expansion plans.
- STRUCTURE OF TRANSACTION. It is expected that the merger will be tax-free
for federal income tax purposes to Iron Mountain and its stockholders (see
"Material Federal Income Tax Consequences"). Also, the structure of the
merger, in which Pierce Leahy is the surviving corporation, will not
result in acceleration in the vesting of either company's options.
However, the Iron Mountain Board was aware that the Pierce Leahy Board was
going to accelerate options to acquire fewer than 70,000 shares of Pierce
Leahy common stock. See "The Merger--Interests of Officers and Directors
in the Merger--Acceleration of Vesting of Some Pierce Leahy Options."
Finally, since only stock is being issued in the merger, New Iron Mountain
will not be required to incur substantial amounts of additional
indebtedness to finance the transaction.
- TERMS OF THE MERGER AGREEMENT AND RELATED DOCUMENTS. The Iron Mountain
Board believes that the terms and conditions of the merger agreement and
the related documents, including the representations and warranties and
covenants of the parties, the conditions to the parties' obligations
thereunder and the termination provisions, are favorable to Iron Mountain.
In addition to the general terms and conditions, the Iron Mountain Board
views as favorable the following:
- All nine members of Iron Mountain Board will become members of the New
Iron Mountain Board.
- C. Richard Reese will remain as Chairman and Chief Executive Officer of
New Iron Mountain.
23
<PAGE>
- Substantially all of the senior management of Iron Mountain will become
the senior management of New Iron Mountain, except that J. Peter Pierce
will be President of New Iron Mountain and David S. Wendell will be
Senior Vice President of New Iron Mountain.
- The surviving corporation's name will be Iron Mountain Incorporated.
- New Iron Mountain will enter into an employment agreement, which will
include non-competition covenants, with J. Peter Pierce, Pierce Leahy's
President and Chief Executive Officer, who will serve as President of
New Iron Mountain.
- The members of the Pierce family party to the Pierce Leahy
shareholders' agreement agreed to "standstill" restrictions and to
limitations on the volume of New Iron Mountain common stock they may
sell. See "--Pierce Leahy Shareholders' Agreement."
- OPINION OF BEAR STEARNS. The Iron Mountain Board also relied on the
opinion, analyses and presentations of Bear Stearns described under
"--Opinion of Iron Mountain's Financial Advisor," to the effect that, as
of the date of such opinion and based upon and subject to the matters
stated therein, the merger consideration, which results in the equivalent
of a fixed exchange ratio of 1.1 shares of Iron Mountain common stock for
each share of Pierce Leahy common stock, is fair, from a financial point
of view, to Iron Mountain's stockholders. The Iron Mountain Board viewed
Bear Stearns' opinion as favorable to its determination because Bear
Stearns is an internationally recognized investment banking firm with
experience in the valuation of businesses and their securities in
connection with mergers and acquisitions.
The Iron Mountain Board also considered certain potentially negative factors
that could arise from the merger. These factors included, among others, the
significant transaction costs involved in connection with completing the merger,
the substantial management time and effort required to effectuate the merger and
integrate the businesses of Pierce Leahy and Iron Mountain and the related
disruption to Iron Mountain's operating activities. The Iron Mountain Board also
considered the risk that New Iron Mountain may be unable to successfully
integrate the operating practices of Iron Mountain and Pierce Leahy and the
possibility that the anticipated benefits of the merger might not be fully
realized. In addition, the Iron Mountain Board considered the regulatory and
stockholder approvals required for the completion of the merger, and the
benefits of the transaction to be received by certain officers and directors of
Iron Mountain and Pierce Leahy. For a more detailed discussion of some of the
negative factors considered by the Iron Mountain Board, see "Risk Factors." The
Iron Mountain Board did not believe that the negative factors were sufficient,
either individually or collectively, to outweigh the advantages of the merger.
The foregoing discussion of the information and factors considered by the
Iron Mountain Board is not intended to be exhaustive, but includes the material
factors considered by the Iron Mountain Board. The Iron Mountain Board did not
assign relative weights to the above factors or determine that any factor was of
greater importance than another. A determination of various weights would, in
the view of the Iron Mountain Board, be impractical. Rather, the Iron Mountain
Board viewed its position and recommendations as being based on the totality of
the information presented to and considered by it. In addition, individual
members of the Iron Mountain Board may have given different weights to different
factors.
THE IRON MOUNTAIN BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE MATTERS AND TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND
UNANIMOUSLY RECOMMENDS THAT IRON MOUNTAIN'S STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE MERGER AGREEMENT.
PIERCE LEAHY'S REASONS FOR THE MERGER; RECOMMENDATIONS OF THE PIERCE LEAHY BOARD
In approving the merger proposal and related transactions and making its
recommendation that Pierce Leahy shareholders approve the merger proposal and
vote for the nominated directors, the
24
<PAGE>
Pierce Leahy Board consulted with Pierce Leahy's management as well as its
outside legal counsel and financial advisors and considered the following
material factors, among others:
- NEW IRON MOUNTAIN: BUSINESS; CONDITIONS; AND PROSPECTS. The Pierce Leahy
Board reviewed information relating to the financial performance, business
operations and prospects of Iron Mountain and Pierce Leahy and pro forma
information for New Iron Mountain. These factors, together with the
greater financial flexibility and greater total capitalization of New Iron
Mountain, should enable New Iron Mountain to achieve its long-range goals
such as global expansion with less risk than Pierce Leahy could achieve
without the merger.
- GREATER FINANCIAL FLEXIBILITY. The Pierce Leahy Board believes that the
greater size and enhanced financial flexibility of New Iron Mountain
should increase the ability to accomplish the Pierce Leahy business plan.
The Pierce Leahy Board believes that the more favorable access to capital
markets generally enjoyed by larger companies would place New Iron
Mountain in a stronger position to satisfy the needs of its customers,
respond to changes affecting the records and information management
services industry and compete effectively with competitors that may
possess greater financial resources than those of Pierce Leahy.
- GREATER TOTAL MARKET CAPITALIZATION. The total market capitalization of
New Iron Mountain will represent a substantial increase over Pierce
Leahy's total market capitalization prior to the merger. The Pierce Leahy
Board believes that the increased total market capitalization of New Iron
Mountain should provide enhanced liquidity for shareholders and should
enhance the appeal of New Iron Mountain as an investment among certain
types of investors.
- ANTICIPATED SYNERGIES. The Pierce Leahy Board believes that the
combination of Pierce Leahy and Iron Mountain should enable New Iron
Mountain to achieve operating synergies that Pierce Leahy on a stand-alone
basis would be unlikely to achieve.
- MERGER CONSIDERATION. The Pierce Leahy Board considered the implied
exchange ratio of 1.1 shares of Iron Mountain common stock for each share
of Pierce Leahy common stock, resulting in a substantial premium to Pierce
Leahy shareholders compared to the Pierce Leahy stock price prior to the
announcement of the merger.
- CORPORATE AND OPERATIONAL ISSUES OF NEW IRON MOUNTAIN. The Pierce Leahy
Board considered the proposed organizational and operational structure of
New Iron Mountain, including:
- that based on the current number of outstanding shares of Pierce Leahy
and Iron Mountain stock, the Pierce Leahy shareholders will own
approximately 35% of the stock of New Iron Mountain;
- that New Iron Mountain will initially have an eleven-member Board, of
which Pierce Leahy will have two designees;
- that J. Peter Piece will be the President of New Iron Mountain;
- that J. Peter Pierce will enter into an employment agreement with New
Iron Mountain which will provide for him to be the President of the
hard copy storage operations of New Iron Mountain; and
- that the combination of Pierce Leahy and Iron Mountain should increase
the opportunities available to Pierce Leahy employees through a larger
and more diversified company.
- TERMS OF THE MERGER AGREEMENT AND RELATED DOCUMENTS. The Pierce Leahy
Board considered the terms and conditions of the merger agreement and the
related documents, including:
- the qualification of the merger as a tax free transaction for U.S.
federal income tax purposes;
25
<PAGE>
- the right of Pierce Leahy to terminate the merger agreement under
certain circumstances as set forth in "The Merger
Agreement--Termination and Expenses";
- the terms and conditions of the merger agreement, including the
conditions to closing, the termination fees payable under certain
circumstances and the restrictions imposed on the conduct of the
businesses of Pierce Leahy and Iron Mountain in the period prior to
closing;
- the interests of the officers and directors of Pierce Leahy and Iron
Mountain in the merger, as described under "Interest of Officers and
Directors in the Merger";
- the shareholders' agreement of certain shareholders of Pierce Leahy
which requires them, among other things, to vote in favor of the
merger; and
- the voting agreement of certain stockholders of Iron Mountain which
requires them, among other things, to vote in favor of the merger.
- OPINION OF FIRST UNION. The Pierce Leahy Board also relied on First
Union's financial presentation and opinion to the Pierce Leahy Board to
the effect that based on and subject to the assumptions, limitations and
qualifications stated in the opinion, the merger consideration to be
received by the Pierce Leahy shareholders was fair from a financial point
of view to the shareholders of Pierce Leahy, as described more fully under
"Opinion of Pierce Leahy's Financial Advisor." The Pierce Leahy Board
viewed First Union's opinion as favorable to its determination because
First Union is an internationally recognized investment banking firm with
experience in the valuation of businesses and their securities in
connection with mergers and acquisitions.
- RISK FACTORS. The Pierce Leahy Board also recognized that the merger is
not without risk and considered, among other things, the risks described
under "Risk Factors."
The foregoing discussion of the information and factors considered by the
Pierce Leahy Board is not intended to be exhaustive. In view of the wide variety
of the material factors considered in connection with its evaluation of the
merger and the complexity of these matters, the Pierce Leahy Board did not find
it practicable to, and did not, quantify or otherwise attempt to assign any
relative weight to the various factors considered. In addition, the Pierce Leahy
Board did not undertake to make any specific determination as to whether any
particular factor, or any aspect of any particular factor, was favorable or
unfavorable to the Pierce Leahy Board's ultimate determination, but rather the
Pierce Leahy Board conducted an overall analysis of the factors described above,
including through discussions with and questioning of Pierce Leahy's management
and legal and financial advisors. In considering the factors described above,
individual members of the Pierce Leahy Board may have given different weight to
different factors.
There can be no assurance that any of the potential savings, synergies or
opportunities considered by the Pierce Leahy Board will be achieved through the
merger. See "Risk Factors" and "Forward-Looking Statements."
THE PIERCE LEAHY BOARD BELIEVES THAT THE MERGER IS ADVISABLE AND IS FAIR TO
AND IN THE BEST INTEREST OF PIERCE LEAHY AND ITS SHAREHOLDERS AND RECOMMENDS TO
ITS SHAREHOLDERS THAT THEY VOTE "FOR" THE MERGER PROPOSAL AND "FOR" THE ELECTION
OF THE NOMINATED DIRECTORS.
OPINION OF IRON MOUNTAIN'S FINANCIAL ADVISOR
On October 20, 1999, Bear Stearns delivered its written opinion to the Iron
Mountain Board that, as of that date and based on and subject to the
assumptions, limitations and qualifications described in its opinion, the merger
consideration, which results in the equivalent of a fixed exchange ratio of 1.1
shares of Iron Mountain common stock for each share of Pierce Leahy common
stock, was fair, from a financial point of view, to the stockholders of Iron
Mountain.
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The full text of the Bear Stearns opinion which describes the principal
assumptions made, general procedures followed, matters considered and
limitations on the review undertaken, is attached as Annex F to this joint proxy
statement/prospectus and is incorporated by reference. Iron Mountain
stockholders are urged to read the Bear Stearns opinion carefully in its
entirety. The summary of the Bear Stearns opinion in this joint proxy
statement/prospectus is qualified in its entirety by reference to the full text
of the opinion.
The Bear Stearns opinion was provided to the Iron Mountain Board for its
information, did not constitute a recommendation to the Iron Mountain Board in
connection with the merger and does not constitute a recommendation to any Iron
Mountain common stockholder as to how to vote shares in connection with the
merger. Bear Stearns was not requested to express an opinion regarding, and its
opinion does not address, Iron Mountain's underlying business decision to engage
in the merger. Bear Stearns is not expressing any opinion as to the price or
range of prices at which New Iron Mountain common stock may trade subsequent to
the merger. The Bear Stearns opinion is necessarily based upon economic,
monetary, market and other conditions and information made available to it as of
the date of its opinion.
The form and amount of consideration to be paid in the merger were
determined by arm's-length negotiations between Iron Mountain and Pierce Leahy.
Bear Stearns advised Iron Mountain in those negotiations. Except as noted below,
Iron Mountain did not impose any limits on Bear Stearns with respect to the
investigations made or the procedures followed by Bear Stearns in rendering its
opinion.
In arriving at its opinion, Bear Stearns, among other things:
- reviewed the merger agreement, together with the related exhibits and
schedules, in substantially final form;
- reviewed Iron Mountain's and Pierce Leahy's Annual Reports on Form 10-K
for the years ended December 31, 1997 and 1998, and Quarterly Reports on
Form 10-Q for the periods ended March 31, 1999 and June 30, 1999;
- reviewed Iron Mountain's Current Reports on Form 8-K filed on January 19,
1999, April 16, 1999 and July 9, 1999 and on Form 8-K/A filed on
March 22, 1999;
- reviewed certain operating and financial information, including financial
projections and operational cost synergy estimates, provided to it by Iron
Mountain's management relating to Iron Mountain's and Pierce Leahy's
businesses and future prospects;
- met with certain members of Iron Mountain's and Pierce Leahy's senior
management to discuss their respective company's businesses, operations,
historical and projected financial results and future prospects;
- reviewed the historical prices, valuation parameters and trading volumes
of the common stock of Iron Mountain and Pierce Leahy;
- reviewed publicly available financial data, stock market performance data
and valuation parameters of companies which it deemed generally comparable
to Iron Mountain and Pierce Leahy;
- reviewed the terms of recent acquisitions of companies which it deemed
generally comparable to Pierce Leahy;
- performed discounted cash flow analyses based on the projections and
operational cost synergy estimates for Pierce Leahy provided by Iron
Mountain's management;
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- conducted an accretion/dilution analysis, comparing Iron Mountain's
stand-alone cash earnings per share of common stock with cash earnings per
common share of the surviving entity pro forma for the merger;
- compared Iron Mountain's trading multiples with Pierce Leahy's valuation
multiples as implied in the merger;
- performed a relative contribution analysis, comparing revenue, EBITDA and
free cash flow contributions to the relative enterprise value of the
combined entity and comparing cash earnings, net income and EBITDA minus
interest to equity ownership of the combined entity pro forma for the
merger; and
- conducted such other studies, analyses, inquiries and investigations as it
deemed appropriate.
In the course of its review, Bear Stearns relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information, including without limitation the financial projections and
operational cost synergy estimates, provided to it by Iron Mountain and Pierce
Leahy. In addition, Bear Stearns did not perform or obtain any independent
appraisal of the assets or liabilities of Iron Mountain and Pierce Leahy, nor
was Bear Stearns furnished with any appraisal of that type.
Bear Stearns assumed that the Iron Mountain and Pierce Leahy projected
financial results and the estimated operational cost synergies that could be
achieved upon consummation of the merger, that it relied on or which were
provided to it, had been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the senior management of Iron
Mountain and Pierce Leahy as to the expected future performance of Iron Mountain
and Pierce Leahy and New Iron Mountain. As a result, Bear Stearns did not make
any independent assessment of the assumptions contained in those projected
financial results or estimated operational cost synergies. Bear Stearns also
assumed that the merger would:
- qualify as a tax-free "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code; and
- be consummated in accordance with the merger agreement without any
limitations, restrictions, conditions, amendments or modifications that
collectively would have a material effect on New Iron Mountain.
In arriving at its opinion, Bear Stearns did not assign any particular
weight to any factor it considered. Instead, Bear Stearns made qualitative
judgments based upon its experience in providing similar opinions and on then
existing economic, monetary, market and other conditions as to the significance
of each analysis and factor. Bear Stearns believes that its analyses must be
considered as a whole and that selecting portions of its analyses and the
factors considered, without considering all of its analyses and the factors
considered, could create a misleading or incomplete view of the processes
underlying its opinion. In its analyses, Bear Stearns made numerous assumptions
with respect to industry performance, general business conditions and other
matters, many of which are beyond control of Iron Mountain, Pierce Leahy or Bear
Stearns. Any assumed estimates implicitly contained in the Bear Stearns opinion
or relied upon by it in rendering its opinion are not necessarily reflective of
actual values or predictive of future results or values, which may be
significantly more or less favorable than those assumed or relied upon for
purposes of its opinion. Any estimates relating to the value of a business or
securities do not purport to be appraisals or necessarily reflect the prices at
which companies or securities may actually be sold.
Bear Stearns is an internationally recognized investment banking firm and,
as part of its investment banking activities, regularly engages in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of
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listed and unlisted securities, private placements and valuations for corporate
and other purposes. The Iron Mountain Board selected Bear Stearns because of its
expertise, reputation and familiarity with Iron Mountain in particular and the
records and information management services industry in general, and because its
investment banking professionals have substantial experience in transactions
similar to the merger.
In the past, Bear Stearns has provided investment banking services to Iron
Mountain and has received customary compensation for those services. In the
ordinary course of business, Bear Stearns may actively trade the equity and debt
securities of Iron Mountain and/or Pierce Leahy for its own account and for the
account of its customers and, accordingly, may at any time hold a long or short
position in those securities.
Under the engagement letter between Iron Mountain and Bear Stearns under
which Iron Mountain retained Bear Stearns as its financial advisor in connection
with the merger, Iron Mountain has paid Bear Stearns retainer and opinion fees
to date of approximately $600,000 and has agreed to pay a transaction success
fee of $4,000,000 upon completion of the merger. Amounts paid for the cash
retainer fee and fairness opinion fee will be credited against the success fee.
Iron Mountain has also agreed to reimburse Bear Stearns for its reasonable
out-of-pocket expenses, including reasonable fees and disbursements of counsel
and of other consultants and advisors retained by Bear Stearns, and to indemnify
Bear Stearns and its related persons against specified liabilities in connection
with the engagement of Bear Stearns, including specified liabilities under
federal securities law.
The following is a summary of the material valuation, financial and
comparative analyses performed by Bear Stearns in arriving at its opinion dated
October 20, 1999. In all analyses outlined below, Pierce Leahy's EBITDA and
capital expenditures were adjusted to reflect Iron Mountain's accounting.
COMPARABLE COMPANY ANALYSIS. In its analysis, Bear Stearns noted that there
are few publicly traded companies in the records and information management
services business. Bear Stearns developed a set of three public companies,
consisting of Iron Mountain, F.Y.I. Inc. and Lason Inc., for purposes of
comparison after reviewing the following factors, among others:
- business comparability;
- relative size of market capitalization and liquidity;
- growth parameters; and
- other relevant business and financial characteristics.
Using publicly available information, Bear Stearns compared the financial
performance and stock market valuation of Iron Mountain, F.Y.I. and Lason with
Pierce Leahy. The range of multiples for the three comparable companies'
enterprise value, defined as the market value of equity plus minority interest
plus the market value of debt and preferred stock, net of cash, to latest
quarter annualized EBITDA was 8.6x to 13.5x. This range compared to a
transaction multiple of 12.9x at an implied transaction price of $36.03,
calculated as 1.1 multiplied by Iron Mountain's closing stock price on
October 19, 1999. After giving effect to expected operational cost synergies,
the transaction multiple implied by a transaction price of $36.03 was 11.1x
EBITDA. The ratios for the three comparable companies were based on their
closing stock prices on October 19, 1999 and the public financial statements
available to Bear Stearns on October 19, 1999.
The comparable EBITDA multiple for Pierce Leahy using the implied
transaction price was within the range of multiples for the three comparable
companies, but was at a discount to Iron Mountain's EBITDA multiple. Based on
its October 19, 1999 closing stock price, Iron Mountain traded at a 13.5x EBITDA
multiple, which represents a premium both to the implied transaction multiple of
12.9x EBITDA and to the 11.1x EBITDA multiple after giving effect to expected
operational cost synergies.
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PRECEDENT M&A TRANSACTIONS ANALYSIS. In its analysis, Bear Stearns noted
that there were no comparable transactions involving the purchase of public
companies in the records and information management services industry. However,
it observed that Iron Mountain and Pierce Leahy had both disclosed information
relating to some of their larger acquisitions, and that data was considered for
use in its precedent M&A transaction analysis. Although Bear Stearns expressed
the belief that the transaction data it used for its analysis represented the
best comparisons available, it noted that those transactions may not be
applicable for a number of reasons, including:
- the transaction size of the comparable transactions, only two of which
were greater than $100 million in transaction value, but all of which were
less than $200 million;
- lack of information regarding available cost reductions, which could have
a significant impact on the effective valuation multiples of the
transactions; and
- that although its analysis presented both revenue and EBITDA transaction
multiples, the implied valuations were based on revenue multiples because
of uncertainty with respect to synergies.
Using publicly available information, Bear Stearns developed a set of four
transactions, consisting of: Iron Mountain/Data Base, Inc.; Pierce
Leahy/Kestrel; Iron Mountain/Arcus Group; and Iron Mountain/HIMSCORP (Record
Masters), for purposes of its comparable transaction analysis. The range of
multiples of enterprise value to revenues of the four comparable transactions
was 3.1x to 4.4x. This range did not include the 1.6x multiple for the Iron
Mountain/Arcus Group transaction because Arcus Group had significantly lower
EBITDA margins, which limited its comparability. Lower EBITDA margins were due
to the fact that a significant portion of the Arcus Group operations was
represented by a staffing business, which had different financial
characteristics. This range compared to a transaction revenue multiple of 3.6x
at an implied transaction price of $36.03, calculated as the exchange ratio
multiplied by Iron Mountain's closing stock price on October 19, 1999. The
ratios for the four comparable transactions were based on public financial
statements available to Bear Stearns at the time of respective transactions.
DISCOUNTED CASH FLOW ANALYSIS OF PIERCE LEAHY. Bear Stearns performed a
discounted cash flow analysis on the after-tax cash flows of Pierce Leahy based
on projections provided to Bear Stearns by Pierce Leahy and as adjusted by Iron
Mountain management. After-tax cash flows for the six-year period beginning
January 1, 2000 and ending on December 31, 2005 were discounted to December 31,
1999. After-tax cash flows were calculated as after-tax EBITDA, less changes in
working capital and capital expenditures. Bear Stearns calculated a terminal
value by applying to projected 2005 EBITDA a range of multiples of 9.0x to
10.0x. Bear Stearns' determination of the appropriate range of multiples was
based on the expected growth prospects of Pierce Leahy in 2005. To that extent,
Bear Stearns considered the expected perpetual growth rates in the cash flows
implied by the selected multiples. Discount rates of 10% to 11% were chosen
based on several assumptions regarding factors such as the inflation rate,
interest rates, the inherent business risk in Pierce Leahy's business and the
cost of capital to Pierce Leahy calculated within the capital asset pricing
model framework. The discounted cash flow analysis of Pierce Leahy's financial
projections resulted in a per share equity value range of $37.81 to $48.72.
After giving effect to projected annual operating synergies, the discounted cash
flow analysis of Pierce Leahy's financial projections resulted in a per share
equity value range of $43.56 to $55.21.
ACCRETION/DILUTION ANALYSIS. Bear Stearns performed accretion/dilution
analysis comparing Iron Mountain's stand-alone cash earnings, defined as net
income plus tax-effected goodwill amortization, per share of common stock with
cash earnings per share of New Iron Mountain common stock pro forma for the
merger. Bear Stearns noted that the merger will result in pro forma cash
earnings per share accretion starting immediately in 2000.
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RELATIVE CONTRIBUTION ANALYSIS. Bear Stearns analyzed the relative
contribution to estimated combined revenues and EBITDA for Iron Mountain and
Pierce Leahy for each of the years 1999, pro forma for the merger, through 2003.
This analysis indicated that in 1999, pro forma for the merger, 2000, 2001, 2002
and 2003 Iron Mountain is projected to contribute 60%, 61%, 61%, 61% and 61%,
and Pierce Leahy is projected to contribute 40%, 39%, 39%, 39% and 39%, of
estimated combined revenues. This analysis also indicated that in 1999, pro
forma for the merger, 2000, 2001, 2002 and 2003 Iron Mountain is projected to
contribute 57%, 58%, 58%, 58% and 59%, and Pierce Leahy is projected to
contribute 43%, 42%, 42%, 42% and 41%, of estimated combined EBITDA. Bear
Stearns compared (1) Iron Mountain's and Pierce Leahy's relative contribution to
the estimated combined revenues and EBITDA of the combined entity to (2) Iron
Mountain's and Pierce Leahy's relative contribution to the pro forma enterprise
value of the combined entity. The relative total enterprise value consideration
of approximately 40% reflected by Pierce Leahy was approximately the same as its
estimated contribution of revenues and less than its estimated contribution of
EBITDA in all years of the analysis.
Bear Stearns also analyzed the relative contribution to EBITDA less interest
expense ("EBDAT") for Iron Mountain and Pierce Leahy for each of the years 1999,
pro forma for the merger, through 2003. This analysis indicated that in 1999,
pro forma for the merger, 2000, 2001, 2002 and 2003 Iron Mountain is projected
to contribute 62%, 62%, 61%, 61% and 61%, and Pierce Leahy is projected to
contribute 38%, 38%, 39%, 39% and 39%, of estimated combined EBDAT. Bear Stearns
compared such relative contributions to Iron Mountain's and Pierce Leahy's
relative pro forma ownership of the combined entity. The relative equity
ownership of approximately 35% reflected by Pierce Leahy was less than its
estimated contribution of EBDAT in all years of the analysis.
PRO FORMA TRADING MULTIPLE ANALYSIS. Bear Stearns analyzed the impact of
change in trading EBITDA multiple on price per share by comparing the pro forma
stock price of New Iron Mountain at different trading multiples with (1) Iron
Mountain's closing stock price on October 19, 1999 and (2) Iron Mountain's
implied stock price at the same trading multiples. Bear Stearns noted, assuming
New Iron Mountain trades at 13.5x EBITDA, which was Iron Mountain's trading
multiple based on its October 19, 1999 closing stock price, that the pro forma
stock price of New Iron Mountain is accretive compared to Iron Mountain's
closing stock price on October 19, 1999. Also, assuming both Iron Mountain and
New Iron Mountain trade at the same multiples, the pro forma stock prices of New
Iron Mountain are accretive across the selected range of multiples.
The theoretical pro forma stock price ranges calculated by Bear Stearns were
calculated solely for analytical purposes and did not, and do not, constitute or
reflect an opinion or prediction as to what the value of shares of Iron Mountain
common stock actually will be at the time of the merger or the actual trading
price or range of trading prices of shares of New Iron Mountain common stock
after the merger. Such actual trading prices may be impacted by, among other
things, prevailing interest rates, conditions in the financial markets,
arbitrage activity and other factors that generally influence the prices of
securities.
OPINION OF PIERCE LEAHY'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated October 5, 1999, Pierce Leahy
retained First Union Securities, Inc. to serve as Pierce Leahy's financial
advisor in connection with its proposed merger with Iron Mountain. On
October 11, 1999, First Union delivered its oral opinion to the Pierce Leahy
Board of Directors that, as of such date and based upon and subject to certain
matters discussed with the Board, the consideration to be paid to the
shareholders of Pierce Leahy pursuant to the merger, which results in an implied
exchange ratio of 1.1 shares of Iron Mountain common stock for each outstanding
share of Pierce Leahy common stock, was fair from a financial point of view to
the Pierce Leahy shareholders. This opinion was confirmed orally and in writing
on October 20, 1999.
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The full text of the First Union opinion dated October 20, 1999, is attached
hereto as Annex G and sets forth certain important qualifications, assumptions
made, matters considered, areas of reliance on others, and limitations on the
review undertaken in connection with such opinion. The First Union opinion was
directed to the Pierce Leahy Board for its consideration in connection with the
proposed merger and is not a recommendation to any holder of Pierce Leahy common
stock as to whether the merger is in that holder's best interests or as to
whether any holder should vote for or against the merger. The summary
description of the First Union opinion set forth below is qualified in its
entirety by the full text of the opinion attached hereto as Annex G, and is
incorporated herein by reference and should be read carefully and in its
entirety.
In arriving at its opinion, First Union, among other things, (1) reviewed
the financial terms of the merger as set forth in the merger agreement;
(2) reviewed certain historical financial and other information regarding Pierce
Leahy and Iron Mountain that was publicly available or furnished by Pierce
Leahy's or Iron Mountain's management; (3) reviewed certain financial forecasts
and other data provided by members of Pierce Leahy's or Iron Mountain's
management relating to their respective businesses; (4) conducted discussions
with members of Pierce Leahy's and Iron Mountain's management with respect to
their businesses, financial and other information, including their business
prospects and financial forecasts; (5) conducted discussions with members of
Pierce Leahy's and Iron Mountain's management with respect to various strategic
and operating benefits anticipated from the merger; (6) reviewed certain
financial terms of the merger in relation to the current and historical market
prices and trading volumes of Pierce Leahy common stock; (7) compared the
financial position and operating results of Pierce Leahy with those of publicly
traded companies First Union deemed relevant; (8) reviewed merger and
acquisition transactions involving companies in the lines of business comparable
to Pierce Leahy and Iron Mountain; and (9) conducted such other financial
studies, analyses and investigations as First Union deemed appropriate.
In connection with its review, First Union relied upon the accuracy and
completeness of the foregoing financial and other information, and did not
assume any responsibility for any independent verification of such information.
Pierce Leahy and Iron Mountain each provided First Union with financial
forecasts for the period from 1999 to 2003. First Union assumed that the
projections had been reasonably prepared on bases reflecting the best available
estimates and judgments of Pierce Leahy's and Iron Mountain's respective
management as to the future financial performance of Pierce Leahy and Iron
Mountain and that such projections provided a reasonable basis upon which First
Union could form its opinion. First Union did not assume responsibility for
making an independent evaluation, appraisal or physical inspection of any of the
assets or liabilities (contingent or otherwise) of Pierce Leahy or Iron
Mountain, nor was First Union furnished with any such appraisals. Pierce Leahy
imposed no limitations on First Union with respect to the investigations made or
procedures followed by First Union.
The First Union opinion was based on economic, monetary, market and other
conditions as in effect on, and the information made available to First Union as
of, the date of its opinion. Accordingly, although subsequent developments may
affect the First Union opinion, First Union assumed that the merger will be
consummated in accordance with the terms described in the merger agreement,
without any waiver of any material terms or conditions. The First Union opinion
does not address the relative merits of the merger and the other business
strategies considered by the Pierce Leahy Board, nor does it address the Pierce
Leahy Board's decision to proceed with the merger. The merger agreement is filed
as Annex A hereto and the terms in the merger agreement and the conditions to
Pierce Leahy's obligations thereunder should be reviewed and understood by
holders of Pierce Leahy common stock in connection with their consideration of
the merger.
Set forth below is a brief summary of selected analyses presented by First
Union to the Pierce Leahy Board on October 11, 1999 and on October 20, 1999 in
connection with the First Union opinion.
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HISTORICAL STOCK PRICE ANALYSIS. First Union reviewed the trading
performance of the Pierce Leahy common stock for the 12 months, six months, and
the 30 trading days ending on October 18, 1999. First Union noted that there was
an implied premium based on Iron Mountain's closing price as of October 18, 1999
multiplied by the implied exchange ratio of 1.1x. As of October 18, 1999, the
implied premium to Pierce Leahy common stock was: 47.8% at a $24.34 average
price per share for the past 12 months; 49.5% at a $24.05 average price per
share for the past six months; 56.7% at a $22.95 average price per share for the
past 30 trading days; and 47.1% at a $24.44 price per share for the closing
price of Pierce Leahy common stock on October 18, 1999.
COMPARABLE PUBLIC COMPANY ANALYSIS. Using publicly available information and
information provided by Pierce Leahy, First Union compared the historical
financial and operating performance of Pierce Leahy with the corresponding
performance of a group of publicly-traded records and information management
services companies that First Union deemed to be similar to Pierce Leahy. These
comparable companies were Iron Mountain, F.Y.I. and Lason. In comparing Pierce
Leahy's financial performance to that of the comparable companies, First Union
made the following observations, among others: (i) Pierce Leahy had a latest
quarter annualized ("LQA") gross profit margin ("Gross Margin") of 43.6%,
compared to the median latest twelve months' ("LTM") Gross Margin of 37.3% for
the comparable companies, and (ii) Pierce Leahy had a LQA EBITDA margin of
28.1%, compared to a median LTM EBITDA margin of 16.6% for the comparable
companies.
In order to arrive at an implied valuation for Pierce Leahy, First Union
calculated the adjusted market value, defined as aggregate equity value plus
debt less cash and cash equivalents, of the comparable companies as a multiple
of LQA EBITDA. An analysis of the multiples of adjusted market value to EBITDA
yielded a harmonic mean multiple of 11.3x. This analysis indicated an implied
price per share ranging from $31.77 to $38.83 for New Iron Mountain assuming pro
forma EBITDA based on LQA results and pro forma operating synergies and
reflecting the implied exchange ratio of 1:1.1. This range represents a premium
to the $24.44 price per share for the closing price of Pierce Leahy common stock
on October 18, 1999.
COMPARABLE ACQUISITIONS ANALYSIS. Using publicly available information,
First Union reviewed selected recent merger and acquisition transactions in the
records and information management services industry. These transactions
include: Pierce Leahy's acquisition of Kestrel Holdings, Inc.; Pierce Leahy's
acquisition of Archivex, Inc.; Iron Mountain's acquisition of Data Base, Inc.;
Iron Mountain's acquisition of Britannia Data Management Ltd.; Iron Mountain's
acquisition of National Underground Storage, Inc.; Iron Mountain's acquisition
of HIMSCORP; and Lason, Inc.'s acquisition of M-R Group plc. First Union
compared the adjusted market value of the acquired companies as implied by the
consideration paid in each such transaction to the corresponding LTM EBITDA for
the acquired companies. This analysis indicated that adjusted market value as a
multiple of LTM EBITDA had a median value of 8.9x. First Union applied the
median EBITDA multiple for the comparable acquisitions to the corresponding LQA
results, yielding an implied price per share ranging from $20.64 to $25.22 for
New Iron Mountain assuming pro forma EBITDA based on LQA results and pro forma
operating synergies and reflecting the implied exchange ratio of 1:1.1. This
range compares to the $24.44 price per share for the closing price of Pierce
Leahy common stock on October 18, 1999.
DISCOUNTED CASH FLOW ANALYSIS. First Union performed a discounted cash flow
analysis to estimate the present value of the projected unlevered free cash
flows for New Iron Mountain based on the projections. First Union calculated the
estimated future free cash flows that New Iron Mountain would produce for the
fiscal years 2000 through 2004, as well as the estimated terminal value of New
Iron Mountain at the end of the forecasting period. First Union assumed that the
projections reflect the best judgements of Pierce Leahy's and Iron Mountain's
management of the future financial performance and include assumptions regarding
the impact of the integration of operations and assets merged as a result of the
transaction. Pierce Leahy and Iron Mountain have projected that New Iron
Mountain will realize certain cost savings from this integration by
consolidating operations and reducing
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overhead. The terminal value was computed by multiplying New Iron Mountain's
estimated fiscal year 2004 EBITDA by a range of multiples between 8.0x and
12.0x, chosen to reflect New Iron Mountain's potential acquisition multiple at
the end of year 2004. The projected free cash flows and terminal values were
discounted to present values using a range of discount rates between 12.0% and
15.0%, chosen to reflect assumptions regarding New Iron Mountain's cost of
capital. This analysis indicated an implied price per share ranging from $37.16
to $53.44 for New Iron Mountain based on a weighted average cost of capital of
13.0% to 14.0% and terminal EBITDA multiple of 9.0x to 11.0x. This range
represents a premium to the $24.44 price per share for the closing price of
Pierce Leahy common stock on October 18, 1999.
While the foregoing summary describes the analyses and examinations that
First Union deemed material in arriving at the First Union opinion, it does not
purport to be a comprehensive description of all analyses and examinations
actually conducted by First Union. The preparation of a fairness opinion
necessarily is not susceptible to partial analysis or summary description; and
selecting portions of the analyses and of the factors considered by First Union,
without considering all analyses and factors, would create an incomplete view of
the process underlying the analyses set forth in the presentation of First Union
to the Pierce Leahy Board on October 11, 1999 and October 20, 1999. In addition,
First Union may have given some analyses more or less weight than other
analyses, and may have deemed various assumptions more or less probable than
other assumptions. Accordingly, the ranges of valuations resulting from any
particular analysis described above should not be taken to be First Union's view
of the actual value of Pierce Leahy or Pierce Leahy common stock. To the
contrary, First Union expressed no opinion on the actual value of Pierce Leahy
or Pierce Leahy common stock, and the First Union opinion extends only to the
belief expressed by First Union that, from a financial point of view, the
consideration that holders of Pierce Leahy common stock will receive pursuant to
the merger, which results in an implied exchange ratio of 1.1 shares of Iron
Mountain common stock for each outstanding share of Pierce Leahy common stock,
was within the range of values that might fairly be ascribed to Pierce Leahy
common stock as of the date of the First Union opinion.
In performing its analyses, First Union made numerous assumptions with
respect to industry performance, general business and economic conditions, and
other matters, many of which are beyond the control of Pierce Leahy. The
analyses performed by First Union are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than those suggested by such analyses. The analyses were prepared
solely as part of First Union's analysis for the Pierce Leahy Board of the
fairness of the merger to the holders of Pierce Leahy common stock from a
financial point of view, and were provided solely to the Pierce Leahy Board in
connection with its consideration of the merger. The analyses do not purport to
be appraisals or to reflect the prices at which a company might actually be sold
or the prices at which any securities may trade at any time in the future. First
Union used in its analyses the projections of future performance prepared by the
management of Pierce Leahy and Iron Mountain. The projections are based on
numerous variables and assumptions which are inherently unpredictable and must
be considered not certain or accurate as projected. Accordingly, actual results
could vary significantly from those set forth in the projections.
The First Union opinion and the presentation to the Pierce Leahy Board
summarized above were among the many factors taken into consideration by the
Pierce Leahy Board in making its determination to approve, and to recommend that
Pierce Leahy shareholders approve, the merger. First Union does not, however,
make any recommendation to holders of Pierce Leahy common stock (or to any other
person or entity) as to whether such shareholders should vote for or against the
merger.
Pursuant to the engagement letter, Pierce Leahy agreed to pay First Union a
fee of $500,000 upon the delivery of the First Union opinion. The opinion fee
was not conditioned on the outcome of the First Union opinion or whether Pierce
Leahy or its Board deemed such opinion favorable or unfavorable. In addition, if
the merger is effected, the engagement letter provides for Pierce Leahy to
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pay First Union a fee equal to approximately $1,000,000. Pierce Leahy will be
obligated to pay the transaction fee only if the merger (or another transaction)
is completed. Accordingly, the payment of a substantial majority of First
Union's total fee is subject to completion of the merger. The engagement letter
also calls for Pierce Leahy to reimburse First Union for its reasonable
out-of-pocket expenses and for Pierce Leahy to indemnify First Union, its
affiliates, directors, agents, employees and controlling persons against certain
liabilities, including liabilities under the federal securities laws, relating
to or arising out of First Union's engagement. First Union and its affiliates
may maintain business relationships with Pierce Leahy and its affiliates.
First Union Securities, Inc., a subsidiary of First Union Corporation, is a
nationally recognized investment banking firm and an affiliate of First Union
Corporation. First Union and its affiliates, as part of their investment banking
activities, are regularly engaged in the valuation of businesses and their
securities in connection with merger transactions and other types of
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. Pierce Leahy selected First Union as its financial advisor on the
basis of First Union's experience and expertise in transactions similar to the
merger. In the ordinary course of business, First Union or its affiliates may
actively trade the debt and equity securities of Pierce Leahy and Iron Mountain
for its or any such affiliate's own account or for the account of customers and,
accordingly, may hold a long or short position in such securities.
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
In considering the recommendations of the Pierce Leahy Board and the Iron
Mountain Board with respect to the merger, shareholders of Pierce Leahy and
stockholders of Iron Mountain should be aware that some of the officers and
directors of Pierce Leahy and Iron Mountain have interests in the merger that
are different from, or in addition to, their interests as shareholders of Pierce
Leahy and stockholders of Iron Mountain generally. The Pierce Leahy Board and
the Iron Mountain Board were aware of these interests and considered them, among
other matters, in approving the merger agreement and the transactions
contemplated by the merger agreement.
NEW IRON MOUNTAIN BOARD; MANAGEMENT. Pierce Leahy and Iron Mountain have
agreed in the merger agreement that, as of the effective time of the merger, the
New Iron Mountain Board will consist of eleven members, including the nine
current members of the Iron Mountain Board of Directors, J. Peter Pierce, who
currently serves as President, Chief Executive Officer and a director of Pierce
Leahy, and one other designee of Pierce Leahy who is not currently a director of
either company. Iron Mountain and Pierce Leahy have also agreed that C. Richard
Reese, the current Chairman of the Board and Chief Executive Officer of Iron
Mountain, will assume those same positions for New Iron Mountain, that J. Peter
Pierce will become President of New Iron Mountain, and that David S. Wendell,
the current President and Chief Operating Officer of Iron Mountain, will become
Senior Vice President of New Iron Mountain.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. The merger agreement
provides that New Iron Mountain will indemnify, defend and hold harmless each
person who has been an officer or director of Pierce Leahy or any of its
subsidiaries against all costs or expenses incurred in connection with any claim
arising out of the fact that such person was a director or officer of Pierce
Leahy or any of its subsidiaries to the fullest extent currently provided under
Pierce Leahy's or the applicable subsidiary's charter documents, but only to the
extent permitted under applicable law. New Iron Mountain will also pay any
expenses in advance of the final disposition of any such action or proceeding to
the fullest extent permitted under applicable law.
In addition, New Iron Mountain is required to maintain Pierce Leahy's
existing directors' and officers' liability insurance policy for a period of not
less than six years after the closing date of the merger or substitute policies
of substantially similar coverage and amounts.
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IRON MOUNTAIN AND PIERCE LEAHY OPTIONS. The merger agreement provides that
each option to purchase Iron Mountain common stock outstanding at the time of
the merger will become an option to purchase an equal number of shares of New
Iron Mountain common stock at the same price and on the same terms. Similarly,
each option to purchase shares of Pierce Leahy common stock outstanding at the
time of the merger will remain an option to purchase an equal number of shares
of New Iron Mountain common stock at the same price and on the same terms. Prior
to the merger, Pierce Leahy intends to pay a one-for-ten stock dividend. The
stock option plans under which the Pierce Leahy options have been granted
provide for an automatic adjustment to the number of shares issuable upon
exercise and the exercise price of the options as a result of the stock
dividend.
Both the Pierce Leahy and the Iron Mountain stock option plans provide for
acceleration of the vesting of options granted under those plans upon the
occurrence of certain events. The merger will not cause the automatic
acceleration of any options. As described below, however, the Pierce Leahy Board
has voted to accelerate the vesting of some Pierce Leahy options.
ACCELERATION OF VESTING OF SOME PIERCE LEAHY OPTIONS. When Pierce Leahy was
privately held, it adopted a Nonqualified Stock Option Plan that permitted the
grant of options to certain key employees. Options granted under that plan had
limitations on exercise in part because Pierce Leahy's tax status as a
Subchapter S corporation prior to the time of its initial public offering
limited the number of persons who could be shareholders. The Pierce Leahy Board
has determined that it is appropriate to accelerate the vesting of the remaining
unvested options granted under the Nonqualified Stock Option Plan. Prior to the
adjustment as a result of the expected one-for-ten stock dividend, options to
purchase an aggregate of 63,123 shares of Pierce Leahy common stock will be
accelerated, including options to purchase 57,828 held by executive officers of
Pierce Leahy, one of whom is also a director of Pierce Leahy but will not become
a director of New Iron Mountain.
Each of Pierce Leahy's four nonemployee directors was granted an option to
purchase 2,500 shares of Pierce Leahy common stock at the then fair market value
under the Pierce Leahy 1997 Stock Option Plan in January 1998. The options vest
in five equal annual installments, and options to purchase 1,500 shares of
Pierce Leahy common stock for each nonemployee director will not be vested at
the closing of the merger. None of the Pierce Leahy nonemployee directors will
continue as directors of New Iron Mountain and, therefore, their unvested
options would never have an opportunity to vest. Accordingly, the Pierce Leahy
Board has voted to accelerate the vesting of the Pierce Leahy nonemployee
directors' options upon the closing of the merger.
EMPLOYMENT AGREEMENT OF J. PETER PIERCE. The Pierce Leahy Board of
Directors believes that the continued involvement of J. Peter Pierce, Pierce
Leahy's President and Chief Executive Officer, is important for the Pierce Leahy
shareholders in viewing the prospects of New Iron Mountain and its ability to
combine the hard copy storage operations of Pierce Leahy and Iron Mountain.
Accordingly, at the request of the Pierce Leahy Board, New Iron Mountain will
enter into a four-year employment agreement with Mr. Pierce upon the closing of
the merger. The agreement provides for Mr. Pierce to be the President of New
Iron Mountain and the most senior officer of New Iron Mountain's paper records
management operations in the Americas. Under the agreement, Mr. Pierce will have
an initial base salary of $325,000. The agreement has provisions for payments
upon termination of employment by New Iron Mountain without "cause" and by
Mr. Pierce for "good reason," as these terms are defined in the agreement. Among
other things, Mr. Pierce will be entitled to resign for good reason if he is not
renominated to serve as a director or his reporting relationship to Mr. Reese is
changed. The agreement contains a noncompetition provision and has no special
arrangements regarding a change of control of New Iron Mountain.
JOINDER TO REGISTRATION RIGHTS AGREEMENT. J. Peter Pierce, by signing the
Pierce Leahy shareholders' agreement described below, has become subject to
substantial restrictions on his Pierce Leahy stock. Like all of the Pierce Leahy
shareholders who signed the shareholders' agreement, Mr. Pierce will also
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become a party to the Iron Mountain registration rights agreement, which will be
assumed by New Iron Mountain. Under that agreement, Mr. Pierce will be entitled
to share in certain "demand" and "piggyback" registration rights described under
"The Merger Agreement--Restrictions on Resales by Affiliates and Registration
Rights."
PIERCE LEAHY SHAREHOLDERS' AGREEMENT
In connection with the merger agreement, Iron Mountain, Pierce Leahy and
certain members of the Pierce family and related trusts (the "Pierce Family
Shareholders") entered into a shareholders' agreement. A copy of the
shareholders' agreement is attached to this joint proxy statement/prospectus as
Annex B and is incorporated herein by reference. We urge you to read the
shareholders' agreement carefully in its entirety.
Under this agreement, each of the Pierce Family Shareholders has agreed not
to sell or otherwise transfer any of the shares of Pierce Leahy common stock as
to which he or she has dispositive power prior to the closing date of the
merger, subject to limited exceptions for intra-family and charitable transfers.
Each Pierce Family Shareholder has agreed to vote all of the shares of
Pierce Leahy common stock that he or she has the right to vote:
- in favor of the approval of the merger agreement, including the amended
and restated articles of incorporation and bylaws of Pierce Leahy, and the
nominated directors and for any action required in furtherance thereof;
and
- against any transaction or series of related transactions described under
"The Merger Agreement--Material Covenants--No Solicitation."
Pursuant to a voting trust agreement among the Pierce Family Shareholders and
other related parties, J. Peter Pierce and Leo W. Pierce, Sr. have the right to
vote shares representing approximately 39% of the outstanding shares of Pierce
Leahy common stock.
The shareholders' agreement also contains "standstill" restrictions on the
Pierce Family Shareholders with respect to securities of Pierce Leahy and Iron
Mountain prior to the merger and the securities of New Iron Mountain after the
merger. These restrictions end ten years from the closing or, if sooner, when
the shareholder, individually or with affiliates, the other Pierce Family
Shareholders and their permitted assignees, no longer beneficially own 5% or
more of the common stock of New Iron Mountain. In particular, the shareholders
have agreed, subject to limited expectations, not to:
- acquire any equity securities of Pierce Leahy, Iron Mountain or New Iron
Mountain;
- propose to enter into a business combination involving Pierce Leahy, Iron
Mountain or New Iron Mountain or to purchase a material portion of the
assets of Pierce Leahy, Iron Mountain or New Iron Mountain;
- solicit proxies to vote any securities of Iron Mountain or New Iron
Mountain;
- be a part of a group for the purpose of acquiring, holding, voting or
transferring any equity securities of Iron Mountain or New Iron Mountain;
or
- seek to control or influence in any public manner or public forum the
management or policies of Iron Mountain or New Iron Mountain.
The Pierce Family Shareholders have also agreed to limit their transfers of
New Iron Mountain common stock in any calendar quarter, subject to limited
exceptions, to the greater of (1) 1% of the shares of outstanding common stock
of New Iron Mountain or (2) the average weekly reported volume of trading in
such securities on all national securities exchanges and/or reported through the
automated
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quotation system of a registered securities association during the four calendar
weeks prior to the date of sale. These limitations will terminate on the first
to occur of:
- the fifth anniversary of the closing date of the merger;
- the shares of Pierce Leahy listed in the shareholders' agreement then
owned by the Pierce Family Shareholders represent less than 5% of the
outstanding common stock of New Iron Mountain; or
- J. Peter Pierce no longer serves as a director of New Iron Mountain, other
than as a result of his resignation or his refusal to accept nomination by
the Board of Directors of New Iron Mountain.
In the event the merger does not occur, the shareholders' agreement will
terminate upon termination of the merger agreement; provided that if the merger
agreement is terminated in circumstances where Iron Mountain is entitled to the
$35 million fee described under "The Merger Agreement--Termination and
Expenses--Fees and Expenses," then the voting provisions contained in the
shareholders' agreement will survive for one year after the termination.
IRON MOUNTAIN VOTING AGREEMENT
In connection with the merger agreement, Iron Mountain, Pierce Leahy and
Kent P. Dauten, Vincent J. Ryan, Schooner Capital LLC, B. Thomas Golisano and C.
Richard Reese, each a stockholder of Iron Mountain, entered into a voting
agreement. A copy of the Iron Mountain voting agreement is attached to this
joint proxy statement/prospectus as Annex C and is incorporated herein by
reference. We urge you to read the Iron Mountain voting agreement carefully in
its entirety.
Each Iron Mountain stockholder party to the voting agreement has agreed to
vote all of the shares of Iron Mountain owned by him or which he has the right
to vote, equal to approximately 25% of the outstanding Iron Mountain common
stock in the aggregate, in favor of the approval of the merger agreement and any
action required in furtherance thereof. Each has also agreed to vote his shares
against any transaction or series of related transactions resulting in any
"change in control" of Iron Mountain, as defined in Iron Mountain's indentures.
Each Iron Mountain stockholder party to the voting agreement has further
agreed, until the merger is completed, not to transfer any shares of Iron
Mountain common stock, other than to limited family members and charities.
The Iron Mountain voting agreement will terminate upon the termination of
the merger agreement prior to the completion of the merger; provided that if the
merger agreement is terminated in circumstances where Iron Mountain is entitled
to the $35 million fee described under "The Merger Agreement--Termination and
Expenses--Fees and Expenses," then the voting provisions contained in the
shareholders' agreement will survive for one year after the termination.
ACCOUNTING TREATMENT
As the stockholders of Iron Mountain will own approximately 65% of the
shares of New Iron Mountain common stock upon completion of the merger, the
merger will be accounted for as a reverse acquisition, and Iron Mountain will be
treated as the acquiring company for accounting purposes. Under reverse
acquisition accounting, the equity portion of the purchase price is based on the
fair value of the Pierce Leahy common stock. Because the exchange ratio is
fixed, the fair value of the Pierce Leahy common stock is based on the stock
price on the date the merger was announced.
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NO APPRAISAL OR DISSENTERS' RIGHTS
Under Delaware law, where Iron Mountain is incorporated, holders of Iron
Mountain common stock are not entitled to appraisal rights in connection with
the merger because such shares will be converted into stock that is listed on a
national securities exchange.
Under Pennsylvania law, where Pierce Leahy is incorporated, holders of
Pierce Leahy common stock are not entitled to dissenters' rights in connection
with the merger because they will continue to hold their shares after the
merger.
STOCK EXCHANGE LISTING OF NEW IRON MOUNTAIN'S COMMON STOCK
It is a condition to the merger that the NYSE approve for listing the shares
of New Iron Mountain common stock to be issued in the merger. Currently, Pierce
Leahy common stock is listed on the NYSE under the symbol "PLH," and Iron
Mountain common stock is listed on the NYSE under the symbol "IRM." New Iron
Mountain will adopt the symbol "IRM."
REGISTRAR AND TRANSFER AGENT FOR NEW IRON MOUNTAIN'S COMMON STOCK
The registrar and transfer agent for New Iron Mountain's common stock will
be BankBoston, N.A. c/o EquiServe, L.P., 150 Royall Street, Canton,
Massachusetts 02021.
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THE MERGER AGREEMENT
A COPY OF THE MERGER AGREEMENT IS ATTACHED TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AS ANNEX A AND IS INCORPORATED HEREIN BY REFERENCE. WE URGE
YOU TO READ THE MERGER AGREEMENT CAREFULLY IN ITS ENTIRETY.
GENERAL
The merger agreement provides for the merger of Iron Mountain with and into
Pierce Leahy, with Pierce Leahy being the surviving corporation. As part of the
merger, Pierce Leahy will change its name to Iron Mountain Incorporated. The
merger will become effective on the date and time that the certificate of merger
is filed with the Delaware Secretary of State and articles of merger are filed
with the Pennsylvania Secretary of State. As part of the merger, Pierce Leahy's
articles of incorporation will be amended and restated to read as set forth in
Annex D and its bylaws will be amended and restated to read as set forth in
Annex E. Unless otherwise agreed upon by Iron Mountain and Pierce Leahy, the
merger will close on the fifth business day after the date on which the last of
the conditions set forth in the merger agreement is fulfilled or waived. The
merger agreement provides that the closing of the merger may not be earlier than
January 15, 2000.
MERGER CONSIDERATION
At the closing of the merger, regardless of whether the Pierce Leahy stock
dividend described below has been declared or paid:
- each outstanding share of Pierce Leahy common stock will remain
outstanding; and
- each outstanding share of Iron Mountain common stock will be converted
automatically into one share of New Iron Mountain common stock.
Prior to the merger, Pierce Leahy expects to declare and pay a stock
dividend on outstanding shares of Pierce Leahy common stock in an amount equal
to one-tenth of a share of Pierce Leahy common stock for each outstanding share
of Pierce Leahy common stock. Assuming the stock dividend is paid, each
stockholder of Iron Mountain will receive one share of New Iron Mountain common
stock for each share currently owned and each shareholder of Pierce Leahy will
hold 1.1 shares of New Iron Mountain common stock for each share of Pierce Leahy
common stock currently held.
After the completion of the merger, based on the outstanding stock of Pierce
Leahy and Iron Mountain as of November 15, 1999 and assuming the stock dividend
is paid, current shareholders of Pierce Leahy will own approximately 35% of the
shares of New Iron Mountain and current stockholders of Iron Mountain will own
approximately 65% of the shares of New Iron Mountain.
CONVERSION OF OPTIONS
At the effective time of the merger:
- each outstanding option to purchase Pierce Leahy common stock, which will
have been previously adjusted to give effect to the stock dividend, will
remain outstanding; and
- each outstanding option to purchase Iron Mountain common stock will be
converted automatically into an option to purchase that number of shares
of New Iron Mountain common stock equal to the number of shares of Iron
Mountain common stock subject to the Iron Mountain option immediately
prior to the closing of the merger. The other terms and conditions,
including exercise price, as were applicable under the applicable Iron
Mountain option plan and the underlying stock option agreement will remain
unchanged.
As part of the merger, New Iron Mountain will assume each of Iron Mountain's
option plans and each underlying stock option agreement that relates to
outstanding Iron Mountain options. New Iron Mountain will reserve for issuance
the number of additional shares of common stock that will become issuable upon
the exercise of the Iron Mountain options, as so converted.
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EXCHANGE OF STOCK CERTIFICATES
Iron Mountain stockholders and Pierce Leahy shareholders must exchange their
stock certificates. As soon as reasonably practicable after the effective time
of the merger, EquiServe, L.P., in its capacity as exchange agent for New Iron
Mountain, will mail to each shareholder of record the necessary documents and
instructions to make the exchange.
Upon surrender of a stock certificate for exchange to the exchange agent,
together with the documents that New Iron Mountain or the exchange agent
reasonably requests, a record holder of Iron Mountain or Pierce Leahy common
stock will be entitled to receive promptly a replacement certificate for the
same number of shares of New Iron Mountain.
SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THE ENCLOSED PROXY
CARD. AFTER THE MERGER, THE EXCHANGE AGENT WILL PROVIDE YOU THE INFORMATION AND
DOCUMENTS YOU WILL NEED TO EXCHANGE YOUR CERTIFICATES.
Shareholders may surrender certificates to the exchange agent until
12 months after the closing of the merger, and to New Iron Mountain thereafter.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains substantially reciprocal representations and
warranties customary to transactions of the same size and structure as the
merger. The representations and warranties do not survive the completion of the
merger.
MATERIAL COVENANTS
The merger agreement contains various covenants and agreements that govern
Pierce Leahy's and Iron Mountain's actions prior to the effective time of the
merger, including the following:
CONDUCT OF BUSINESS PENDING THE MERGER. Pierce Leahy and Iron Mountain have
each agreed to conduct their businesses in the normal and customary manner and
to use all reasonable efforts, consistent with past practice, to maintain and
preserve their business organization, assets, employees and business
relationships and to additional customary covenants.
In addition, Pierce Leahy has agreed that, without the consent of Iron Mountain,
it will not:
- settle any pending or threatened material legal action;
- enter into, amend or terminate any contractual obligation that restrains,
limits or impedes Pierce Leahy or any of its subsidiaries or, after the
merger, New Iron Mountain or any of its subsidiaries, from freely engaging
in any business or competing anywhere in the world, including in
connection with any joint venture that provides for it to be the exclusive
provider of records management services in a particular geographic area;
- sell or transfer any equity interests in it or any of its subsidiaries,
subject to limited exceptions;
- incur any indebtedness other than borrowings under existing agreements and
under agreements representing other indebtedness permitted by the merger
agreement up to an aggregate of $50 million beyond the current limit of
its credit facility so long as the proceeds of the borrowings are used in
a manner consistent with the covenants in the merger agreement relating to
the conduct of Pierce Leahy's business; and
- acquire any business (1) having a fair market value in excess of
$25 million individually or $100 million in the aggregate or (2) that is
primarily engaged in a line of business different than those of Pierce
Leahy and its subsidiaries, regardless of fair market value.
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Iron Mountain has further agreed that, without the consent of Pierce Leahy, it
will not:
- sell or dispose of any material amount of properties or assets, except in
the ordinary course of business consistent with past practice, other than
Iron Mountain's information technology staffing business or any other
properties or assets that generated not more than $50 million in revenues
for the last fiscal year;
- sell or transfer any equity interest in it or any of its subsidiaries,
except: (1) issuances of additional shares of its common stock in an
aggregate amount not to exceed approximately 3.5 million shares in
connection with acquisitions by Iron Mountain or any of its subsidiaries;
(2) shares of preferred stock of Iron Mountain that do not represent
option securities, convertible securities or indebtedness having voting
rights or convertible into securities having voting rights; and (3) other
limited exceptions; or
- acquire businesses (1) having a fair market value in excess of
$200 million in the aggregate or (2) that are primarily engaged in a line
of business different than those of Iron Mountain and its subsidiaries,
regardless of fair market value.
OPTION SECURITIES. Each party has agreed not to accelerate the exercise,
exchange or vesting schedule of any of its option securities. However, the
parties have agreed that Pierce Leahy may accelerate the vesting of all Pierce
Leahy options under the Pierce Leahy Nonqualified Option Plan and any Pierce
Leahy options owned by current non-employee directors of Pierce Leahy. See "The
Merger--Interests of Officers and Directors in the Merger."
AGREEMENT TO COOPERATE. Each of the parties has agreed to use its best
efforts to take all actions and to do all things necessary to complete the
merger.
NO SOLICITATION. Pierce Leahy has agreed that it will not, directly or
indirectly, initiate, solicit or facilitate any proposal, or provide any
information to any person with respect to any transaction, other than the
merger, resulting in:
- any change in control of Pierce Leahy;
- any merger or consolidation of Pierce Leahy other than a transaction in
which Pierce Leahy acquires assets or a business so long as (1) the
transaction is not prohibited by the covenants of the merger agreement
regarding the conduct of Pierce Leahy's business and (2) Pierce Leahy is
the surviving corporation;
- any tender offer or exchange offer for any securities of Pierce Leahy or
any other acquisition of greater than 20% of the outstanding Pierce Leahy
common stock; or
- any sale or other disposition of assets of Pierce Leahy or its
subsidiaries if the fair market value of the assets exceeds 20% of the
aggregate fair market value of the assets of Pierce Leahy and its
subsidiaries.
Iron Mountain has agreed that it will not, directly or indirectly, initiate,
solicit or facilitate any proposal, or provide any information to any person
with respect to any transaction resulting in any "change in control" of Iron
Mountain, as defined in Iron Mountain's indentures.
Any transaction relating to the prohibition of solicitations by Pierce Leahy
or Iron Mountain, as described in the preceding two paragraphs, is referred to
as a "Competing Transaction."
Prior to the approval of the merger agreement by Iron Mountain stockholders
and Pierce Leahy shareholders, either company may engage in discussions or
negotiations with, and may furnish information concerning itself to, a third
party who without any solicitation makes a written proposal regarding a
Competing Transaction that is not subject to any material contingencies relating
to
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financing and is financially superior to the consideration to be received by the
applicable company's shareholders pursuant to the merger if:
- the Board of the company receiving the offer determines in good faith,
after consultation with its outside legal counsel, that the action is
required for it to act in a manner consistent with its fiduciary duties
under applicable law; and
- prior to furnishing information, the company has received from the third
party an executed confidentiality agreement in reasonably customary form
on terms not more favorable to the third party than the terms contained in
the confidentiality agreement entered into between Pierce Leahy and Iron
Mountain.
Pierce Leahy and Iron Mountain have agreed to promptly inform each other of
the status of any proposal or discussions that might lead to a Competing
Transaction and to provide each other with copies of all information given to a
third party.
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The parties have
agreed that New Iron Mountain will indemnify, defend and hold harmless the
present and former officers and directors of Pierce Leahy or any of its
subsidiaries against all claims or amounts that, with the approval of New Iron
Mountain as to settlements only, are paid in settlement of or otherwise in
connection with any claim based on the fact that the person is or was a director
or officer of Pierce Leahy or any of its subsidiaries and arising out of actions
or omissions occurring at or prior to the effective time of the merger, to the
fullest extent currently provided under Pierce Leahy's or its subsidiary's
organizational documents, but only to the extent permitted under applicable law.
New Iron Mountain will maintain Pierce Leahy's existing officers' and directors'
liability insurance or substantially similar insurance for six years after the
effective time of the merger.
TERMINATION OF PLANS. Pierce Leahy has agreed, if Iron Mountain requests, to
take all actions necessary to terminate its participation in any plan that
complies or is intended to comply with Section 401 of the Internal Revenue Code.
If a plan is terminated, benefit accruals will cease. For a period of three
years following the closing of the merger, if New Iron Mountain maintains any
plan intended to comply with Section 401 of the Internal Revenue Code, service
with Pierce Leahy prior to the closing of the merger will, to the extent
permitted by ERISA and the Internal Revenue Code, count as service with New Iron
Mountain for purposes of the participation, vesting and benefit accrual
provisions of any such plan to the extent such service is recognized for
similarly situated employees of Iron Mountain as of the closing of the merger.
TAX TREATMENT. Each of the parties has agreed to use its reasonable best
efforts to cause the merger to qualify as a reorganization under the provisions
of Section 368(a) of the Internal Revenue Code and to obtain opinions of counsel
as to such qualification.
OTHER COVENANTS. Pierce Leahy and Iron Mountain have also agreed to
additional covenants customary to transactions of the same size and structure as
the merger.
CONDITIONS TO COMPLETE THE MERGER
CONDITIONS TO OBLIGATIONS OF BOTH PARTIES. The obligations of each of Iron
Mountain and Pierce Leahy to complete the merger are subject to the satisfaction
of conditions, including:
- the obtaining of the requisite votes of the shareholders of Pierce Leahy
and the stockholders of Iron Mountain;
- the absence of any pending legal action seeking to restrain, delay
materially or otherwise hinder the merger, or to impose any adverse
conditions, or conditions that might reasonably be expected to have an
adverse effect on New Iron Mountain;
- the obtaining of all material governmental approvals required to complete
the merger;
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- the approval for listing on the NYSE of the shares of New Iron Mountain
common stock issuable to Iron Mountain stockholders pursuant to the merger
agreement; and
- the effectiveness of the registration statement of which this joint proxy
statement/prospectus is a part and the absence of any stop order
suspending the effectiveness of the registration statement.
CONDITIONS TO OBLIGATIONS OF IRON MOUNTAIN. The obligations of Iron Mountain
to complete the merger are also subject to the satisfaction of the following
additional conditions:
- the representations and warranties of Pierce Leahy in connection with the
merger are true and correct, except as would not reasonably be expected to
have a material adverse effect on Pierce Leahy or New Iron Mountain;
- each of the covenants and conditions to be performed or satisfied by
Pierce Leahy under the merger agreement at or prior to the closing of the
merger has been duly performed or satisfied in all material respects;
- no adverse change affecting Pierce Leahy shall have occurred and be
continuing from the condition of Pierce Leahy reflected in the financial
statements included in its Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999;
- each of the officers and directors of Pierce Leahy, other than J. Peter
Pierce, who will continue as the President and as a director of New Iron
Mountain, and each trustee under each employee benefit plan of Pierce
Leahy covered by ERISA shall have resigned from those positions;
- Iron Mountain shall have received a favorable opinion of Sullivan &
Worcester LLP, its special tax counsel, to the effect that the merger
agreement constitutes a tax-free plan of reorganization in accordance with
the provisions of Section 368(a) of the Internal Revenue Code and as to
the consequences thereof to Iron Mountain's stockholders;
- J. Peter Pierce shall have executed and delivered the employment agreement
described above under "The Merger--Interests of Officers and Directors in
the Merger"; and
- the Pierce Leahy shareholders eligible to become parties to Iron
Mountain's registration rights agreement shall have executed and delivered
a joinder to the registration rights agreement.
CONDITIONS TO OBLIGATIONS OF PIERCE LEAHY. The obligations of Pierce Leahy
to complete the merger are also subject to the satisfaction of the following
additional conditions:
- the representations and warranties of Iron Mountain in connection with the
merger are true and correct, except as would not reasonably be expected to
have an adverse effect on Iron Mountain or New Iron Mountain;
- each of the covenants and conditions to be performed or satisfied by Iron
Mountain under the merger agreement at or prior to the closing of the
merger has been duly performed or satisfied in all material respects;
- no adverse change affecting Iron Mountain shall have occurred and be
continuing from the condition of Iron Mountain reflected in the financial
statements included in its Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999;
- Pierce Leahy shall have received a favorable opinion of Cozen and
O'Connor, its special tax counsel, to the effect that the merger agreement
constitutes a tax-free plan of reorganization in accordance with the
provisions of Section 368(a) of the Internal Revenue Code and as to the
consequences thereof to Pierce Leahy; and
- Iron Mountain shall have executed and delivered the joinder to the
registration rights agreement.
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<PAGE>
The obligations of each of Pierce Leahy and Iron Mountain to complete the
merger are further subject to the condition that all agreements, certificates,
opinions and other documents be reasonably satisfactory in form, scope and
substance to Pierce Leahy, Iron Mountain and their counsel, and Pierce Leahy,
Iron Mountain and their counsel shall have received all information and copies
of all documents that they may reasonably request.
TERMINATION AND EXPENSES
TERMINATION EVENTS. The merger agreement may be terminated at any time prior
to the effective time of the merger, whether before or after approval by the
Pierce Leahy shareholders or Iron Mountain stockholders:
- by mutual consent of Iron Mountain and Pierce Leahy;
- by either Iron Mountain or Pierce Leahy if either of the following occurs:
(1) any permanent injunction, decree, judgment, statute or regulation
preventing the completion of the merger has become final and
nonappealable; or
(2) if the merger and related transactions fail to receive the requisite
vote of the Pierce Leahy shareholders or the Iron Mountain
stockholders at the applicable special meeting.
- by Pierce Leahy if any of the following occurs:
(1) Iron Mountain is in breach of the merger agreement or its
representations or warranties become and continue to be untrue and the
breach or untruth would reasonably be expected to have an adverse
effect on Iron Mountain or New Iron Mountain, unless the breach or
untruth is capable of being cured by and will not prevent or delay
completion of the merger by April 30, 2000;
(2) the merger and the related transactions have not been completed by
April 30, 2000;
provided, that if the events in (1) or (2) occur, Pierce Leahy is not
in material breach of any covenant or agreement in the merger
agreement, unless the breach is capable of being cured by and will not
prevent or delay completion of the merger by April 30, 2000;
(3) prior to the approval of the merger agreement by the Pierce Leahy
shareholders, Pierce Leahy's Board of Directors withdraws its
recommendation of the merger agreement and recommends a Competing
Transaction, as long as:
- Pierce Leahy is not then in breach of its covenants described above
under "--Material Covenants--No Solicitation";
- prior to the termination, Pierce Leahy has negotiated with Iron
Mountain in good faith to make such adjustments in the terms and
conditions of the merger agreement as would enable Pierce Leahy to
proceed with the transactions contemplated by the merger agreement;
and
- Pierce Leahy's Board of Directors has determined in good faith,
after consultation with Pierce Leahy's outside legal counsel, that
termination is required for the Board of Directors to act in a
manner consistent with its fiduciary duties under applicable law;
(4) the Board of Directors of Iron Mountain (A) withdraws or modifies its
recommendation so that it is not in favor of the merger agreement, or
resolves to do so, or (B) recommends or resolves to recommend to Iron
Mountain's stockholders a Competing Transaction; or
(5) Iron Mountain enters into or agrees to enter into a Competing
Transaction.
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<PAGE>
- by Iron Mountain if any of the following occurs:
(1) Pierce Leahy is in breach of the merger agreement or its
representations or warranties become and continue to be untrue and the
breach or untruth would reasonably be expected to have an adverse
effect on Pierce Leahy or New Iron Mountain, unless the breach or
untruth is capable of being cured by and will not prevent or delay
completion of the merger by April 30, 2000;
(2) the merger and the related transactions have not been completed by
April 30, 2000;
provided, that if the events in (1) or (2) occur, Iron Mountain is not
in material breach of any covenant or agreement in the merger
agreement, unless the breach is capable of being cured by and will not
prevent or delay completion of the merger by April 30, 2000;
(3) prior to the approval of the merger agreement by the Iron Mountain
stockholders, Iron Mountain's Board of Directors withdraws its
recommendation of the merger agreement, and recommends a Competing
Transaction, as long as:
- Iron Mountain is not then in breach of its covenants described above
under "--Material Covenants--No Solicitation"; and
- Iron Mountain's Board of Directors has determined in good faith,
after consultation with Iron Mountain's outside legal counsel, that
termination is required for the Board of Directors to act in a
manner consistent with its fiduciary duties under applicable law.
(4) the Board of Directors of Pierce Leahy (A) withdraws or modifies its
recommendation so that it is not in favor of the merger agreement, or
resolves to do so, or (B) recommends or resolves to recommend to
Pierce Leahy's shareholders a Competing Transaction; or
(5) Pierce Leahy enters into or agrees to enter a Competing Transaction.
EFFECT OF TERMINATION. With exceptions relating to confidentiality, public
announcements, effect of termination and expenses, in the event of the
termination of the merger agreement, there will be no liability on the part of
any party thereto, or any of their respective officers or directors, to the
other party and all rights and obligations of any party thereto will cease. No
termination will prevent either party from seeking damages or pursuing other
remedies for any breach of the merger agreement.
FEES AND EXPENSES. Each party will bear its own costs and expenses incurred
in connection with the merger, except that filing fees for regulatory filings
will be shared equally.
In addition, Pierce Leahy will pay Iron Mountain a fee of $35 million if the
merger agreement is terminated:
- by Iron Mountain, if the Pierce Leahy Board withdraws or modifies its
recommendation to vote in favor of the merger agreement, recommends a
Competing Transaction or resolves to do either of the foregoing;
- by Iron Mountain, if Pierce Leahy enters into or agrees to enter into a
Competing Transaction;
- by Pierce Leahy, if prior to the approval of the merger agreement by the
Pierce Leahy shareholders, Pierce Leahy's Board withdraws its
recommendation of the merger agreement and recommends a Competing
Transaction to Pierce Leahy's shareholders, subject to the conditions for
such a termination; or
- by Pierce Leahy or Iron Mountain, if the merger and related transactions
fail to receive the requisite vote of the Pierce Leahy shareholders or the
Iron Mountain stockholders at the applicable special meeting, and
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<PAGE>
(1) Pierce Leahy's Board of Directors has materially modified or withdrawn
its recommendation of the merger agreement prior to Pierce Leahy's
special meeting of shareholders; or
(2) a Competing Transaction has been proposed and such proposal has not
been withdrawn prior to Pierce Leahy's special meeting of shareholders
and within one year thereafter Pierce Leahy enters into a definitive
agreement with respect to that proposal.
Iron Mountain will pay Pierce Leahy a fee of $35 million if the merger
agreement is terminated:
- by Pierce Leahy, if the Iron Mountain Board withdraws or modifies its
recommendation to vote in favor of the merger agreement, recommends a
Competing Transaction or resolves to do either of the foregoing;
- by Pierce Leahy, if Iron Mountain enters into or agrees to enter into a
Competing Transaction;
- by Iron Mountain, if prior to the approval of the merger agreement by the
Iron Mountain stockholders, Iron Mountain's Board withdraws its
recommendation of the merger agreement and recommends a Competing
Transaction to Iron Mountain's stockholders, subject to the conditions for
such a termination; or
- by Pierce Leahy or Iron Mountain, if the merger and related transactions
fail to receive the requisite vote of the Pierce Leahy shareholders or the
Iron Mountain stockholders at the applicable special meeting, and
(1) Iron Mountain's Board of Directors has materially modified or
withdrawn its recommendation of the merger agreement prior to Iron
Mountain's special meeting of stockholders; or
(2) a Competing Transaction has been proposed and such proposal has not
been withdrawn prior to Iron Mountain's special meeting of
stockholders and within one year thereafter Iron Mountain enters into
a definitive agreement with respect to that proposal.
AMENDMENT OR WAIVER
The parties may amend the merger agreement by mutual consent, except that
they may not amend the agreement after shareholder approval has been obtained in
a manner that requires shareholder approval unless such approval is obtained.
Each party may waive compliance with, or extend the time for performance of, any
provision of the merger agreement that runs to its benefit.
CORPORATE GOVERNANCE
As of the effective time of the merger, the New Iron Mountain Board will
consist of eleven members, including the nine current members of the Iron
Mountain Board of Directors, J. Peter Pierce, who currently serves as President,
Chief Executive Officer and a director of Pierce Leahy, and one other person who
is not currently a director of either company.
Upon the closing of the merger, the executive officers of New Iron Mountain
will be as follows:
- C. Richard Reese, the current Chairman of the Board and Chief Executive
Officer of Iron Mountain, will assume those same positions for New Iron
Mountain;
- J. Peter Pierce, President and Chief Executive Officer of Pierce Leahy,
will become President of New Iron Mountain;
- David S. Wendell, the current President and Chief Operating Officer of
Iron Mountain, will become Senior Vice President of New Iron Mountain;
- John F. Kenny, Jr., the current Executive Vice President and Chief
Financial Officer of Iron Mountain, will assume those same positions for
New Iron Mountain; and
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<PAGE>
- Harold E. Ebbighausen, the current President of Arcus Data
Security, Inc., a subsidiary of Iron Mountain, will maintain his position
under New Iron Mountain.
For further information on the directors and executive officers of New Iron
Mountain, see "Election of Directors of New Iron Mountain."
RESTRICTIONS ON RESALES BY AFFILIATES AND REGISTRATION RIGHTS
All shares of New Iron Mountain common stock held by Iron Mountain
stockholders after the merger will be freely transferable, except that shares
held by persons who are deemed to be "affiliates," as that term is defined under
the Securities Act, of Iron Mountain prior to the merger may be resold by them
only pursuant to an effective registration statement under the Securities Act or
an applicable exemption from registration, such as Rule 145 under the Securities
Act. In addition, affiliates of New Iron Mountain will be subject to the resale
limitations of Rule 144 under the Securities Act. "Affiliates" are generally
defined as individuals or entities that control, are controlled by, or are under
common control with, a company and include executive officers and directors.
Pursuant to the merger agreement, Pierce Leahy will assume the rights and
obligations of Iron Mountain under Iron Mountain's existing registration rights
agreement with respect to certain shares of New Iron Mountain stock to be issued
in the merger. Pierce Leahy and Iron Mountain have agreed that Iron Mountain's
registration rights agreement will be amended as of the closing of the merger to
join the Pierce Family Shareholders, together with their permitted assignees,
with respect to an aggregate of 5,142,610 shares listed in the shareholders'
agreement, without giving effect to Pierce Leahy's contemplated stock dividend.
See "The Merger--Pierce Leahy Shareholders' Agreement." Those Pierce Leahy
shareholders will collectively be entitled to two "demand" registration rights
requesting the registration of common stock of New Iron Mountain owned by them
and unlimited "piggy back" registration rights to register any amount of New
Iron Mountain common stock owned by them that are listed in the shareholders'
agreement.
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<PAGE>
THE COMPANIES
IRON MOUNTAIN INCORPORATED
Iron Mountain is the world's largest records and information management
services company, as measured by its revenues. Iron Mountain's management
believes that it is the industry leader in business records management services,
off-site data security services, which is the management of electronic records,
and healthcare information management. As an international, full-service
provider of records and information management services, Iron Mountain and its
5,400 employees serve over 70,000 customer accounts, including more than half of
the Fortune 500. Iron Mountain provides storage for all major media, including
paper, which is the dominant form of records storage, and magnetic media,
including computer tapes. Its principal services provided to its storage
customers include courier pick-up and delivery, filing, retrieval and
destruction of records, database management, customized reporting and disaster
recovery support. It also sells storage materials, including cardboard boxes and
magnetic media, and provides consulting, facilities management and other
outsourcing services. As of October 31, 1999, Iron Mountain operated nearly 340
facilities in 85 markets throughout the United States, Europe and Mexico.
PIERCE LEAHY CORP.
Pierce Leahy is the largest hardcopy records management company in North
America, as measured by its cubic feet of records currently under management. As
an international full service provider of records management and related
services, Pierce Leahy and its 3,500 employees serve over 45,000 customer
accounts enabling them to outsource their data and records management functions.
Pierce Leahy offers storage for all major media, including paper, computer
tapes, optical disks, microfilm, videotapes and X-rays. In addition, it provides
next day or same day records retrieval and delivery, allowing customers prompt
access to all stored material. Pierce Leahy also offers other data management
services, including customer records management programs, imaging services and
records management consulting services, and marketing literature storage and
fulfillment services. As of October 31, 1999, Pierce Leahy operated nearly 250
facilities in 76 markets throughout the United States, Canada and the United
Kingdom.
NEW IRON MOUNTAIN
After the merger, New Iron Mountain will provide records and information
management services to over 100,000 customer accounts in 77 markets in the
United States. New Iron Mountain's domestic operations will employ about 7,400
people and operate nearly 500 facilities. Outside the United States, it will
serve over 15,000 customer accounts in 28 markets, employ approximately 1,500
people and operate about 90 facilities.
Giving effect to the merger and the 1998 and 1999 acquisitions completed by
Iron Mountain and Pierce Leahy through October 31, 1999, New Iron Mountain would
have had pro forma revenues of $794.7 million for the year ended December 31,
1998 and $661.7 million for the nine months ended September 30, 1999. For the
same periods, pro forma revenues from international operations would have been
$92.4 million and $78.0 million, respectively. Upon completion of the merger,
New Iron Mountain will have approximately 54 million shares outstanding and an
equity market capitalization of $1.7 billion, based on Iron Mountain's closing
price on November 19, 1999.
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<PAGE>
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of material United States federal income
tax consequences of both the stock dividend and the merger to Pierce Leahy, Iron
Mountain and their shareholders and stockholders. The discussion is based upon
current provisions of the Internal Revenue Code of 1986, existing temporary and
final Treasury Department regulations, and administrative rulings and court
decisions now in effect, all of which are subject to change or differing
interpretations, possibly on a retroactive basis. Neither Pierce Leahy nor Iron
Mountain has sought a ruling from the Internal Revenue Service with respect to
any matter described in this summary, and neither can provide assurance that the
IRS or a court will agree with the statements made in this summary. The summary
applies to you only if you hold all your Pierce Leahy stock and Iron Mountain
stock as a capital asset, which generally is an asset held for investment rather
than as inventory or as property used in a trade or business, and only if you
continue to hold your New Iron Mountain stock as a capital asset after the
merger. The summary does not discuss the particular tax consequences that might
be relevant to you if you are subject to special rules under the federal income
tax law, for example if you are:
- a bank, life insurance company, regulated investment company, or other
financial institution;
- a broker or dealer in securities or foreign currency;
- a person that has a functional currency other than the U.S. dollar;
- a person who acquired Pierce Leahy stock or Iron Mountain stock in
connection with your employment or other performance of services;
- a person subject to alternative minimum tax;
- a person who owns Pierce Leahy stock or Iron Mountain stock as part of a
straddle, hedging transaction, conversion transaction, or constructive
sale transaction;
- an individual who is not a citizen or resident of the United States, a
foreign corporation or partnership, or another foreign entity;
- a tax-exempt entity; or
- an expatriate.
In addition, the following summary does not address all possible tax
consequences, and in particular it does not discuss any estate, gift, state,
local, or foreign tax consequences. For all these reasons, shareholders of
Pierce Leahy and stockholders of Iron Mountain are urged to consult their tax
advisors to determine the specific tax consequences to them of the stock
dividend and the merger, including any state, local or other tax consequences.
One condition to the obligation of Pierce Leahy to complete the merger is
the receipt by Pierce Leahy of an opinion of Cozen and O'Connor to the effect
that the merger is a reorganization described in Internal Revenue Code
Section 368(a) and as to the consequences thereof to Pierce Leahy. In addition,
one condition to the obligation of Iron Mountain to complete the merger is the
receipt by Iron Mountain of an opinion of Sullivan & Worcester LLP to the effect
that the merger is a reorganization described in Internal Revenue Code
Section 368(a) and as to the consequences thereof to the Iron Mountain
stockholders. These opinions will be based upon representations furnished by
Pierce Leahy and Iron Mountain dated as of the closing of the merger. See "The
Merger Agreement--Conditions to Complete the Merger."
Cozen and O'Connor has provided an opinion to Pierce Leahy, based on the law
in effect as of the date of the filing of this joint proxy statement/prospectus,
regarding the material federal income tax consequences of the stock dividend and
the merger to Pierce Leahy and its shareholders. Sullivan & Worcester LLP has
provided an opinion to Iron Mountain, based on the law in effect as of the date
of
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<PAGE>
the filing of this joint proxy statement/prospectus, regarding the material
federal income tax consequences of the merger to Iron Mountain and its
stockholders. These tax opinions, which are not intended to satisfy the closing
conditions referred to above, have been filed with the SEC as exhibits to the
registration statement of which this joint proxy statement/prospectus forms a
part. These tax opinions rely on assumptions that are subject to confirmation by
Pierce Leahy and Iron Mountain at the closing of the merger, including
assumptions regarding the absence of changes in existing facts and the
completion of the merger in accordance with both the merger agreement and the
statements made in this joint proxy statement/prospectus. If any of these
assumptions is inaccurate, the conclusions contained in these opinions could be
affected. Taken together, these tax opinions conclude that the merger will be an
Internal Revenue Code Section 368(a) reorganization, and that the stock dividend
and the merger will have the consequences described below.
CONSEQUENCES TO PIERCE LEAHY AND ITS SHAREHOLDERS
As described above, Cozen and O'Connor has provided an opinion to Pierce
Leahy regarding the material federal income tax consequences of the stock
dividend and the merger to Pierce Leahy and its shareholders. This tax opinion
concludes that Pierce Leahy will not recognize gain or loss as a result of the
merger, and that the stock dividend and the merger will have the following
consequences to you if you are a Pierce Leahy shareholder.
- You will recognize no gain or loss as a result of receiving Pierce Leahy
common stock in the form of the stock dividend, except with respect to any
cash you receive in lieu of a fractional share interest in Pierce Leahy
common stock.
- Your tax basis in the shares of Pierce Leahy common stock with respect to
which the stock dividend is made will be allocated between those shares
and the shares you receive in the dividend in proportion to the fair
market values of each on the date of distribution.
- Your holding period in the shares of Pierce Leahy common stock you receive
in the stock dividend will include the holding period of the shares of
common stock with respect to which the stock dividend is made.
- If you receive cash instead of a fractional share of Pierce Leahy common
stock in the stock dividend, you will be treated as having received the
fractional share, and then as having that fractional share redeemed by
Pierce Leahy in a distribution under Section 302 of the Internal Revenue
Code. Accordingly, you should, in general, recognize capital gain or loss
equal to the difference, if any, between the amount of cash you receive
and the tax basis allocable to the fractional share.
- You will recognize no gain or loss as a result of the merger or as a
result of exchanging your Pierce Leahy common stock certificates for New
Iron Mountain common stock certificates, and your tax basis and holding
period in your New Iron Mountain common stock immediately after the merger
will be the same as they were for your Pierce Leahy common stock
immediately preceding the merger after giving effect to the stock
dividend's tax consequences described above.
- Under the backup withholding rules, you may be subject to backup
withholding at the rate of 31% with respect to cash payments for
fractional shares received pursuant to the stock dividend, unless you
(1) are a corporation or come within certain other exempt categories and,
when required, demonstrate this fact, or (2) provide a taxpayer
identification number, certify that you are not subject to backup
withholding, and otherwise comply with applicable requirements of the
backup withholding rules. If you do not provide your correct taxpayer
identification number, you may also be subject to penalties imposed by the
IRS. Any amount paid as backup withholding
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will be creditable against your federal income tax liability, provided
that applicable filings are made with the IRS.
CONSEQUENCES TO IRON MOUNTAIN AND ITS STOCKHOLDERS
As described above, Sullivan & Worcester LLP has provided an opinion to Iron
Mountain regarding the material federal income tax consequences of the merger to
Iron Mountain and its stockholders. This tax opinion concludes that Iron
Mountain will not recognize gain or loss in the merger, except that Iron
Mountain will recognize gain to the extent its aggregate liabilities exceed its
assets' aggregate adjusted tax basis at the time of the merger. Iron Mountain's
preliminary estimate as of September 30, 1999, which preliminary estimate may be
refined in the future, is that its aggregate liabilities do not exceed its
assets' aggregate adjusted tax basis, and thus Iron Mountain's preliminary
expectation is that it will recognize no gain in the merger. Sullivan &
Worcester LLP has not reviewed and will not review Iron Mountain's computation
of its aggregate liabilities or its assets' aggregate adjusted tax basis.
Sullivan & Worcester LLP's tax opinion to Iron Mountain also concludes that
if you are an Iron Mountain stockholder, then you will have the following
consequences as a result of the merger.
- You will recognize no gain or loss when your Iron Mountain common stock is
converted into New Iron Mountain common stock as a result of the merger or
as a result of exchanging your Iron Mountain stock certificates for New
Iron Mountain stock certificates.
- Your tax basis and holding period in your New Iron Mountain common stock
immediately after the merger will be the same as they were for your Iron
Mountain common stock immediately preceding the merger.
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IRON MOUNTAIN INCORPORATED
SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected statements of operations and balance sheet data of
Iron Mountain are derived from Iron Mountain's financial statements. You should
read this information in conjunction with Iron Mountain's financial statements
and Iron Mountain's "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included or incorporated by reference in this joint
proxy statement/prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Storage.......................................... $ 54,098 $ 64,165 $ 85,826 $125,968 $230,702 $168,046 $229,989
Service and Storage Material Sales............... 33,520 40,271 52,892 82,797 153,259 113,018 148,054
-------- -------- -------- -------- -------- -------- --------
Total Revenues................................. 87,618 104,436 138,718 208,765 383,961 281,064 378,043
-------- -------- -------- -------- -------- -------- --------
Operating Expenses:
Cost of Sales (excluding depreciation)........... 45,880 52,277 70,747 106,879 192,113 141,179 189,828
Selling, General and Administrative.............. 20,853 26,035 34,342 51,668 95,867 70,067 94,194
Depreciation and Amortization.................... 8,690 12,341 16,936 27,107 48,301 35,591 46,214
-------- -------- -------- -------- -------- -------- --------
Total Operating Expenses....................... 75,423 90,653 122,025 185,654 336,281 246,837 330,236
-------- -------- -------- -------- -------- -------- --------
Operating Income................................... 12,195 13,783 16,693 23,111 47,680 34,227 47,807
Interest Expense, Net.............................. 8,954 11,838 14,901 27,712 45,673 34,166 40,246
Other Income, Net.................................. -- -- -- -- 1,384 1,700 115
-------- -------- -------- -------- -------- -------- --------
Income (Loss) from Continuing Operations Before
Provision (Benefit) for Income Taxes and Minority
Interest......................................... 3,241 1,945 1,792 (4,601) 3,391 1,761 7,676
Provision (Benefit) for Income Taxes............... 1,957 1,697 1,435 (80) 6,558 3,720 7,805
Minority Interest.................................. -- -- -- -- -- -- 515
-------- -------- -------- -------- -------- -------- --------
Income (Loss) from Continuing Operations........... 1,284 248 357 (4,521) (3,167) (1,959) (644)
Income from Discontinued Operations (net of
applicable taxes)................................ -- -- -- -- 201 315 241
Loss on Sale of Discontinued Operations (net of tax
benefit)......................................... -- -- -- -- -- -- (13,400)
-------- -------- -------- -------- -------- -------- --------
Income (Loss) Before Extraordinary Charge.......... 1,284 248 357 (4,521) (2,966) (1,644) (13,803)
Extraordinary Charge (net of tax benefit).......... -- -- 2,126 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net Income (Loss) Before Warrant Accretion......... 1,284 248 (1,769) (4,521) (2,966) (1,644) (13,803)
Accretion of Redeemable Put Warrant................ 1,412 2,107 280 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net Loss Applicable to Common Stockholders......... $ (128) $ (1,859) $ (2,049) $ (4,521) $ (2,966) $ (1,644) $(13,803)
======== ======== ======== ======== ======== ======== ========
Net Loss Per Common Share--Basic and Diluted:
Income (Loss) from Continuing Operations........... $ (0.40) $ (32.61) $ 0.00 $ (0.26) $ (0.12) $ (0.07) (0.02)
Income from Discontinued Operations................ -- -- -- -- 0.01 0.01 0.01
Loss on Sale of Discontinued Operations (net of tax
benefit)......................................... -- -- -- -- -- -- (0.41)
-------- -------- -------- -------- -------- -------- --------
Income (Loss) Before Extraordinary Charge.......... (0.40) (32.61) 0.00 (0.26) (0.11) (0.06) (0.42)
Extraordinary Charge (net of tax benefit).......... -- -- (0.15) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net Loss Applicable to Common Stockholders......... $ (0.40) $ (32.61) $ (0.15) $ (0.26) $ (0.11) $ (0.06) $ (0.42)
======== ======== ======== ======== ======== ======== ========
Weighted Average Common Shares Outstanding--Basic
and Diluted...................................... 321 57 13,911 17,172 27,470 26,848 32,641
======== ======== ======== ======== ======== ======== ========
Pro Forma (1):
Net Loss Per Share Applicable to Common
Stockholders................................... $ (0.01) $ (0.16) $ (0.13) $ (0.26) $ (0.11) $ (0.06) $ (0.42)
======== ======== ======== ======== ======== ======== ========
Weighted Average Common Shares Outstanding....... 11,976 11,676 15,206 17,172 27,470 26,848 32,641
======== ======== ======== ======== ======== ======== ========
</TABLE>
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<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA from Continuing Operations(2)............... $ 20,885 $ 26,124 $ 33,629 $ 50,218 $ 95,981 $ 69,818 $ 94,021
EBITDA from Continuing Operations as a Percentage
of Total Revenues................................ 23.8% 25.0% 24.2% 24.1% 25.0% 24.8% 24.9%
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
---------------------------------------------------- ---------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and Cash Equivalents......................... $ 1,303 $ 1,585 $ 3,453 $ 24,510 $ 1,715 $ 522 $ 3,472
Total Assets...................................... 136,859 186,881 281,799 636,786 967,385 894,706 1,287,924
Total Debt........................................ 86,258 121,874 184,733 428,018 456,178 443,189 603,063
Stockholders' Equity.............................. 22,869 21,011 52,384 137,733 338,882 340,460 484,155
</TABLE>
- ------------------------------
(1) Represents pro forma net loss per share as if the preferred stock that was
converted into common stock in connection with Iron Mountain's initial
public offering completed in 1996 had been converted for all periods
presented.
(2) Based on Iron Mountain's experience in the records and information
management services industry, Iron Mountain's management believes that
EBITDA is an important tool for measuring the performance of records and
information management services companies (including potential acquisitions)
in several areas, such as liquidity, operating performance and leverage. In
addition, lenders use EBITDA in evaluating records and information
management services companies, and substantially all of Iron Mountain's
financing agreements contain covenants in which EBITDA is used as a measure
of financial performance. However, you should not consider EBITDA to be a
substitute for operating or net income (as determined in accordance with
GAAP) as an indicator of Iron Mountain's performance or for cash flow from
operations (as determined in accordance with GAAP) as a measure of
liquidity. Revenue and EBITDA information for the nine months ended
September 30, 1999 included in this table give effect to all of the
consolidated revenues and EBITDA of Britannia Data Management, Memogarde and
Sistemas de Archivos Corporativo without reduction for the 49.9% minority
interest.
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PIERCE LEAHY CORP.
SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected statements of operations and balance sheet data of
Pierce Leahy are derived from Pierce Leahy's financial statements. You should
read this information in conjunction with Pierce Leahy's financial statements
and Pierce Leahy's "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included or incorporated by reference in this joint
proxy statement/prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Storage............................................ $47,123 $55,501 $75,900 $107,879 $153,533 $111,217 $139,856
Service and Storage Material Sales................. 35,513 39,895 53,848 75,638 116,767 83,816 113,903
------- ------- ------- -------- -------- -------- --------
Total Revenues................................... 82,636 95,396 129,748 183,517 270,300 195,033 253,759
Operating Expenses:
Cost of Sales (excluding depreciation and
amortization).................................... 49,402 55,616 73,870 101,940 154,435 111,155 143,429
Selling, General and Administrative................ 15,882 16,148 20,007 30,070 36,994 27,512 33,563
Depreciation and Amortization...................... 8,436 8,163 12,869 21,528 35,772 25,181 32,084
Special Compensation Charge........................ -- -- -- 1,752 -- -- --
Foreign Currency Exchange.......................... -- -- -- 702 7,907 7,908 (5,505)
Consulting Payments to Related Parties............. 500 500 -- -- -- -- --
Non-Recurring Charge............................... -- -- 3,254 -- -- -- --
------- ------- ------- -------- -------- -------- --------
Operating Income..................................... 8,416 14,969 19,748 27,525 35,192 23,277 50,188
Interest Expense..................................... 7,216 9,622 17,225 29,262 42,864 30,772 38,877
------- ------- ------- -------- -------- -------- --------
Income (Loss) Before Income Taxes and Extraordinary
Charge............................................. 1,200 5,347 2,523 (1,737) (7,672) (7,495) 11,311
Income Taxes......................................... -- -- -- 7,424 3,318 2,613 3,482
Extraordinary Charge (net of applicable taxes)....... 5,991 3,279 2,015 6,036 -- -- --
------- ------- ------- -------- -------- -------- --------
Net Income (Loss).................................... (4,791) 2,068 508 (15,197) (10,990) (10,108) 7,829
Perferred Stock Dividend............................. -- -- -- -- -- -- 648
Accretion of Redeemable Warrants..................... 16 889 1,561 -- -- -- --
------- ------- ------- -------- -------- -------- --------
Net Income (Loss) Applicable to Common
Shareholders....................................... $(4,807) $ 1,179 $(1,053) $(15,197) $(10,990) $(10,108) $ 7,181
======= ======= ======= ======== ======== ======== ========
Net Income (Loss) Per Common Share--Basic:
Income (Loss) Before Extraordinary Charge.......... $ 0.18 $ 0.41 $ 0.09 $ (0.69) $ (0.65) $ (0.60) $ 0.42
Extraordinary Charge (net of applicable taxes)..... (0.56) (0.30) (0.19) (0.45) -- -- --
------- ------- ------- -------- -------- -------- --------
Net Income (Loss) Applicable to Common
Shareholders..................................... $ (0.38) $ 0.11 $ (0.10) $ (1.14) $ (0.65) $ (0.60) $ 0.42
======= ======= ======= ======== ======== ======== ========
Net Income (Loss) Per Common Share--Diluted:
Income (Loss) Before Extraordinary Charge.......... $ 0.18 $ 0.41 $ 0.09 $ (0.69) $ (0.65) $ (0.60) $ 0.41
Extraordinary Charge (net of applicable taxes)..... (0.56) (0.30) (0.19) (0.45) -- -- --
------- ------- ------- -------- -------- -------- --------
Net Income (Loss) Applicable to Common
Shareholders..................................... $ (0.38) $ 0.11 $ (0.10) $ (1.14) $ (0.65) $ (0.60) $ 0.41
======= ======= ======= ======== ======== ======== ========
Weighted Average Common Shares Outstanding:
Basic.............................................. 10,591 10,591 10,547 13,385 16,805 16,731 17,066
======= ======= ======= ======== ======== ======== ========
Diluted............................................ 10,888 10,890 10,631 13,385 16,805 16,731 17,589
======= ======= ======= ======== ======== ======== ========
Pro Forma (unaudited) (1):
Pro Forma Net Loss Applicable
to Common Shareholders $ (9,225)
========
Basic and Diluted Net Loss per Common Share:
Loss before Extraordinary Charge................. $ (0.24)
Extraordinary Charge............................. (0.45)
--------
Pro Forma Basic and Diluted Net Loss Per Common
Share............................................ $ (0.69)
========
Weighted Average Common Shares Outstanding......... 13,385
========
OTHER DATA:
EBITDA (2)........................................... $17,352 $23,632 $35,871 $ 51,507 $ 78,871 $ 56,366 $ 76,767
EBITDA as a Percentage of Total Revenues............. 21.0% 24.8% 27.6% 28.1% 29.2% 28.9% 30.3%
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
---------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents........................... $ 358 $ 722 $ 1,254 $ 1,782 $ 2,312 $ 4,358 $ 2,028
Total Assets........................................ 79,746 131,328 234,820 394,713 666,458 654,629 751,058
Total Debt (including redeemable warrants).......... 77,683 120,071 217,423 279,197 518,111 510,942 583,348
Shareholders' equity (deficit)...................... (19,341) (18,201) (25,438) 59,323 63,095 63,907 70,483
</TABLE>
- ------------------------------
(1) Until July 1, 1997, Pierce Leahy was taxed as a Subchapter S corporation.
Such status was terminated in connection with Pierce Leahy's 1997 initial
public offering. The pro forma data indicates the basic and diluted net loss
per common share as if Pierce Leahy had provided for income taxes for the
entire 1997 period.
(2) For purposes of this table, EBITDA is defined to be earnings before
interest, taxes, depreciation and amortization, extraordinary charges, non
recurring charges, special compensation charge, consulting payments to
related parties and foreign currency exchange. Pierce Leahy's management
believes that EBITDA is an important tool in evaluating records and
information management services companies. Moreover, substantially all of
Pierce Leahy's financing agreements contain covenants in which EBITDA is
used as a measure of financial performance. However, EBITDA is not a measure
of performance under GAAP and should not be considered in isolation or as a
substitute for net income, cash flows from operating activities and other
income or cash flow statement data prepared in accordance with GAAP, or as a
measure of profitability or liquidity.
56
<PAGE>
COMPARATIVE PER COMMON SHARE DATA
You should read this information in conjunction with the historical
financial statements of Iron Mountain and Pierce Leahy and with the New Iron
Mountain, Iron Mountain and Pierce Leahy pro forma financial statements included
or incorporated by reference in this joint proxy statement/ prospectus.
<TABLE>
<CAPTION>
PRO FORMA AND
EQUIVALENT
PRO FORMA PRO FORMA
HISTORICAL IRON HISTORICAL PRO FORMA NEW IRON
IRON MOUNTAIN MOUNTAIN PIERCE LEAHY PIERCE LEAHY MOUNTAIN(1)
------------- --------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Income (loss) per common share from
continuing operations:
Basic:
Nine months ended September 30,
1999............................ $ (0.02) $ (0.03) $ 0.42 $ 0.45 $ (0.02)
Year ended December 31, 1998...... (0.12) (0.23) (0.65) (1.06) (0.65)
Diluted:
Nine months ended September 30,
1999............................ (0.02) (0.03) 0.41 0.43 (0.02)
Year ended December 31, 1998...... (0.12) (0.23) (0.65) (1.06) (0.65)
Book value per common share:
September 30, 1999(2)............. $ 13.70 $ 13.70 $ 4.13 $ 4.13 $ 17.58
</TABLE>
- ------------------------
(1) The equivalent pro forma net loss per share and equivalent pro forma book
value per share gives effect to the conversion of Iron Mountain stock into
New Iron Mountain stock. As described in the New Iron Mountain's Pro Forma
Financial Statements, the pro forma weighted average shares outstanding
include the effect of the 10% stock dividend.
(2) Computed by dividing shareholders' equity by the respective number of common
shares outstanding as of September 30, 1999.
57
<PAGE>
NEW IRON MOUNTAIN
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet of
New Iron Mountain has been prepared based upon the Iron Mountain and Pierce
Leahy Pro Forma Balance Sheets as of September 30, 1999. The Iron Mountain Pro
Forma Balance Sheet gives effect to Iron Mountain's acquisitions not acquired or
consolidated as of September 30, 1999. The Pierce Leahy Pro Forma Balance Sheet
gives effect to the redemption of Pierce Leahy's redeemable preferred stock on
November 1, 1999. The New Iron Mountain Pro Forma Balance Sheet gives effect to
the merger as if it had occurred as of September 30, 1999.
The following Unaudited Pro Forma Condensed Consolidated Statements of
Operations of New Iron Mountain for the nine months ended September 30, 1999 and
for the year ended December 31, 1998 have been prepared based upon the Iron
Mountain and Pierce Leahy Pro Forma Statements of Operations for these same
periods. The New Iron Mountain Pro Forma Statements of Operations give effect to
the merger as if it had occurred as of January 1, 1998.
The acquisition of Pierce Leahy by Iron Mountain will be effected by merging
Iron Mountain with and into Pierce Leahy, with Pierce Leahy being the surviving
legal entity. Immediately after the merger, Pierce Leahy will change its name to
Iron Mountain Incorporated. As the Iron Mountain stockholders will own
approximately 65% of New Iron Mountain, the merger will be accounted for as a
reverse acquisition, and Iron Mountain will be the acquiring company for
accounting purposes.
The pro forma financial statements do not give effect to estimated annual
net cost savings of $15 million. Management expects to achieve this annual level
of savings within three years after the merger. Further, the pro forma financial
statements do not reflect any costs that may be associated with integrating the
two companies as it is not practicable to quantify these costs at this time.
These costs may be material to New Iron Mountain's results of operations.
Depending upon management's plans and the nature and timing of the costs, the
costs may be accounted for as part of the acquisition accounting, as a
post-combination restructuring charge, as operating expenses in the period
incurred or as capital expenditures.
The New Iron Mountain Pro Forma Statements of Operations do not necessarily
indicate the actual results of operations that we would have reported if the
events described above had occurred as of January 1, 1998, nor do they
necessarily indicate the results of future operations. In the opinion of
management of Iron Mountain and Pierce Leahy, all adjustments and disclosures
necessary to fairly present these pro forma financial statements have been made.
You should read the New Iron Mountain Pro Forma Financial Statements in
conjunction with each of Iron Mountain's and Pierce Leahy's Pro Forma Financial
Statements, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and financial statements included or incorporated by
reference in this joint proxy statement/prospectus.
58
<PAGE>
NEW IRON MOUNTAIN
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA
IRON PIERCE PRO FORMA NEW
MOUNTAIN(1) LEAHY(1)(2) ADJUSTMENTS IRON MOUNTAIN
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets............................... $ 139,704 $ 66,788 $ -- $ 206,492
Property, Plant and Equipment, net........... 386,155 262,576 -- 648,731
Goodwill, net................................ 740,800 353,871 438,378 (A) 1,533,049
Other Long-term Assets....................... 40,129 67,823 (59,587)(A) 48,365
---------- -------- -------- ----------
Total Assets........................... $1,306,788 $751,058 $378,791 $2,436,637
========== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities.......................... $ 118,701 $ 86,107 $ -- $ 204,808
Long-term Debt, net of Current Portion....... 606,703 569,032 3,837 (B) 1,179,572
Other Long-term Liabilities.................. 17,113 -- -- 17,113
Deferred Rent................................ 10,591 6,822 (5,209)(B) 12,204
Deferred Income Taxes........................ 21,168 18,614 (17,084)(B) 22,698
Minority Interest............................ 48,357 -- -- 48,357
Shareholders' Equity......................... 484,155 70,483 397,247 (B) 951,885
---------- -------- -------- ----------
Total Liabilities and Shareholders'
Equity............................... $1,306,788 $751,058 $378,791 $2,436,637
========== ======== ======== ==========
</TABLE>
- ------------------------
(1) Represents the pro forma balance sheets of Iron Mountain and Pierce Leahy as
of September 30, 1999 after giving effect to certain acquisitions and
financing transactions. See the Iron Mountain Pro Forma Balance Sheet and
the Pierce Leahy Pro Forma Balance Sheet.
(2) Certain amounts have been reclassified to conform to Iron Mountain's balance
sheet presentation.
The accompanying notes are an integral part of these pro forma financial
statements.
59
<PAGE>
NEW IRON MOUNTAIN
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA
IRON PIERCE PRO FORMA NEW IRON
MOUNTAIN(1) LEAHY(1) ADJUSTMENTS MOUNTAIN(2)
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Storage..................................... $250,186 $140,990 $ -- $391,176
Service and Storage Material Sales.......... 155,517 115,036 -- 270,553
-------- -------- -------- --------
Total Revenues............................ 405,703 256,026 -- 661,729
-------- -------- -------- --------
Operating Expenses:
Cost of Sales (excluding depreciation)...... 203,344 145,088 (18,438)(C) 329,994
Selling, General and Administrative......... 101,297 33,724 22,719 (D) 157,740
Depreciation and Amortization............... 50,504 32,430 3,149 (E) 86,083
Foreign Currency Exchange................... -- (5,505) 5,505 (F) --
-------- -------- -------- --------
Total Operating Expenses.................. 355,145 205,737 12,935 573,817
-------- -------- -------- --------
Operating Income................................ 50,558 50,289 (12,935) 87,912
Interest Expense, net........................... 42,625 39,600 (3,475)(G) 78,750
Other Income, net............................... 115 -- 5,505 (H) 5,620
-------- -------- -------- --------
Income from Continuing Operations Before
Provision for Income Taxes and Minority
Interest...................................... 8,048 10,689 (3,955) 14,782
Provision for Income Taxes...................... 8,284 3,091 3,664 (I) 15,039
Minority Interest............................... 854 -- -- 854
-------- -------- -------- --------
Income (Loss) from Continuing Operations........ $ (1,090) $ 7,598 $ (7,619) $ (1,111)
======== ======== ======== ========
Loss from Continuing Operations per Common
Share--Basic and Diluted...................... $ (0.03) $ (0.02)
======== ========
Weighted Average Common Shares Outstanding--
Basic and Diluted............................. 35,400 18,783 (J) 54,183
======== ======== ========
EBITDA from Continuing Operations............... $101,062 $ 77,214 $ (4,281) $173,995
======== ======== ======== ========
</TABLE>
- ------------------------
(1) Represents the pro forma statements of operations of Iron Mountain and
Pierce Leahy for the nine months ended September 30, 1999 after giving
effect to certain acquisitions and financing transactions. See the Iron
Mountain and Pierce Leahy Pro Forma Statements of Operations for the nine
months ended September 30, 1999.
(2) Does not give pro forma effect to certain identified cost savings of
approximately $12.9 million that management of Iron Mountain and Pierce
Leahy believes would have been realized had the merger with Pierce Leahy and
the 1998 and 1999 acquisitions completed by Iron Mountain and Pierce Leahy
through October 31, 1999 been fully integrated as of January 1, 1998. Of the
$12.9 million, $11.3 million of cost savings relate to the merger with
Pierce Leahy and are comprised of: (a) elimination of redundant corporate
expenses; (b) more efficient operations and utilization of real estate; and
(c) reduction of workforce accomplished primarily through attrition.
The accompanying notes are an integral part of these pro forma financial
statements.
60
<PAGE>
NEW IRON MOUNTAIN
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA PRO FORMA NEW
IRON PIERCE PRO FORMA IRON
MOUNTAIN(1) LEAHY(1) ADJUSTMENTS MOUNTAIN(2)
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Storage................................. $308,551 $173,492 $ -- $482,043
Service and Storage Material Sales...... 180,036 132,607 -- 312,643
-------- -------- -------- --------
Total Revenues........................ 488,587 306,099 -- 794,686
-------- -------- -------- --------
Operating Expenses:
Cost of Sales (excluding
depreciation)......................... 244,174 175,929 (20,169)(C) 399,934
Selling, General and Administrative..... 122,368 43,891 25,180 (D) 191,439
Depreciation and Amortization........... 65,331 41,027 5,480 (E) 111,838
Foreign Currency Exchange............... -- 7,907 (7,907)(F) --
-------- -------- -------- --------
Total Operating Expenses.............. 431,873 268,754 2,584 703,211
-------- -------- -------- --------
Operating Income............................ 56,714 37,345 (2,584) 91,475
Interest Expense, net....................... 58,693 50,555 (5,951)(G) 103,297
Other Income (Expense), net................. 1,384 -- (7,907)(H) (6,523)
-------- -------- -------- --------
Loss from Continuing Operations Before
Provision for Income Taxes and Minority
Interest.................................. (595) (13,210) (4,540) (18,345)
Provision for Income Taxes.................. 6,499 4,922 4,319 (I) 15,740
Minority Interest........................... 911 -- -- 911
-------- -------- -------- --------
Loss from Continuing Operations............. $ (8,005) $(18,132) $ (8,859) $(34,996)
======== ======== ======== ========
Loss from Continuing Operations per Common
Share--Basic and Diluted.................. $ (0.23) $ (0.65)
======== ========
Weighted Average Common Shares
Outstanding--Basic and Diluted............ 34,880 18,783 (J) 53,663
======== ======== ========
EBITDA from Continuing Operations........... $122,045 $ 86,279 $ (5,011) $203,313
======== ======== ======== ========
</TABLE>
- ------------------------
(1) Represents the pro forma statements of operations of Iron Mountain and
Pierce Leahy for the year ended December 31, 1998 after giving effect to
certain acquisitions and financing transactions. See the Iron Mountain and
Pierce Leahy Pro Forma Statements of Operations for the year ended
December 31, 1998.
(2) Does not give pro forma effect to certain identified cost savings of
approximately $25.0 million that management of Iron Mountain and Pierce
Leahy believes would have been realized had the merger with Pierce Leahy and
the 1998 and 1999 acquisitions completed by Iron Mountain and Pierce Leahy
through October 31, 1999 been fully integrated as of January 1, 1998. Of the
$25.0 million, $15.0 million of cost savings relate to the merger with
Pierce Leahy and are comprised of: (a) elimination of redundant corporate
expenses; (b) more efficient operations and utilization of real estate; and
(c) reduction of workforce accomplished primarily through attrition.
The accompanying notes are an integral part of these pro forma financial
statements.
61
<PAGE>
NEW IRON MOUNTAIN
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
OVERVIEW
On October 20, 1999, Iron Mountain entered into a merger agreement to
acquire Pierce Leahy for approximately $1.1 billion, consisting of common stock,
options to acquire common stock and the assumption of debt. Pierce Leahy will be
the surviving legal entity and will immediately change its name to Iron Mountain
Incorporated. Although Pierce Leahy is the surviving legal entity, Iron Mountain
is considered the acquirer for accounting purposes.
The merger consideration will result in the equivalent of a fixed exchange
ratio of 1.1 shares of Iron Mountain common stock for each share of Pierce Leahy
common stock. The exchange ratio will be effected by Pierce Leahy paying, prior
to the merger, a stock dividend of one share of Pierce Leahy common stock for
each 10 shares then outstanding. The Pierce Leahy common stock will remain
outstanding after the merger as shares of New Iron Mountain common stock. Each
outstanding share of Iron Mountain common stock will be converted into one share
of New Iron Mountain common stock.
The transaction will be accounted for as a reverse acquisition. The purchase
price of Pierce Leahy is based upon the fair value of Pierce Leahy common stock
and options to acquire Pierce Leahy common stock, the fair value of the assumed
debt on the date that the merger is completed and transaction costs. As the
exchange ratio is fixed, the fair value of Pierce Leahy common stock is based
upon the stock price on the date the merger was announced.
Our estimate of the purchase price is as follows (in millions):
<TABLE>
<S> <C> <C>
Fair Value of Common Stock Issued(1)..................... $ 444.0
Fair Value of Stock Options(2)........................... 24.7
Fair Value of Debt Assumed(3)............................ 587.0
Transaction Costs........................................ 4.0
--------
Total Estimated Purchase Price......................... $1,059.7
========
</TABLE>
(1) Based on 17,075,125 outstanding shares of Pierce Leahy common stock at
September 30, 1999 at a fair value of $26.00 per share.
(2) Based on options to acquire 1,336,246 shares of Pierce Leahy common stock at
September 30, 1999.
(3) Estimated fair value of Pierce Leahy's debt. The fair value of Pierce
Leahy's publicly-traded debt is based on quoted market prices. For purposes
of determining the final purchase price, the actual fair value used will be
based on the quoted market prices when the merger is completed.
A number of Pierce Leahy shareholders are parties to the Pierce Leahy
shareholders' agreement. This agreement restricts the ability of these
shareholders to sell 5.7 million shares of New Iron Mountain common stock (after
giving effect to the stock dividend) for up to five years after the merger. Iron
Mountain will obtain an appraisal to determine the fair value of these
restricted shares. Iron Mountain believes that, due to these restrictions, the
actual fair value of these restricted shares is less than the $26 per share
value used for purposes of calculating the purchase price. Accordingly, Iron
Mountain expects to record a corresponding decrease in equity, goodwill and
goodwill amortization from the amounts used in the accompanying pro forma
financial statements. If the resale restrictions result in a 10% discount to the
fair value of the shares, there would be a reduction of approximately
$13 million of equity and goodwill and $0.5 million of goodwill amortization
annually.
62
<PAGE>
NEW IRON MOUNTAIN
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
The pro forma statements of operations do not reflect estimated transaction
costs of $3.0 million that Pierce Leahy will charge to expense as incurred.
Additionally, Pierce Leahy may record a compensation charge associated with
accelerating the vesting of certain stock options in the period the merger is
completed. Although the amount of the charge is not determinable at this time,
at a price of $30 per share, the charge would be approximately $1.6 million.
BALANCE SHEET
Iron Mountain will pay approximately $1.1 billion in aggregate consideration
to acquire Pierce Leahy. The purchase price will be allocated to tangible and
intangible assets, based on our estimate of the fair value of the net assets
acquired. The following allocation of the aggregate purchase price is
preliminary and subject to adjustment, based on the final determination of the
fair value of the net assets acquired (in millions):
<TABLE>
<S> <C>
Current Assets.............................................. $ 66.8
Property, Plant and Equipment (1)........................... 262.6
Goodwill.................................................... 792.2
Other Long-term Assets...................................... 8.2
Current Liabilities......................................... (67.0)
Deferred Income Taxes....................................... (1.5)
Deferred Rent............................................... (1.6)
--------
Total Purchase Price...................................... $1,059.7
========
</TABLE>
(1) Represents book value at September 30, 1999, as it is not practicable to
estimate the fair value of the real estate and other fixed assets at this
time.
The accompanying New Iron Mountain Pro Forma Balance Sheet as of
September 30, 1999 has been prepared as if the acquisition of Pierce Leahy had
occurred as of September 30, 1999 and reflects the following pro forma
adjustments:
(A) Pro forma adjustments to assets consist of the following (in millions):
<TABLE>
<CAPTION>
OTHER
LONG-TERM
GOODWILL ASSETS
-------- ---------
<S> <C> <C>
Adjust the fair value of other long-term assets consisting
primarily of deferred financing costs and customer
acquisition costs......................................... $ -- $(59.6)
Reverse Pierce Leahy historical goodwill.................... (353.8) --
Record goodwill related to the merger....................... 792.2 --
------ ------
Total Adjustments......................................... $438.4 $(59.6)
====== ======
</TABLE>
63
<PAGE>
NEW IRON MOUNTAIN
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(B) Pro Forma adjustments to liabilities and shareholders' equity consist of
the following (in millions):
<TABLE>
<CAPTION>
DEFERRED
LONG-TERM DEFERRED INCOME SHAREHOLDERS'
DEBT RENT TAXES EQUITY
--------- -------- -------- -------------
<S> <C> <C> <C> <C>
Reverse equity not assumed........................... $ -- $ -- $ -- $(70.5)
Issuance of common stock and options................. -- -- -- 468.7
Fair value of operating leases....................... -- (5.2) -- --
Tax effect of fair value adjustments................. -- -- (17.1) --
Fair value of debt assumed........................... (4.2) -- -- --
Iron Mountain's estimated transaction costs assumed
to be financed with debt........................... 4.0 -- -- --
Pierce Leahy's estimated transaction costs assumed to
be financed with debt.............................. 3.0 -- -- --
Estimated costs to register common stock assumed to
be financed with debt.............................. 1.0 -- -- (1.0)
----- ----- ------ ------
Total Adjustments.................................. $ 3.8 $(5.2) $(17.1) $397.2
===== ===== ====== ======
</TABLE>
STATEMENTS OF OPERATIONS
The accompanying New Iron Mountain Pro Forma Statements of Operations for
the nine months ended September 30, 1999 and for the year ended December 31,
1998 have been prepared as if the acquisition of Pierce Leahy occurred as of
January 1, 1998 and reflects the following pro forma adjustments (in millions):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
(C) Costs of Sales (excluding depreciation)
To decrease rent expense for the fair value of
operating leases................................ $ (1.1) $ (0.7)
To conform Pierce Leahy's classification of cost
of sales and selling, general and administrative
expenses to Iron Mountain's classification...... (17.3) (19.5)
------ ------
$(18.4) $(20.2)
====== ======
</TABLE>
64
<PAGE>
NEW IRON MOUNTAIN
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
(D) Selling, General and Administrative
To conform Pierce Leahy's classification of cost
of sales and selling, general and administrative
expenses to Iron Mountain's classification...... $ 17.3 $ 19.5
To conform Pierce Leahy's accounting for
customer acquisition costs to Iron Mountain's
accounting...................................... 5.4 5.7
------ ------
$ 22.7 $ 25.2
====== ======
(E) Depreciation and Amortization
Amortization of goodwill created in the merger
based on a 30-year life......................... $ 11.0 $ 14.6
To adjust depreciation and amortization for Iron
Mountain's estimation of useful lives of Pierce
Leahy's fixed assets and intangible assets...... (7.9) (9.1)
------ ------
$ 3.1 $ 5.5
====== ======
(F) Foreign Currency Exchange
To conform Pierce Leahy's classification of
foreign currency exchange (gain) loss related to
long-term debt to Iron Mountain's
classification.................................. $ 5.5 $ (7.9)
====== ======
(G) Interest Expense
Reverse amortization of Pierce Leahy's deferred
financing costs in connection with the
adjustment to fair value of debt assumed........ $ (1.2) $ (1.4)
Record the amortization related to fair value
adjustment of debt assumed...................... (1.5) (3.8)
Record interest for borrowings associated with
the transaction costs of the merger as well as
the costs of registration of shares of Pierce
Leahy common stock.............................. 0.4 0.5
Reverse interest on Pierce Leahy's revolving
credit facility................................. (8.9) (6.7)
Record interest on Iron Mountain's revolving
credit facility at 6.69%........................ 7.7 5.4
------ ------
$ (3.5) $ (6.0)
====== ======
</TABLE>
65
<PAGE>
NEW IRON MOUNTAIN
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
The impact of a 1/8% change in the interest rate on pro forma borrowings
under Iron Mountain's revolving credit facility for the nine months ended
September 30, 1999 and the year ended December 31, 1998 is $153,000 and
$204,000, respectively.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
(H) Other Income (Expense), net
To conform Pierce Leahy's classification of
foreign currency exchange (gain) loss related to
long-term debt to Iron Mountain's
classification.................................. $ 5.5 $ (7.9)
====== ======
(I) Provision for Income Taxes
To adjust the provision for income taxes to a
40% rate on pro forma income before
nondeductible goodwill amortization and other
nondeductible expenses.......................... $ 3.7 $ 4.3
====== ======
</TABLE>
(J) To adjust the pro forma weighted average common shares outstanding as if
the merger with Pierce Leahy had occurred on January 1, 1998, including
the effect of the 10% stock dividend.
66
<PAGE>
IRON MOUNTAIN INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet of
Iron Mountain has been prepared based on the historical condensed consolidated
balance sheets of Iron Mountain and Midtown Professional Records Centre, Inc. as
of September 30, 1999 and the balance sheet of Stortext (Holdings) Limited as of
September 12, 1999. The Iron Mountain Pro Forma Balance Sheet gives effect to
the acquisition of Stortext by Britannia Data Management Limited (Iron
Mountain's 50.1% subsidiary) and Midtown by Iron Mountain as if the two
acquisitions had been completed or consolidated as of September 30, 1999.
The following Unaudited Pro Forma Condensed Consolidated Statements of
Operations of Iron Mountain for the nine months ended September 30, 1999 and for
the year ended December 31, 1998 give effect to each of the following as if each
occurred as of January 1, 1998: (a) Iron Mountain's 1998 and 1999 acquisitions
completed through October 31, 1999; (b) Iron Mountain's sale of 6.0 million
shares of common stock in April 1998; (c) Iron Mountain's issuance of 8 1/4%
Senior Subordinated Notes Due 2011 in April 1999; and (d) Iron Mountain's sale
of 5.8 million shares of common stock in May 1999. The Iron Mountain Pro Forma
Statements of Operations do not include results of operations prior to the date
of acquisition, or pro forma adjustments, for one acquisition completed by Iron
Mountain on October 1, 1999 and one acquisition completed by Britannia Data
Management in September 1999. The impact of these acquisitions is immaterial to
the Iron Mountain Pro Forma Financial Statements. Pro forma adjustments are
described in the accompanying notes.
In June 1999 Iron Mountain decided to sell its information technology
staffing business, Arcus Staffing, which was acquired in January 1998 as part of
the acquisition of Arcus Group, Inc. Iron Mountain completed the sale of
substantially all of the assets of Arcus Staffing effective November 1, 1999.
Iron Mountain has accounted for the sale of Arcus Staffing as a discontinued
operation.
The Iron Mountain Pro Forma Statements of Operations do not necessarily
indicate the actual results of operations that Iron Mountain would have reported
if the events described above had occurred as of January 1, 1998, nor do they
necessarily indicate the results of future operations. Furthermore, the pro
forma results do not give effect to all cost savings or incremental costs that
may occur as a result of the integration and consolidation of the 1998 and 1999
acquisitions. In the opinion of Iron Mountain's management, all adjustments and
disclosures necessary to fairly present these pro forma financial statements
have been made.
Iron Mountain has accounted for its acquisitions and the related real estate
transactions using the purchase method of accounting.
You should read the Iron Mountain Pro Forma Financial Statements in
conjunction with Iron Mountain's "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and with Iron Mountain's
financial statements included or incorporated by reference in this joint proxy
statement/prospectus.
67
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
IRON RECENT PRO FORMA IRON
MOUNTAIN ACQUISITIONS(1) ADJUSTMENTS MOUNTAIN(2)
---------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets............................ $ 144,988 $2,044 $(7,328)(A) $ 139,704
Property, Plant and Equipment, net........ 379,249 4,906 2,000 (A) 386,155
Goodwill, net............................. 724,578 2,068 14,154 (A) 740,800
Other Long-term Assets.................... 39,109 20 1,000 (A) 40,129
---------- ------ ------- ----------
Total Assets........................ $1,287,924 $9,038 $ 9,826 $1,306,788
========== ====== ======= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities....................... $ 116,468 $2,852 $ (619)(B) $ 118,701
Long-term Debt, net of Current Portion.... 598,493 2,141 6,069 (B) 606,703
Other Long-term Liabilities............... 8,914 -- 8,199 (B) 17,113
Deferred Rent............................. 10,591 -- -- 10,591
Deferred Income Taxes..................... 20,946 222 -- 21,168
Minority Interest......................... 48,357 -- -- 48,357
Stockholders' Equity...................... 484,155 3,823 (3,823)(B) 484,155
---------- ------ ------- ----------
Total Liabilities and Stockholders'
Equity............................ $1,287,924 $9,038 $ 9,826 $1,306,788
========== ====== ======= ==========
</TABLE>
- ------------------------
(1) Consists of Midtown and Stortext acquisitions, which were not included in
the historical Iron Mountain balance sheet as of September 30, 1999.
(2) Includes the assets and liabilities of Arcus Staffing. These assets and
liabilities are not material to Iron Mountain's financial position. Iron
Mountain sold substantially all of Arcus Staffing's assets effective
November 1, 1999.
The accompanying notes are an integral part of these pro forma financial
statements.
68
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1999 ACQUISITIONS (1)
----------------------------------------------------------------
FIRST
HISTORICAL BRITANNIA AMERICAN
IRON DATA RECORDS PRO FORMA
MOUNTAIN MANAGEMENT MANAGEMENT DATA BASE MEMOGARDE OTHER ADJUSTMENTS
---------- ------------ ------------ --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Storage................ $229,989 $3,178 $ 1,687 $ 6,781 $1,847 $6,704 $ --
Service and Storage
Material Sales....... 148,054 2,032 1,165 415 902 2,949 --
-------- ------ ------- -------- ------ ------ -------
Total Revenues....... 378,043 5,210 2,852 7,196 2,749 9,653 --
-------- ------ ------- -------- ------ ------ -------
Operating Expenses:
Cost of Sales
(excluding
depreciation)........ 189,828 2,624 1,816 3,254 826 5,034 (38)(C)
Selling, General and
Administrative....... 94,194 1,313 3,258 8,695 719 2,574 (9,456)(D)
Depreciation and
Amortization......... 46,214 608 153 873 271 611 1,774 (E)
-------- ------ ------- -------- ------ ------ -------
Total Operating
Expenses........... 330,236 4,545 5,227 12,822 1,816 8,219 (7,720)
-------- ------ ------- -------- ------ ------ -------
Operating Income
(Loss)................. 47,807 665 (2,375) (5,626) 933 1,434 7,720
Interest Expense, net.... 40,246 200 161 491 151 214 1,162 (F)
Other Income, net........ 115 -- -- -- -- -- --
-------- ------ ------- -------- ------ ------ -------
Income (Loss) Before
Provision (Benefit) for
Income Taxes and
Minority Interest...... 7,676 465 (2,536) (6,117) 782 1,220 6,558
Provision (Benefit) for
Income Taxes........... 7,805 215 -- -- 408 211 (355)(G)
Minority Interest........ 515 -- -- -- -- -- 339 (H)
-------- ------ ------- -------- ------ ------ -------
Income (Loss) from
Continuing
Operations............. $ (644) $ 250 $(2,536) $ (6,117) $ 374 $1,009 $ 6,574
======== ====== ======= ======== ====== ====== =======
Loss from Continuing
Operations per Common
Share--Basic and
Diluted................ $ (0.02)
========
Weighted Average Common
Shares Outstanding--
Basic and Diluted...... 32,641 2,759 (I)
======== =======
EBITDA from Continuing
Operations............. $ 94,021 $1,273 $(2,222) $ (4,753) $1,204 $2,045 $ 9,494
======== ====== ======= ======== ====== ====== =======
<CAPTION>
PRO FORMA
IRON
MOUNTAIN(2)
------------
<S> <C>
Revenues:
Storage................ $250,186
Service and Storage
Material Sales....... 155,517
--------
Total Revenues....... 405,703
--------
Operating Expenses:
Cost of Sales
(excluding
depreciation)........ 203,344
Selling, General and
Administrative....... 101,297
Depreciation and
Amortization......... 50,504
--------
Total Operating
Expenses........... 355,145
--------
Operating Income
(Loss)................. 50,558
Interest Expense, net.... 42,625
Other Income, net........ 115
--------
Income (Loss) Before
Provision (Benefit) for
Income Taxes and
Minority Interest...... 8,048
Provision (Benefit) for
Income Taxes........... 8,284
Minority Interest........ 854
--------
Income (Loss) from
Continuing
Operations............. $ (1,090)
========
Loss from Continuing
Operations per Common
Share--Basic and
Diluted................ $ (0.03)
========
Weighted Average Common
Shares Outstanding--
Basic and Diluted...... 35,400
========
EBITDA from Continuing
Operations............. $101,062
========
</TABLE>
- ------------------------------
(1) Represents historical results of operations for each 1999 acquisition
completed through October 31, 1999 for the period in 1999 prior to the time
it was acquired, unless otherwise noted. See "Overview" in the accompanying
notes.
(2) Does not give pro forma effect to certain identified cost savings of
$1.5 million that Iron Mountain's management believes would have been
realized had the 1999 acquisitions completed through October 31, 1999 been
fully integrated as of January 1, 1998. These cost savings relate to:
(a) termination of specific employees and related net reductions in labor
expenses; (b) closure of identified redundant facilities and related net
reductions in occupancy costs; and (c) elimination of related party
expenses, management fees and compensation expenses in excess of amounts
that Iron Mountain would have incurred.
The accompanying notes are an integral part of these pro forma financial
statements.
69
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1998 AND 1999 ACQUISITIONS (2)
--------------------------------------------------------------------------------
FIRST
HISTORICAL NATIONAL BRITANNIA AMERICAN
IRON UNDERGROUND DATA RECORDS
MOUNTAIN(1) STORAGE MANAGEMENT MANAGEMENT DATA BASE MEMOGARDE OTHER
------------ ------------ ------------ ------------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Storage.............. $230,702 $4,657 $16,258 $ 6,139 $24,907 $4,301 $21,587
Service and Storage
Material Sales..... 153,259 885 14,062 3,761 1,682 18 6,369
-------- ------ ------- ------- ------- ------ -------
Total Revenues..... 383,961 5,542 30,320 9,900 26,589 4,319 27,956
-------- ------ ------- ------- ------- ------ -------
Operating Expenses:
Cost of Sales
(excluding
depreciation)...... 192,113 2,116 16,511 7,338 11,337 1,165 13,879
Selling, General and
Administrative..... 95,867 1,121 5,580 2,212 6,555 1,049 9,984
Depreciation and
Amortization....... 48,301 713 3,863 572 3,706 465 1,743
-------- ------ ------- ------- ------- ------ -------
Total Operating
Expenses......... 336,281 3,950 25,954 10,122 21,598 2,679 25,606
-------- ------ ------- ------- ------- ------ -------
Operating Income
(Loss)............... 47,680 1,592 4,366 (222) 4,991 1,640 2,350
Interest Expense,
net.................. 45,673 282 1,533 541 1,776 80 721
Other Income, net...... 1,384 -- -- -- -- -- --
-------- ------ ------- ------- ------- ------ -------
Income (Loss) from
Continuing Operations
Before Provision
(Benefit) for Income
Taxes and Minority
Interest............. 3,391 1,310 2,833 (763) 3,215 1,560 1,629
Provision (Benefit) for
Income Taxes......... 6,558 544 1,504 238 -- 632 (99)
Minority Interest...... -- -- -- -- -- -- --
-------- ------ ------- ------- ------- ------ -------
Income (Loss) from
Continuing
Operations........... $ (3,167) $ 766 $ 1,329 $(1,001) $ 3,215 $ 928 $ 1,728
======== ====== ======= ======= ======= ====== =======
Loss from Continuing
Operations per Common
Share--Basic and
Diluted.............. $ (0.12)
========
Weighted Average Common
Shares
Outstanding--Basic
and Diluted.......... 27,470
========
EBITDA from Continuing
Operations........... $ 95,981 $2,305 $ 8,229 $ 350 $ 8,697 $2,105 $ 4,093
======== ====== ======= ======= ======= ====== =======
<CAPTION>
PRO FORMA
PRO FORMA IRON
ADJUSTMENTS MOUNTAIN(3)
------------ ------------
<S> <C> <C>
Revenues:
Storage.............. $ -- $308,551
Service and Storage
Material Sales..... -- 180,036
-------- --------
Total Revenues..... -- 488,587
-------- --------
Operating Expenses:
Cost of Sales
(excluding
depreciation)...... (285)(C) 244,174
Selling, General and
Administrative..... -- 122,368
Depreciation and
Amortization....... 5,968 (E) 65,331
-------- --------
Total Operating
Expenses......... 5,683 431,873
-------- --------
Operating Income
(Loss)............... (5,683) 56,714
Interest Expense,
net.................. 8,087 (F) 58,693
Other Income, net...... -- 1,384
-------- --------
Income (Loss) from
Continuing Operations
Before Provision
(Benefit) for Income
Taxes and Minority
Interest............. (13,770) (595)
Provision (Benefit) for
Income Taxes......... (2,878)(G) 6,499
Minority Interest...... 911 (H) 911
-------- --------
Income (Loss) from
Continuing
Operations........... $(11,803) $ (8,005)
======== ========
Loss from Continuing
Operations per Common
Share--Basic and
Diluted.............. $ (0.23)
========
Weighted Average Common
Shares
Outstanding--Basic
and Diluted.......... 7,410 (I) 34,880
======== ========
EBITDA from Continuing
Operations........... $ 285 $122,045
======== ========
</TABLE>
- ----------------------------------
(1) Represents historical results of operations for Iron Mountain for the year
ended December 31, 1998, after reclassifications to report the results of
operations of Arcus Staffing as a discontinued operation.
(2) Represents historical results of operations for each 1998 acquisition for
the period in 1998 prior to the time it was acquired and each 1999
acquisition completed through October 31, 1999, unless otherwise noted, for
the year ended December 31, 1998. See "Overview" in the accompanying notes.
(3) Does not give pro forma effect to certain identified cost savings of
approximately $7.3 million that Iron Mountain's management believes would
have been realized had the 1998 and 1999 acquisitions completed through
October 31, 1999 been fully integrated as of January 1, 1998. These cost
savings relate to: (a) termination of specific employees and related net
reductions in labor expenses; (b) closure of identified redundant facilities
and related net reductions in occupancy costs; and (c) elimination of
related party expenses, management fees and compensation expenses in excess
of amounts that Iron Mountain would have incurred.
The accompanying notes are an integral part of these pro forma financial
statements.
70
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
OVERVIEW
RECENT ACQUISITIONS
In 1998, Iron Mountain acquired 15 records and information management
services businesses including Arcus Group, Inc. and National Underground
Storage, Inc. Total consideration for Arcus Group was $153.7 million, including
$55.0 million in aggregate fair value of Iron Mountain common stock and options
to acquire Iron Mountain common stock and the balance in cash and assumed debt.
Total consideration for National Underground Storage was $30.1 million in cash
and assumed debt. The aggregate purchase price of the businesses and related
real estate acquired in 1998, excluding Arcus Group and National Underground
Storage, was $74.8 million, including $12.1 million in fair value of Iron
Mountain common stock. In addition, Iron Mountain exchanged certain assets of
Copyright, Inc., one of its subsidiaries, with a fair value of $3.0 million as
partial consideration in its acquisition of Leonard Archives. The Iron Mountain
Pro Forma Statement of Operations for the year ended December 31, 1998 reflects
a reduction of service and storage material sales revenues of $2.6 million and a
reduction of EBITDA of $0.6 million related to the disposition of these assets.
In 1999, through October 31, 1999, Iron Mountain acquired 16 records and
information management services businesses, including Data Base, Inc., First
American Records Management, Inc., Memogarde and a controlling 50.1 percent
interest in Britannia Data Management. Total consideration for the 50.1 percent
interest in Britannia Data Management was $49.3 million, consisting of cash and
the capital stock of Arcus Data Security Limited, Iron Mountain's existing U.K.
subsidiary. Total consideration for Data Base, including related real estate,
was $115.0 million, including $46.0 million in fair value of Iron Mountain
common stock and the balance in cash and assumed debt. Total consideration for
First American Records Management was $41.5 in cash, and total consideration for
Memogarde was $16.9 in cash and assumed debt. The aggregate purchase price of
the businesses and related real estate that Iron Mountain acquired in 1999,
excluding Britannia Data Management, Data Base, First American Records
Management, Inc. and Memogarde, was $44.2 million.
All Iron Mountain 1998 acquisitions and 1999 acquisitions completed through
October 31, 1999 are listed below:
<TABLE>
<S> <C>
1998 ACQUISITIONS COMPLETION
- ------------------------------------------------------------ DATE
--------------
Bekins Records Management (a division of Bekins Van &
Storage, Inc.)........................................ January 1998
Midwest Records Management (a division of I-GO Van &
Storage Co.).......................................... January 1998
Arcus Group, Inc........................................ January 1998
Records Venture One, Inc. (d/b/a Information Management
Consultants of Arizona)............................... January 1998
Sloan Vaults, Inc. (d/b/a The Vault).................... February 1998
InterMation, Inc........................................ April 1998
Records and information management services business of
Bekins Moving & Storage Co............................ June 1998
National Underground Storage, Inc....................... July 1998
Hart Information Services, Inc.......................... July 1998
Rockford Business Interiors, Inc........................ July 1998
Albuquerque Archives, Inc............................... August 1998
Records and Filing Consultants, Inc..................... August 1998
Commercial Archives, Inc................................ October 1998
Leonard Archives Acquisition Corp....................... October 1998
Datavault Corporation................................... November 1998
</TABLE>
71
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<S> <C>
1999 ACQUISITIONS (THROUGH OCTOBER 31, 1999)
- ------------------------------------------------------------
Britannia Data Management Limited (50.1% interest)...... January 1999
Secure Accessible Files Environment, Inc................ February 1999
Confidential Records Center, Inc........................ March 1999
Information Storage Service Center, Inc................. March 1999
First American Records Management, Inc.................. April 1999
Data Base, Inc.......................................... April 1999
Datavault/United States Safe Deposit Corporation........ May 1999
File Management, Inc.................................... May 1999
MAP, S.A. (Memogarde)(1)................................ June 1999
Carter Media Management, Inc............................ June 1999
Central Files, Inc...................................... June 1999
A Jacksonville, Florida records management business..... June 1999
Sistemas de Archivo Corporativo, S. de R.L. de C.V.
(50.1% interest)........................................ August 1999
Stortext (Holdings) Ltd.(1)............................. September 1999
Datavault S.A.(1)....................................... September 1999
Midtown Professional Records Centre, Inc................ October 1999
</TABLE>
- ------------------------
(1) Britannia Data Management acquired each of these businesses.
BRITANNIA DATA MANAGEMENT
On January 4, 1999, Iron Mountain purchased a controlling 50.1 percent
interest in Britannia Data Management for total consideration of $49.3 million,
consisting of cash and the capital stock of Arcus Data Security Limited, an
existing data security services business in London. Iron Mountain acquired
shares of Britannia Data Management from Mentmore Abbey plc and from Abbey
Storage Limited, a wholly owned subsidiary of Mentmore Abbey. In addition, Iron
Mountain acquired newly issued shares from Britannia Data Management in exchange
for cash and the capital stock of Arcus Data Security Limited. Upon completion
of the transactions, Iron Mountain owns 50.1 percent of the outstanding capital
stock of Britannia Data Management and Mentmore Abbey owns the remaining
49.9 percent.
Britannia Data Management has an April 30 fiscal year end. Iron Mountain has
consolidated Britannia Data Management using an October 31 fiscal year end.
Accordingly, the Iron Mountain Pro Forma Statements of Operations for the nine
months ended September 30, 1999 and for the year ended December 31, 1998 include
Britannia Data Management's results for the nine months ended July 31, 1999 and
for the year ended October 31, 1998.
On June 2, 1999, Britannia Data Management acquired Memogarde for aggregate
consideration of $16.9 million. Memogarde had a February 28 fiscal year end. The
Iron Mountain Pro Forma Statement of Operations for the nine months ended
September 30, 1999 includes Memogarde's results for the nine months ended
July 31, 1999 and the Iron Mountain Pro Forma Statement of Operations for the
year ended December 31, 1998 includes Memogarde's results for its fiscal year
ended February 28, 1999.
On September 12, 1999, Britannia Data Management acquired Stortext for
approximately $16.1 million in cash. Stortext had a March 31 fiscal year end.
The Iron Mountain Pro Forma Balance Sheet as of September 30, 1999 includes the
balance sheet of Stortext as of September 12, 1999. The Iron Mountain Pro Forma
Statement of Operations for the nine months ended September 30, 1999
72
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
includes Stortext's results for the nine months ended July 31, 1999 and the Iron
Mountain Pro Forma Statement of Operations for the year ended December 31, 1998
includes Stortext's results for its fiscal year ended March 31, 1999.
The financial statements of Britannia Data Management, Memogarde and
Stortext have been prepared in accordance with U.S. generally accepted
accounting principles and have been translated into U.S. dollars in accordance
with Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation." The functional currencies of Britannia Data Management and
Stortext are Pounds Sterling and the functional currency of Memogarde is French
Francs. The assets and liabilities have been translated into U.S. dollars at the
exchange rate in effect at the end of the period translated. Revenues and
expenses have been translated into U.S. dollars at the average exchange rate in
effect during the period translated. Gains and losses that result from
translating assets and liabilities into U.S. dollars are included in
stockholders' equity as a cumulative translation adjustment. The amount of the
cumulative translation loss as of September 30, 1999 included in stockholders'
equity in the accompanying Iron Mountain Pro Forma Balance Sheet is
$1.9 million.
DATA BASE ACQUISITION
On April 8, 1999, Iron Mountain acquired Data Base and related real estate
for $115.0 million. As part of the total consideration, Iron Mountain issued
1,476,577 shares of common stock with a fair value of $46.0 million. On May 18,
1999, Iron Mountain repurchased all of the shares issued in connection with the
Data Base acquisition from the former shareholders of Data Base for
$39.5 million, with a portion of the net proceeds from Iron Mountain's 1999
equity offering.
73
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
BALANCE SHEET
Iron Mountain paid $525.5 million in aggregate consideration for the 1998
and 1999 acquisitions completed through October 31, 1999. Iron Mountain has
allocated the excess of the purchase price over the book value of the net assets
acquired for each of the acquisitions to tangible and intangible assets, based
on its estimate of the fair value of the net assets acquired. The following
allocation of the aggregate purchase price is preliminary and subject to
adjustment, based on the final determination of the fair value of the net assets
acquired. Iron Mountain's management believes that the final allocation of the
purchase price will not differ materially from the preliminary estimated
amounts.
<TABLE>
<CAPTION>
(in millions)
<S> <C> <C>
1998 ACQUISITIONS:
Current Assets.......................................... $ 28.9
Property, Plant and Equipment........................... 54.2
Goodwill................................................ 202.7
Other Long-term Assets.................................. 1.7
Current Liabilities..................................... (22.7)
Deferred Income Taxes................................... (2.4)
Other Long-term Liabilities............................. (3.8)
------
Purchase Price of 1998 Acquisitions................... 258.6
1999 ACQUISITIONS (COMPLETED THROUGH OCTOBER 31, 1999):
Current Assets.......................................... 33.1
Property, Plant and Equipment........................... 72.4
Goodwill................................................ 246.2
Other Long-term Assets.................................. 2.7
Current Liabilities..................................... (26.9)
Long-term Debt.......................................... (15.2)
Deferred Income Taxes................................... (2.2)
Other Long-term Liabilities............................. (0.1)
Minority Interest....................................... (43.1)
------
Purchase Price of 1999 Acquisitions................... 266.9
------
Total Purchase Price of the 1998 and 1999
Acquisitions........................................ $525.5
======
</TABLE>
74
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
The 1998 and 1999 acquisitions are assumed to be financed as follows (in
millions):
<TABLE>
<S> <C> <C>
1998 ACQUISITIONS:
Fair value of common stock issued....................... $ 51.4
Fair value of options granted........................... 15.7
Net proceeds from Iron Mountain's 1997 debt offering.... 24.5
Net proceeds from Iron Mountain's 1998 equity
offering.............................................. 132.0
Net proceeds from Iron Mountain's 1999 debt offering.... 32.0
Assets of Copyright, Inc................................ 3.0
------
Purchase Price of 1998 Acquisitions................. 258.6
1999 ACQUISITIONS COMPLETED THROUGH OCTOBER 31, 1999:
Fair value of common stock issued....................... $ 46.0
Net proceeds from Iron Mountain's 1999 debt offering.... 145.0
Net proceeds from Iron Mountain's 1999 equity
offering.............................................. 56.5
Borrowings under Britannia Data Management's line of
credit................................................ 13.6
Assumption of Long-term debt............................ 3.3
Capital Stock of Arcus Data Security Limited............ 2.5
------
Purchase Price of 1999 Acquisitions................. 266.9
------
Total Purchase Price of 1998 and 1999
Acquisitions.................................. $525.5
======
</TABLE>
The accompanying Iron Mountain Pro Forma Balance Sheet as of September 30,
1999 has been prepared as if the Stortext and Midtown acquisitions had been
consolidated or completed as of September 30, 1999 and reflects the following
pro forma adjustments:
(A) Pro forma adjustments to assets consist of the following (in millions):
<TABLE>
<CAPTION>
PROPERTY, OTHER
CURRENT PLANT AND LONG-TERM
ASSETS EQUIPMENT GOODWILL ASSETS
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Record use of Britannia Data Management's cash to fund
Stortext acquisition................................. $(14.7) $ -- $ -- $ --
Record Britannia Data Management receivable from
Mentmore Abbey to fund Stortext acquisition.......... 7.5 -- -- --
Reverse assets of acquired companies not purchased..... (0.1) -- -- --
Record estimated fair value in excess of book value of
assets acquired...................................... -- 2.0 -- 1.0
Record goodwill related to acquired companies.......... -- -- 14.2 --
------ ---- ----- ----
Total Adjustments................................ $ (7.3) $2.0 $14.2 $1.0
====== ==== ===== ====
</TABLE>
75
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(B) Pro forma adjustments to liabilities and stockholders' equity consist of the
following (in millions):
<TABLE>
<CAPTION>
OTHER
LONG-
CURRENT LONG-TERM TERM STOCKHOLDERS'
LIABILITIES DEBT LIABILITIES EQUITY
----------- --------- ----------- -------------
<S> <C> <C> <C> <C>
Reverse liabilities and equity not assumed in
connection with the Stortext and Midtown
acquisitions..................................... $(0.8) $(1.1) $ -- $(3.8)
Record additional debt to finance the Midtown
acquisition...................................... -- 7.2 -- --
Record Britannia Data Management payable to
Mentmore Abbey to finance Stortext acquisition... -- -- 7.5 --
Record deferred portion of purchase price related
to the Midtown acquisition....................... 0.2 -- 0.7 --
----- ----- ---- -----
Total Adjustments............................ $(0.6) $ 6.1 $8.2 $(3.8)
===== ===== ==== =====
</TABLE>
STATEMENTS OF OPERATIONS
The accompanying Iron Mountain Pro Forma Statements of Operations for the
nine months ended September 30, 1999 and the year ended December 31, 1998 have
been prepared as if the 1998 and 1999 acquisitions completed through
October 31, 1999, the 1998 and 1999 equity offerings, and the 1999 debt offering
had occurred on January 1, 1998 and reflect the following pro forma adjustments:
(C) To reduce cost of sales to eliminate rent expense for facilities purchased
as part of certain acquisitions that would not have been incurred had these
acquisitions occurred as of January 1, 1998.
(D) To reverse one-time bonus payments, other non-recurring compensation
expenses and brokers' fees directly attributable to the Data Base, First
American Records Management and Secure Accessible Files Environment, Inc.
acquisitions.
(E) To reflect additional depreciation expense based on the fair value of the
property, plant and equipment acquired and the remaining useful lives and
the amortization of goodwill and other intangible assets. Property, plant
and equipment are depreciated over three to 50 years, goodwill is amortized
over 25 to 30 years, software is amortized over three years and covenants
not-to-compete are amortized over two to five years on a straight-line
basis.
76
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(F) Pro forma adjustments to interest expense consist of the following (in
millions):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
ACQUISITION ADJUSTMENTS:
Reverse interest expense on debt of the acquired companies
retired or not assumed.................................... $(0.8) $(3.2)
Record interest expense on the additional debt used to
finance the 1998 and 1999 acquisitions assumed to be
financed under Iron Mountain's revolving credit
facility.................................................. 2.6 14.7
FINANCING ADJUSTMENTS:
Reverse interest expense on Iron Mountain's revolving credit
facility debt assumed to be retired with the net proceeds
from the 1999 debt offering and a portion of the net
proceeds from Iron Mountain's 1999 equity offering........ (4.4) (16.2)
Record interest expense related to Iron Mountain's 1999 debt
offering, including amortization of deferred financing
fees...................................................... 3.8 12.8
----- -----
Total Acquisition and Financing Adjustments........... $ 1.2 $ 8.1
===== =====
</TABLE>
(G) To adjust the provision for income taxes to a 40% rate on domestic pro forma
income before nondeductible goodwill amortization and other nondeductible
expenses, and adjust to foreign statutory rates on foreign pro forma income
before nondeductible goodwill amortization.
(H) To record the 49.9 percent minority interest in the net income of Memogarde,
Stortext, Sistemas de Archivo Corporativo and Britannia Data Management
after giving pro forma effect to Arcus Data Security Limited's 1998 net
income.
(I) To adjust the pro forma weighted average common shares outstanding as if the
1998 and 1999 acquisitions completed through October 31, 1999, and the 1998
and 1999 equity offerings had occurred on January 1, 1998. The number of
shares of common stock issued and repurchased, and the adjustments, are as
follows (in thousands):
<TABLE>
<CAPTION>
TOTAL NUMBER OF NINE MONTHS
SHARES ISSUED ENDED YEAR ENDED
TRANSACTIONS OR REPURCHASED SEPTEMBER 30, 1999 DECEMBER 31, 1998
- ------------ --------------- ------------------ -----------------
<S> <C> <C> <C>
1999 equity offering.......................... 5,750 2,759 5,750
1998 equity offering.......................... 6,038 -- 1,538
Data Base..................................... 1,477 525 1,477
Repurchase of Data Base shares................ (1,477) (525) (1,477)
Other......................................... 489 -- 122
------ ----- ------
Net shares issued........................... 12,277 2,759 7,410
====== ===== ======
</TABLE>
77
<PAGE>
PIERCE LEAHY CORP.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet of
Pierce Leahy Corp. has been prepared based on the historical condensed
consolidated balance sheet of Pierce Leahy as of September 30, 1999. The Pierce
Leahy Pro Forma Balance Sheet gives effect to the redemption of Pierce Leahy's
redeemable preferred stock on November 1, 1999 and its replacement with
additional borrowings under Pierce Leahy's revolving credit facility as if it
had occurred as of September 30, 1999.
The following Unaudited Pro Forma Condensed Consolidated Statements of
Operations of Pierce Leahy for the nine months ended September 30, 1999 and for
the year ended December 31, 1998 give effect to: (a) all of the 1998 and 1999
acquisitions that Pierce Leahy completed through October 31, 1999; and (b) the
issuance of 8 1/8% Senior Notes due 2008 in April 1998, as if each had occurred
as of January 1, 1998. It should be noted that all of the 1999 Pierce Leahy
acquisitions were completed prior to September 30, 1999 and therefore the
historical balance sheet at that date gives effect to those transactions. The
pro forma adjustments are described in the accompanying notes.
The Pierce Leahy Pro Forma Statements of Operations do not necessarily
indicate the actual results of operations that Pierce Leahy would have reported
if the events described above had occurred as of January 1, 1998, nor do they
necessarily indicate the results of future operations. Furthermore, the pro
forma results do not give effect to all cost savings or incremental costs that
may occur as a result of the integration and consolidation of the 1998 and 1999
acquisitions. In the opinion of Pierce Leahy's management, all adjustments and
disclosures necessary to fairly present these pro forma financial statements
have been made.
Pierce Leahy has accounted for its 1998 and 1999 acquisitions using the
purchase method of accounting.
You should read the Pierce Leahy Pro Forma Financial Statements in
conjunction with Pierce Leahy's "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and with Pierce Leahy's financial
statements included or incorporated by reference in this joint proxy
statement/prospectus.
78
<PAGE>
PIERCE LEAHY CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
PIERCE PRO FORMA PIERCE
LEAHY ADJUSTMENTS LEAHY
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current Assets............................................ $ 66,788 $ -- $ 66,788
Property and Equipment, net............................... 262,576 -- 262,576
Intangible Assets, net.................................... 419,119 -- 419,119
Other Long-term Assets.................................... 2,575 -- 2,575
-------- ------- --------
Total Assets............................................ $751,058 $ -- $751,058
======== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities....................................... $ 86,107 $ -- $ 86,107
Long-term Debt, net of Current Portion.................... 564,105 4,927 (A) 569,032
Deferred Rent............................................. 6,822 -- 6,822
Deferred Income Taxes..................................... 18,614 -- 18,614
Redeemable Preferred Stock................................ 4,927 (4,927 )(A) --
Shareholders' Equity...................................... 70,483 -- 70,483
-------- ------- --------
Total Liabilities and Shareholders' Equity.............. $751,058 $ -- $751,058
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
79
<PAGE>
PIERCE LEAHY CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
PIERCE 1999 PRO FORMA PRO FORMA
LEAHY ACQUISITIONS (1) ADJUSTMENTS (2) PIERCE LEAHY
---------- ---------------- --------------- ------------
<S> <C> <C> <C> <C>
Revenues:
Storage.................................. $139,856 $1,134 $ -- $140,990
Service and Storage Material Sales....... 113,903 1,133 -- 115,036
-------- ------ ---- --------
Total Revenues......................... 253,759 2,267 -- 256,026
-------- ------ ---- --------
Operating Expenses:
Cost of Sales (excluding depreciation and
amortization).......................... 143,429 1,659 -- 145,088
Selling, General and Administrative...... 33,563 161 -- 33,724
Depreciation and Amortization............ 32,084 74 272 (B) 32,430
Foreign Currency Exchange................ (5,505) -- -- (5,505)
-------- ------ ---- --------
Total Operating Expenses............... 203,571 1,894 272 205,737
-------- ------ ---- --------
Operating Income........................... 50,188 373 (272) 50,289
Interest Expense, net...................... 38,877 5 718 (C) 39,600
-------- ------ ---- --------
Income Before Income Taxes................. 11,311 368 (990) 10,689
Income Taxes............................... 3,482 -- (391)(D) 3,091
-------- ------ ---- --------
Net Income................................. 7,829 368 (599) 7,598
Preferred Stock Dividend................... 648 -- (648)(C) --
-------- ------ ---- --------
Net Income Applicable to Common
Shareholders............................. $ 7,181 $ 368 $ 49 $ 7,598
======== ====== ==== ========
Net Income per Common Share--Basic......... $ 0.42 $ 0.45
======== ========
Net Income per Common Share--Diluted....... $ 0.41 $ 0.43
======== ========
Weighted Average Common Shares
Outstanding--Basic....................... 17,066 17,066
======== ========
Weighted Average Common Shares
Outstanding--Diluted..................... 17,589 17,589
======== ========
EBITDA..................................... $ 76,767 $ 447 $ -- $ 77,214
======== ====== ==== ========
</TABLE>
- ------------------------
(1) Represents historical results of operations for each 1999 acquisition
completed through October 31, 1999 for the period in 1999 prior to the time
it was acquired.
(2) Does not give pro forma effect to certain identified cost savings of
$0.1 million that Pierce Leahy believes would have been realized had the
1999 acquisitions completed through October 31, 1999 been fully integrated
as of January 1, 1998. These cost savings relate to: (a) termination of
specific employees and related net reductions in labor expenses and
(b) reduction of other operating and administrative costs due to economies
of scale.
The accompanying notes are an integral part of these pro forma financial
statements.
80
<PAGE>
PIERCE LEAHY CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL 1998 AND 1999 ACQUISITIONS (1) PRO FORMA
PIERCE ------------------------------ PRO FORMA PIERCE
LEAHY ARCHIVEX KESTREL OTHER ADJUSTMENTS (2) LEAHY
---------- -------- -------- -------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Storage........................ $153,533 $1,825 $3,482 $14,652 $ -- $173,492
Service and Storage Material
Sales........................ 116,767 2,048 2,575 11,217 -- 132,607
-------- ------ ------ ------- -------- --------
Total Revenues............... 270,300 3,873 6,057 25,869 -- 306,099
-------- ------ ------ ------- -------- --------
Operating Expenses:
Cost of Sales (excluding
depreciation and
amortization)................ 154,435 2,182 2,720 16,592 -- 175,929
Selling, General and
Administrative............... 36,994 950 1,929 4,018 -- 43,891
Depreciation and
Amortization................. 35,772 245 510 946 3,554(B) 41,027
Foreign Currency Exchange...... 7,907 -- -- -- -- 7,907
-------- ------ ------ ------- -------- --------
Total Operating Expenses..... 235,108 3,377 5,159 21,556 3,554 268,754
-------- ------ ------ ------- -------- --------
Operating Income................. 35,192 496 898 4,313 (3,554) 37,345
Interest Expense, net............ 42,864 112 428 143 7,008(C) 50,555
-------- ------ ------ ------- -------- --------
Income (loss) before Income
Taxes.......................... (7,672) 384 470 4,170 (10,562) (13,210)
Income Taxes..................... 3,318 115 171 34 1,284(D) 4,922
-------- ------ ------ ------- -------- --------
Net Income (Loss)................ $(10,990) $ 269 $ 299 $ 4,136 $(11,846) $(18,132)
======== ====== ====== ======= ======== ========
Net Loss per Common Share--Basic
and Diluted.................... $ (0.65) $ (1.06)
======== ========
Weighted Average Common Shares
Outstanding--Basic and
Diluted........................ 16,805 221(E) 17,026
======== ======== ========
EBITDA........................... $ 78,871 $ 741 $1,408 $ 5,259 $ -- $ 86,279
======== ====== ====== ======= ======== ========
</TABLE>
- ------------------------
(1) Represents historical results of operations for each 1998 acquisition for
the period in 1998 prior to the time it was acquired and each 1999
acquisition completed through October 31, 1999 for the year ended
December 31, 1998.
(2) Does not give pro forma effect to certain identified cost savings of
$2.7 million that Pierce Leahy's management believes would have been
realized had the 1998 and 1999 acquisitions completed through October 31,
1999 been fully integrated as of January 1, 1998. These cost savings relate
to: (a) termination of specific employees and related net reductions in
labor expenses; (b) closure of identified redundant facilities and related
net reductions in occupancy costs; and (c) reduction of other operating and
administrative costs due to economies of scale.
The accompanying notes are an integral part of these pro forma financial
statements.
81
<PAGE>
PIERCE LEAHY CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
OVERVIEW
ACQUISITIONS
In 1998, Pierce Leahy completed 16 acquisitions for an aggregate purchase
price of $204.1 million, consisting of $186.5 million in net cash, 548,262
shares of Pierce Leahy common stock with a fair value of $14.4 million and
$3.2 million in seller notes. The most significant of these acquisitions were
the acquisitions of Archivex, Inc. for $59.0 million in cash in April 1998, and
Kestrel Holdings, Inc. for $52.0 million in cash in July 1998. During 1998,
Pierce Leahy's principal Canadian subsidiary issued $135.0 principal amount of
8 1/8% Senior Notes due 2008, a portion of which was used to finance the
acquisition of Archivex, Inc. The 8 1/8% Senior Notes due 2008 are guaranteed by
Pierce Leahy on a senior subordinated basis. The remainder of the 1998
acquisitions was financed primarily from borrowings under Pierce Leahy's credit
facility, the issuance of Pierce Leahy common stock and seller notes.
In 1999, through October 31, 1999, Pierce Leahy completed four acquisitions
for an aggregate purchase price of approximately $42.9 million, consisting of
$23.6 million in net cash and $19.3 million in seller notes.
All Pierce Leahy 1998 and 1999 acquisitions are listed below:
<TABLE>
<CAPTION>
1998 ACQUISITIONS COMPLETION DATE
- ----------------- ----------------
<S> <C>
Automated Record Centres Ltd.............................. January 1998
Record Archives Corp...................................... January 1998
DataStor, Inc............................................. January 1998
Off-Site Records Management, Inc.......................... February 1998
DVX. Inc. d/b/a Deliverex of Denver....................... March 1998
Amodio Archives........................................... April 1998
Archivex, Inc............................................. April 1998
All-Safe Archives, Inc.................................... May 1998
The Records Centre........................................ May 1998
Comac Services, Inc....................................... May 1998
Data Protection Services.................................. June 1998
Kestrel Holdings, Inc..................................... July 1998
Bender Records Service.................................... July 1998
Keystone Records Management, Inc.......................... July 1998
Dallas Secured Records Storage, Inc....................... July 1998
Data Management Systems, Ltd.............................. July 1998
1999 ACQUISITIONS (COMPLETED THROUGH OCTOBER 31, 1999)
Allards Record Center..................................... January 1999
Medex Systems Storage, Inc................................ January 1999
Datavault, Ltd............................................ February 1999
Tippet-Richardson, Ltd.................................... July 1999
</TABLE>
BALANCE SHEET
Pierce Leahy paid $247.0 million in aggregate consideration for the 1998 and
1999 acquisitions completed through October 31, 1999. Pierce Leahy has allocated
the excess of the purchase price over the book value of the net assets acquired
for each of the acquisitions to tangible and intangible assets,
82
<PAGE>
based on its estimate of the fair value of the net assets acquired. The
following allocation of the aggregate purchase price is preliminary and subject
to adjustment, based on the final determination of the fair value of the net
assets acquired. Pierce Leahy's management believes that the final allocation of
the purchase price will not differ materially from the preliminary estimated
amounts.
<TABLE>
<CAPTION>
(in millions)
<S> <C> <C>
1998 ACQUISITIONS:
Current Assets............................................ $ 8.1
Property and Equipment.................................... 36.4
Goodwill.................................................. 178.0
Other Long-term Assets.................................... 9.6
Current Liabilities....................................... (13.7)
Deferred Income Taxes..................................... (1.4)
Other Long-term Liabilities............................... (12.9)
------
Purchase Price of 1998 Acquisitions..................... 204.1
1999 ACQUISITIONS COMPLETED THROUGH OCTOBER 31, 1999:
Current Assets............................................ 3.5
Property and Equipment.................................... 4.5
Goodwill.................................................. 40.6
Other Long-term Assets.................................... 1.3
Current Liabilities....................................... (6.1)
Deferred Income Taxes..................................... (0.2)
Other Long-term Liabilities............................... (0.7)
------
Purchase Price of 1999 Acquisitions..................... 42.9
------
Total Purchase Price of the 1998 and 1999
Acquisitions.......................................... $247.0
======
</TABLE>
The 1998 and 1999 acquisitions completed through October 31, 1999 are
assumed to be financed as follows (in millions):
<TABLE>
<S> <C> <C>
1998 ACQUISITIONS:
Seller notes issued....................................... $ 3.2
Fair value of common stock issued......................... 14.4
Net proceeds from 1998 8 1/8% Senior Notes................ 129.0
Net borrowings from revolving credit facility............. 57.5
------
Purchase Price of 1998 Acquisitions..................... 204.1
1999 ACQUISITIONS COMPLETED THROUGH OCTOBER 31, 1999:
Seller notes issued....................................... 19.3
Net borrowings from revolving credit facility............. 23.6
------
Purchase Price of 1999 Acquisitions..................... 42.9
------
Total Purchase Price of 1998 and 1999 Acquisitions.... $247.0
======
</TABLE>
The accompanying Pierce Leahy Pro Forma Balance Sheet as of September 30,
1999 reflects the following pro forma adjustment:
(A) To reflect the redemption of Pierce Leahy's redeemable preferred stock
and its replacement with additional borrowings under Pierce Leahy's
revolving credit facility.
83
<PAGE>
STATEMENTS OF OPERATIONS
The accompanying Pierce Leahy Pro Forma Statements of Operations for the
nine months ended September 30, 1999 and for the year ended December 31, 1998
have been prepared as if the 1998 and 1999 acquisitions completed through
October 31, 1999, and the sale of the 1998 8 1/8% Senior Notes had occurred on
January 1, 1998 and reflect the following pro forma adjustments:
(B) To reflect additional depreciation expense based on the fair value of
the property and equipment acquired and the remaining useful lives and
the amortization of goodwill. Property and equipment are depreciated over
five to 25 years, goodwill is amortized over 30 years and covenants
not-to-compete are amortized over the specific period to be benefited as
specified in the purchase agreement on a straight-line basis.
(C) To record interest expense on the additional debt used to finance the
1998 and 1999 acquisitions. This debt includes the net proceeds from the
1998 8 1/8% Senior Notes and net borrowings under Pierce Leahy's
revolving credit facility. In addition, this adjustment records interest
expense and eliminates preferred stock dividends based on the redemption
of Pierce Leahy's redeemable preferred stock and its replacement with
additional borrowings under Pierce Leahy's revolving credit facility.
(D) To adjust the provision for income taxes to Pierce Leahy's effective
domestic rate on domestic pro forma income before nondeductible goodwill
amortization and other nondeductible expenses, and adjust to foreign
statutory rates on foreign pro forma income before nondeductible goodwill
and interest expense.
(E) To adjust the pro forma weighted average common shares outstanding as if
the 548,262 shares of common stock issued in May 1998 as part of the
aggregate purchase price of Comac Services, Inc. had occurred on
January 1, 1998.
84
<PAGE>
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
On April 21, 1999, Iron Mountain common stock began trading on the NYSE
under the symbol "IRM." Prior to that date, Iron Mountain common stock traded on
the Nasdaq National Market under the symbol "IMTN." Since Pierce Leahy common
stock began public trading on July 1, 1997, it has been traded on the NYSE under
the symbol "PLH." Following the merger, Pierce Leahy, as the surviving entity,
will change its name to Iron Mountain Incorporated and its shares will trade on
the NYSE under the symbol "IRM."
The following table sets forth, for the fiscal quarters indicated, based on
published financial sources, the range of high and low sale prices of Iron
Mountain common stock and Pierce Leahy common stock (rounded to two decimal
places). Neither company has paid any cash dividends during the periods
presented.
<TABLE>
<CAPTION>
IRON MOUNTAIN PIERCE LEAHY
INCORPORATED CORP. COMMON
COMMON STOCK(1) STOCK(2)
------------------- -------------------
HIGH LOW HIGH LOW
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1997
1st Quarter............................................... $20.67 $14.33 $ -- $ --
2nd Quarter............................................... 20.00 15.00 -- --
3rd Quarter............................................... 24.17 19.50 29.31 23.56
4th Quarter............................................... 26.50 21.29 31.06 15.44
1998
1st Quarter............................................... 25.08 20.92 27.00 20.38
2nd Quarter............................................... 30.67 24.58 28.88 23.25
3rd Quarter............................................... 30.50 22.50 25.88 16.75
4th Quarter............................................... 36.25 23.00 26.00 17.63
1999
1st Quarter............................................... 36.25 27.38 27.00 24.00
2nd Quarter............................................... 33.12 25.38 26.75 23.63
3rd Quarter............................................... 34.38 27.88 26.00 20.06
4th Quarter (through November 19, 1999)................... 34.00 25.12 31.06 23.44
</TABLE>
- ------------------------
(1) On June 30, 1998, Iron Mountain's Board of Directors approved a
three-for-two split effected in the form of a dividend on Iron Mountain's
common stock. The additional shares of common stock were issued on July 31,
1998 to all stockholders of record as of the close of business on July 17,
1998. The above table gives effect to this stock split.
(2) Pierce Leahy common stock prices do not reflect a stock dividend of one
share of common stock for every ten shares outstanding which Pierce Leahy
expects to pay prior to the closing of the merger.
On October 20, 1999, the last full trading day before the announcement of
the signing of the merger agreement, the last reported sale prices per share of
Iron Mountain and Pierce Leahy common stock were $30.44 and $25.81. On ,
the most recent practicable date prior to the printing of this joint proxy
statement/prospectus, the last reported sale prices per share of Iron Mountain
and Pierce Leahy common stock were $ and $ . WE URGE SHAREHOLDERS TO
OBTAIN CURRENT MARKET QUOTATIONS PRIOR TO MAKING ANY DECISIONS WITH RESPECT TO
THE MERGER.
85
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
AND BYLAWS OF NEW IRON MOUNTAIN
When the Pierce Leahy shareholders vote to approve the merger agreement,
they are also approving the amended and restated articles of incorporation and
bylaws of Pierce Leahy, which will be the organizational documents that govern
the rights of the shareholders of New Iron Mountain. The amended and restated
articles of incorporation and bylaws of New Iron Mountain do not contain
material, substantive changes from the current articles of incorporation and
bylaws of Pierce Leahy, except for the increase in the number of shares of
authorized common stock of New Iron Mountain.
The following table indicates the current authorized capital of Pierce Leahy
and the proposed authorized capital of New Iron Mountain that Pierce Leahy
shareholders are asked to approve in voting in favor of the merger agreement:
<TABLE>
<CAPTION>
CURRENT PROPOSED
PIERCE LEAHY NEW IRON MOUNTAIN
AUTHORIZED SHARES AUTHORIZED SHARES
----------------- -----------------
<S> <C> <C>
Common Stock................................................ 80,000,000 150,000,000
Preferred Stock............................................. 10,000,000 10,000,000
---------- -----------
Total:.................................................. 90,000,000 160,000,000
========== ===========
</TABLE>
As of November 15, 1999, giving effect to the Pierce Leahy one-for-ten stock
dividend:
- 18,782,637 shares of common stock of Pierce Leahy were issued and
outstanding; and
- 2,801,641 shares of common stock of Pierce Leahy were reserved for future
issuances under equity incentive plans.
In addition, upon closing of the merger, New Iron Mountain will:
- issue approximately 35,415,837 shares of common stock based on Iron
Mountain's shares of common stock outstanding; and
- reserve for issuance under Iron Mountain equity incentive plans that will
be assumed by New Iron Mountain 3,521,174 shares of common stock.
Taking into account the foregoing uses, approximately 19,478,711 shares of
common stock of New Iron Mountain would be unreserved and unissued after the
merger if the number of authorized common shares were to remain the same and
approximately 89,478,711 shares of common stock of New Iron Mountain would be
unreserved and unissued after the merger if the number of authorized common
shares were increased to 150,000,000.
As of November 15, 1999, there were no shares of Pierce Leahy preferred
stock issued and outstanding. The authorized and unissued shares of preferred
stock may be issued with such designations, voting powers, preferences and
relative, participating, optional or other special rights and the qualification,
limitations or restrictions thereon as the Board may authorize without further
action by shareholders.
We believe that the current level of authorized shares of common stock will
restrict New Iron Mountain's ability to issue or reserve common stock for
general corporate purposes, including the following:
- to consummate certain business acquisitions;
- to raise cash through sales of common stock to public and private
investors; and
- to pay stock dividends or effectuate stock splits.
The purpose of the proposed increase in the number of shares of authorized
common stock is to provide sufficient authorized shares of common stock to give
the New Iron Mountain Board the
86
<PAGE>
flexibility to issue common stock in the future in connection with acquisitions
and other transactions that management believes would provide the potential for
growth and increased value for shareholders without the time delay, uncertainty
and expense of having to obtain a shareholder vote to increase authorized
capital at the time of the transaction. At the present time, we have no specific
plans to issue additional shares of common stock other than in connection with
the merger and routine grants under equity incentive plans.
The issuance of additional shares of common stock by New Iron Mountain could
have an antitakeover effect by making it more difficult to obtain shareholder
approval of various actions, such as a merger or removal of management. The
amended and restated articles of incorporation, if approved, could strengthen
the position of management and might make the removal of management more
difficult, even if removal would be generally beneficial to New Iron Mountain's
shareholders. The authorization to issue the additional shares of common stock
would provide management with a capacity to counter the efforts of unfriendly
tender offerors by issuing securities to others who are friendly or desirable to
management. However, the submission of the amended and restated articles of
incorporation is not a part of any present plan by New Iron Mountain management
to render the takeover of it more difficult.
ELECTION OF DIRECTORS OF NEW IRON MOUNTAIN
REQUIRED VOTE AND RECOMMENDATION
As provided in the merger agreement, the Board of New Iron Mountain will
consist of eleven members as follows: the nine current directors of Iron
Mountain and two designees of Pierce Leahy, J. Peter Pierce, currently the
President, Chief Executive Officer and a director of Pierce Leahy, and Howard D.
Ross, who is not currently a director of either company. At the Pierce Leahy
shareholders meeting, the Pierce Leahy shareholders are being asked to elect the
Board of Directors of New Iron Mountain. This election of directors will not be
effective unless the merger actually closes. If the merger does not occur, the
current Pierce Leahy Board of Directors will continue in office.
The Pierce Leahy Board of Directors is, and the New Iron Mountain Board of
Directors will be, divided into three classes serving staggered three-year
terms, the term of one class of directors to expire each year. The term of the
Class III Directors will expire at the 2000 annual meeting of shareholders; the
term of the Class I Directors will expire at the 2001 annual meeting of
shareholders; and the term of the Class II Directors will expire at the 2002
annual meeting of shareholders. The Pierce Leahy Board has unanimously nominated
the persons listed below to be elected directors of New Iron Mountain effective
upon the closing of the merger:
CLASS III (term expiring at the 2000 annual meeting of shareholders)
Kent P. Dauten
Arthur D. Little
J. Peter Pierce
C. Richard Reese
CLASS I (term expiring at the 2001 annual meeting of shareholders)
Clarke H. Bailey
Constantin R. Boden
Eugene B. Doggett
CLASS II (term expiring at the 2002 annual meeting of shareholders)
B. Thomas Golisano
Howard D. Ross
Vincent J. Ryan
David S. Wendell
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Unless contrary instructions are given, the shares represented by a properly
executed Pierce Leahy proxy will be voted "FOR" the election of the directors
recommended by the Pierce Leahy Board. Should any of the nominees become
unavailable to accept election as a director, the persons named in the enclosed
proxy for Pierce Leahy shareholders will vote the shares which they represent
for the election of such other person as the Pierce Leahy Board of Directors may
recommend. The four nominees receiving a plurality of the votes cast for
Class III director, the three nominees receiving a plurality of the votes cast
for Class I director and the four nominees receiving a plurality of the votes
cast for Class II director shall be elected. Although abstentions are counted
for determining whether a quorum is present, abstentions and broker non-votes
are not counted for the purpose of determining which nominees receive a
plurality.
The election of the nominees is a condition to Iron Mountain's obligation to
complete the merger. Accordingly, if both the Iron Mountain and Pierce Leahy
shareholders approve the merger but the Pierce Leahy shareholders do not elect
the nominees for director of New Iron Mountain, Iron Mountain will not be
required to proceed with the merger.
NOMINEES FOR DIRECTOR AND EXECUTIVE OFFICERS OF NEW IRON MOUNTAIN
Assuming the election of the nominees for director, the directors and
executive officers of New Iron Mountain following the merger will be as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
C. Richard Reese............ 53 Chairman of the Board of Directors and Chief Executive
Officer
J. Peter Pierce............. 54 President and Director
David S. Wendell............ 46 Senior Vice President and Director
John F. Kenny, Jr........... 42 Executive Vice President and Chief Financial Officer
Harold E. Ebbighausen....... 44 President of Arcus Data Security, Inc.
Clarke H. Bailey............ 45 Director
Constantin R. Boden......... 63 Director
Kent P. Dauten.............. 44 Director
Eugene B. Doggett........... 63 Director
B. Thomas Golisano.......... 58 Director
Arthur D. Little............ 55 Director
Howard D. Ross.............. 47 Director
Vincent J. Ryan............. 63 Director
</TABLE>
In addition, Leo W. Pierce, Sr. will become Chairman Emeritus of New Iron
Mountain.
INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS
The following is a summary of the business experience and biographical
information for each nominee for director:
C. RICHARD REESE is the Chairman of the Board of Directors of Iron Mountain,
a position that he has held since November 1995, and the Chief Executive Officer
of Iron Mountain, a position that he has held since 1981. Mr. Reese was the
President of Iron Mountain from 1981 to November 1995. Mr. Reese is also a
member of the investment committee of Schooner Capital LLC, which owns
approximately 8.8% of the outstanding Iron Mountain common stock, and a trustee
of Schooner Capital Trust. Prior to joining Iron Mountain, he lectured at
Harvard Business School in "Entrepreneurship" and provided consulting services
to small and medium-sized emerging enterprises. Mr. Reese has also served as
president and a director of Professional Records and Information Services
Management ("PRISM"), the records and information management services industry
trade association. He holds a Master of Business Administration degree from
Harvard Business School.
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<PAGE>
J. PETER PIERCE is the President and Chief Executive Officer of Pierce
Leahy, positions he has held since January 1995, and a director of Pierce Leahy,
a position he has held since the early 1970s. Mr. Pierce served as President and
Chief Operating Officer of Pierce Leahy from January 1984 to January 1995, prior
to which he served in various other capacities with Pierce Leahy, including as
Vice President of Operations, General Manager of Connecticut, New York and New
Jersey, and Sales Executive. Mr. Pierce attended the University of Pennsylvania
and served in the United States Marine Corps.
DAVID S. WENDELL is the President and Chief Operating Officer and a director
of Iron Mountain, positions that he has held since November 1995. After
practicing law with Brown & Wood, Mr. Wendell joined Iron Mountain in 1984,
where he has served in a variety of positions. Prior to November 1995, he was
Executive Vice President, Atlantic Area and prior to 1991, he was Vice
President, New England Region. He holds a Master of Business Administration
degree from Harvard Business School and a Juris Doctor degree from the
University of Virginia. After the merger, Mr. Wendell will become Senior Vice
President of New Iron Mountain.
CLARKE H. BAILEY has been a director of Iron Mountain since January 1998,
when he was appointed to the Iron Mountain Board of Directors in accordance with
the terms of Iron Mountain's acquisition of Arcus Group. He is Co-Chairman and
Director of Hudson River Capital LLC, a private equity firm, and Chairman, Chief
Executive Officer and a director of National Fulfillment, Inc., a private
company. Mr. Bailey was the Chairman and Chief Executive Officer of each of
Arcus Group, United Acquisition Company and Arcus Technology Services, Inc. from
1995 until 1998. He is a director of Connectivity Technologies Inc., Swiss Army
Brands, Inc., SWWT, Inc. (formerly known as Sweetwater, Inc.) and Glenayre
Technologies, Inc. (formerly N-W Group, Inc.). Prior to joining Glenayre in
1990, Mr. Bailey was a Managing Director at Oppenheimer & Co., Inc. He holds a
Master of Business Administration degree from The Wharton School of the
University of Pennsylvania.
CONSTANTIN R. BODEN has been a director of Iron Mountain since
December 1990. Mr. Boden is the principal of Boden Partners LLC and chairman of
the advisory board of Boston Capital Ventures, a risk capital concern. For
34 years, until January 1995, Mr. Boden was employed by The First National Bank
of Boston, most recently as Executive Vice President, International Banking. He
holds a Master of Business Administration degree from Harvard Business School.
KENT P. DAUTEN has been a director of Iron Mountain since November 1997,
when he was appointed to the Iron Mountain Board of Directors in accordance with
the terms of the Record Masters merger. He has also served as President of
Keystone Capital, Inc., a management and consulting advisory service firm since
March 1994. In February 1995, Mr. Dauten founded and served as President of
Record Masters until the completion of the Record Masters merger. From 1993 to
1994, he was employed in various investment management positions, most recently
as Senior Vice President of Madison Dearborn Partners, Inc. and from 1979 to
1992, he was Senior Vice President of First Chicago Venture Capital. Mr. Dauten
currently serves as a director of Health Management Associates, Inc., a hospital
management firm, and is a trustee of ElderTrust, a health care real estate
investment trust. Mr. Dauten holds a Master of Business Administration degree
from Harvard Business School.
EUGENE B. DOGGETT has been a director of Iron Mountain since 1990. From 1987
until May 1997, Mr. Doggett was the Chief Financial Officer of Iron Mountain,
and from 1990 until May 1998, Mr. Doggett was an Executive Vice President of
Iron Mountain. Mr. Doggett is also a director of Mac-Gray Corporation, a
publicly held supplier of card and coin-operated laundry services in multiple
housing facilities. Prior to joining Iron Mountain, he had extensive experience
in commercial and investment banking, as well as financial and general
management experience at senior levels. He holds a Master of Business
Administration degree from Harvard Business School.
89
<PAGE>
B. THOMAS GOLISANO has been a director of Iron Mountain since June 1997,
when he was appointed to the Iron Mountain Board of Directors in accordance with
the terms of Iron Mountain's merger with Safesite Records Management
Corporation. He founded Paychex Inc., a publicly held, national payroll service
company, in 1971 and serves as its Chairman, President and Chief Executive
Officer. Mr. Golisano serves on the Board of Trustees of Rochester Institute of
Technology and on the boards of several privately held companies. He has also
served on the boards of numerous non-profit organizations and is the founder of
the B. Thomas Golisano Foundation.
ARTHUR D. LITTLE has been a director of Iron Mountain since November 1995.
Mr. Little is a principal of The Little Investment Company, which he founded in
1992. Prior to that, he was Managing Director of and also a partner in
Narragansett Capital, Inc., a private investment firm. He holds a Bachelor of
Arts degree in history from Stanford University.
HOWARD D. ROSS has been nominated to serve as a director of New Iron
Mountain. In 1999, Mr. Ross was involved in the formation of and is currently a
partner of LLR Equity Partners, L.P., a venture capital fund. From 1984 to
October 1999, he was a partner at Arthur Andersen LLP. Mr. Ross holds a Bachelor
of Science degree in Economics from The Wharton School of the University of
Pennsylvania and is a Certified Public Accountant. He is currently a director of
Premier Research Worldwide, Ltd., a provider of clinical testing and software
services primarily to the pharmaceutical industry, and Crothall Services
Group, Inc., which provides facility management and other support services
primarily to the health care industry.
VINCENT J. RYAN has been a director of Iron Mountain for more than ten
years. Mr. Ryan is the founder of Schooner Capital LLC and has served as
Chairman and Chief Executive Officer of Schooner Capital LLC since 1971. He is
also President and a Trustee of Schooner Capital Trust, the sole member of
Schooner Capital LLC. Prior to November 1995, Mr. Ryan served as Chairman of the
Iron Mountain Board of Directors.
INFORMATION REGARDING EXECUTIVE OFFICERS
A summary of the business experience and biographical information for each
person who will serve as an executive officer of New Iron Mountain who is not
also a nominee for director follows:
JOHN F. KENNY, JR. has been an Executive Vice President and the Chief
Financial Officer of Iron Mountain since May 1997. Mr. Kenny joined Iron
Mountain in 1991, and held operating responsibilities as Regional Vice President
of New England and later Northeast operations before assuming the position of
Vice President of Corporate Development in 1995. Prior to 1991, he was Vice
President of CS First Boston Merchant Bank, New York, with responsibility for
risk capital investments. Mr. Kenny has also served as a director and the
Treasurer of PRISM. He holds a Master of Business Administration degree from
Harvard Business School.
HAROLD E. EBBIGHAUSEN has been the President of Arcus Data Security, Inc., a
subsidiary of Iron Mountain conducting data security services since May 1998.
Prior to 1997, he had been serving as Vice President of Data Security Services
since joining Iron Mountain in September 1996. Prior to joining Iron Mountain,
Mr. Ebbighausen was Vice President of Document Management Services with INSCI
Corporation, a software provider for computer output and data storage solutions
to optical and CD technology. Previously, he held a number of field management
positions with Anacomp, Inc., a service bureau provider in the micrographics
industry.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of New Iron Mountain will have a standing Audit
Committee, Compensation Committee and Executive Committee, and a Stock Incentive
Plan Subcommittee of the Compensation Committee. New Iron Mountain will not have
a nominating committee.
90
<PAGE>
The Audit Committee will consult with New Iron Mountain's independent public
accountants regarding the plan for New Iron Mountain's annual audit, review with
the public accountants their audit report and related management letter, review
the performance of the independent public accountants and their fees, review New
Iron Mountain's internal accounting control policies and procedures and consider
and recommend the selection of the independent public accountants. The following
nominees for director are expected to become members of the Audit Committee:
Constantin R. Boden; Kent P. Dauten; and Arthur D. Little.
The Compensation Committee will provide recommendations to the New Iron
Mountain Board regarding compensation policies and programs of the Company and
will also be responsible for establishing and modifying the compensation for all
executive officers of the Company. The following nominees for director are
expected to become members of the Compensation Committee: Clarke H. Bailey;
Constantin R. Boden; Arthur D. Little; and Vincent J. Ryan.
The Stock Incentive Plan Subcommittee of the Compensation Committee will
administer and recommend the adoption of, and any amendments to, all equity
incentive plans of New Iron Mountain. It is expected that Messrs. Little and
Boden will be the members of this subcommittee.
The Executive Committee will exercise all the powers of the Board of
Directors in the management and direction of the business and affairs of New
Iron Mountain to the extent not otherwise prohibited by law, the Board of
Directors or the charter documents of New Iron Mountain. The following nominees
for director are expected to become members of the Executive Committee: C.
Richard Reese; J. Peter Pierce; Clarke H. Bailey; and Vincent J. Ryan. The vote
of three of the four members of the Executive Committee will be required for the
Executive Committee to take action.
DIRECTOR COMPENSATION
Directors who are employees of New Iron Mountain will not receive additional
compensation for serving as directors. Each director who is not an employee of
New Iron Mountain will receive an annual retainer fee of $5,000 as compensation
for service as a member of the Board of Directors and $500 for attendance at
committee meetings. In addition, New Iron Mountain will continue Iron Mountain's
program by which it grants its nonemployee directors options to purchase
$100,000 of Iron Mountain common stock every three years. Each option has an
exercise price equal to fair market value, vests in equal amounts over a period
of twelve quarters and has a ten-year term. All directors will be reimbursed for
out-of-pocket expenses incurred in attending meetings of the Board of Directors
or committees thereof, and for other expenses incurred in their capacities as
director.
91
<PAGE>
COMPARISON OF RIGHTS OF SHAREHOLDERS
OF IRON MOUNTAIN AND NEW IRON MOUNTAIN
Iron Mountain is incorporated under the laws of the State of Delaware, and
the rights of Iron Mountain stockholders are currently governed by the Delaware
General Corporation Law, the certificate of incorporation and bylaws of Iron
Mountain. Pierce Leahy is, and New Iron Mountain will be, incorporated under the
laws of the Commonwealth of Pennsylvania. In accordance with the merger
agreement, on the date the merger becomes effective, Iron Mountain stockholders
will become New Iron Mountain shareholders. The rights of New Iron Mountain's
shareholders will be governed by the Pennsylvania Business Corporation Law and
New Iron Mountain's amended and restated articles of incorporation and bylaws.
The following summary is not intended to be complete and is qualified by
reference to the Delaware General Corporation Law, the Iron Mountain certificate
of incorporation and bylaws, the Pennsylvania Business Corporation Law and the
New Iron Mountain amended and restated articles of incorporation and bylaws. The
proposed forms of the New Iron Mountain amended and restated articles of
incorporation and bylaws are included in this joint proxy statement/prospectus
as Annex D and Annex E.
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
AMENDMENTS TO CHARTER
- --------------------------------------------------------------------------------------------
IRON MOUNTAIN NEW IRON MOUNTAIN
- --------------------------------------------- ---------------------------------------------
Under Delaware law, amending the certificate Under Pennsylvania law, amending the articles
of incorporation requires the approval of the of incorporation requires only the
holders of a majority of the shares entitled affirmative vote of a majority of the votes
to vote unless the certificate of actually cast on a proposed amendment at a
incorporation increases the required vote. meeting at which a quorum is present, unless
Under Iron Mountain's certificate of the articles of incorporation require a
incorporation, the vote of holders of at greater percentage. The New Iron Mountain
least 66 2/3% or 80% of the voting power of articles of incorporation do not require a
issued and outstanding common stock is greater percentage vote.
required for the amendment of existing Pennsylvania law eliminates the need for
provisions relating to: shareholder approval of certain non-material
- - the classified board of directors of Iron amendments to the articles, such as changing
Mountain; the corporate name.
- - matters relating to liability and
indemnification of directors;
- - authorizing or changing the preferred and
nonvoting common stock of Iron Mountain;
- - notice requirements for stockholder
nominations of directors or business to be
brought by a stockholder before an annual
meeting;
- - limiting the rights of stockholders to
remove directors or fill director
vacancies;
- - calling special meetings; and
- - amendments to bylaws by the stockholders.
- --------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
AMENDMENTS TO BYLAWS
- --------------------------------------------------------------------------------------------
IRON MOUNTAIN NEW IRON MOUNTAIN
- --------------------------------------------- ---------------------------------------------
Delaware law allows for a majority the board Under the New Iron Mountain bylaws, as
of directors to make changes to the permitted by Pennsylvania law, the board of
corporation's bylaws if the certificate of directors is generally authorized to amend
incorporation confers on the board the power bylaw provisions, subject to the power of
to do so. Delaware law also allows the shareholders to change such action. However,
stockholders to adopt, amend or repeal the the power of the board of directors to adopt
bylaws by a vote of a majority of the or amend certain specific bylaw provisions is
stockholders. The Iron Mountain certificate limited. Pursuant to the New Iron Mountain
of incorporation allows amendments to certain bylaws, amending the provisions to reduce the
provisions of the bylaws by a majority vote limitation of directors' liability or limit
of the full board of directors or by indemnification or the advancement of
affirmative vote of at least two-thirds of expenses requires unanimous vote of the
the shares entitled to vote. The Iron directors or majority vote of the
Mountain certificate of incorporation shareholders. All other provisions may be
provides that the following provisions of the amended by a majority vote of the
bylaws may be amended only with approval of shareholders or the board of directors.
at least 80% of the shares entitled to vote:
- - establishing a classified board;
- - specifying notice requirements for
stockholder nominations of directors or
business to be brought at an annual
meeting;
- - limiting stockholder rights to remove
directors or fill vacancies;
- - calling special meetings; or
- - effecting actions by written consent.
- --------------------------------------------------------------------------------------------
MERGERS AND OTHER FUNDAMENTAL TRANSACTIONS
- --------------------------------------------------------------------------------------------
IRON MOUNTAIN NEW IRON MOUNTAIN
- --------------------------------------------- ---------------------------------------------
Under Delaware law, fundamental corporate Under Pennsylvania law, approval of mergers
transactions, such as mergers, and other fundamental transactions require
consolidations, sales of all or substantially board approval and a majority of the votes
all of the corporation's assets and actually cast by the shareholders at a
dissolutions, require the approval of a meeting at which a quorum is present.
majority of the board of directors and However, Pennsylvania law permits a
approval of the holders of a majority of the corporation to increase the minimum
shares of the company's stock. Although percentage vote required. The New Iron
Delaware law permits a corporation to Mountain articles of incorporation and bylaws
increase the minimum percentage vote will not increase the vote requirement.
required, Iron Mountain has not so increased
the vote required.
- --------------------------------------------------------------------------------------------
SHAREHOLDER ACTION BY CONSENT
- --------------------------------------------------------------------------------------------
IRON MOUNTAIN NEW IRON MOUNTAIN
- --------------------------------------------- ---------------------------------------------
Although Delaware law permits action to be Similarly, Pennsylvania law permits action by
taken by written consent, the Iron Mountain consent, but the New Iron Mountain articles
certificate of incorporation specifically of incorporation and bylaws do not permit
prohibits action by written consent of action by either unanimous or partial written
stockholders. consent of shareholders.
- --------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
DIVIDENDS
- --------------------------------------------------------------------------------------------
IRON MOUNTAIN NEW IRON MOUNTAIN
- --------------------------------------------- ---------------------------------------------
Under Delaware law, directors may, subject to Under Pennsylvania law, a corporation has the
any restrictions in the corporation's power, subject to restrictions in its bylaws,
certificate of incorporation, declare and pay to pay dividends or make other distributions
dividends either (1) out of its surplus or to its shareholders unless, after giving
(2) in the case there is no surplus, out of effect thereto, (1) the corporation would not
its net profits for the current fiscal year be able to pay its debts as they become due
and/or the preceding fiscal year. The in the usual course of business or (2) the
directors of a Delaware corporation may not corporation's assets would be less than the
declare dividends out of net profits, sum of its total liabilities plus the amount
however, if the capital of the corporation is that would be needed upon the dissolution of
less than the aggregate amount of capital the corporation to satisfy the preferential
represented by the issued and outstanding rights, if any, of the shareholders having
stock of all classes having a preference upon superior preferential rights to the
the distribution of assets. The Iron Mountain shareholders receiving the distribution. The
certificate of incorporation allows the board New Iron Mountain articles of incorporation
of directors to declare a dividend in either and bylaws contain no restrictions regarding
cash, capital stock or other property for the dividends.
common stock and the non-voting common stock.
- --------------------------------------------------------------------------------------------
SHAREHOLDER MEETINGS
- --------------------------------------------------------------------------------------------
IRON MOUNTAIN NEW IRON MOUNTAIN
- --------------------------------------------- ---------------------------------------------
Under Delaware law, if there is a failure to Pennsylvania law provides that if the annual
hold an annual meeting for the election of meeting for the election of directors is not
directors or there is a failure to take called and held within six months after the
action by written consent for the election of date designated as provided in or fixed
directors for a period of 30 days after the pursuant to the authority granted in the
designated date, or if no date has been bylaws, any shareholder may call the meeting
designated for the annual meeting for a at any time thereafter. Generally, special
period of 13 months after the organization of meetings of shareholders may not be called by
the corporation, its last annual meeting or shareholders of the corporation except by
action by written consent, the Court of "interested shareholders" for certain
Chancery may order a meeting to be held upon purposes. Pursuant to the New Iron Mountain
the request of any stockholder or director. bylaws, special meetings of the shareholders
The Iron Mountain bylaws provide for special may be called by the chairman of the board or
meetings of the stockholders to be called by the board of directors. Pursuant to the
only by the chairman of the board of bylaws, the business permitted at any special
directors or by resolution adopted by a meeting is limited to the business brought to
majority of the board of directors. Pursuant the meeting by the board of directors.
to the bylaws, the business permitted at any
special meeting is limited to the business
brought to the meeting by the board of
directors.
- --------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
SHAREHOLDER NOMINATIONS AND RIGHTS TO ELECT DIRECTORS
- --------------------------------------------------------------------------------------------
IRON MOUNTAIN NEW IRON MOUNTAIN
- --------------------------------------------- ---------------------------------------------
Pursuant to the Iron Mountain certificate of Pursuant to the New Iron Mountain bylaws,
incorporation and bylaws, nominations of nominations of persons for election to the
persons for election to the board of board of directors may be made only at a
directors may be made at a meeting of the meeting of the shareholders at the direction
stockholders at the direction of the board or of the board, a committee of the board or by
by any stockholder who complies with the any shareholder who complies with the notice
notice provisions. Notice must be given by provisions. Notice must be given by a
the stockholder, in writing, not less than shareholder, in writing, with limited
45 days prior to the annual meeting or, if exceptions:
less than 55 days notice of the annual - in the case of an annual meeting called for
meeting was given to the stockholders, the a date within 30 days before or after the
stockholder must submit his or her notice to anniversary date of the last annual meeting
the company within 10 days of receipt of such of shareholders, not less than 60 days nor
notice. more than 90 days prior to the anniversary
of the date the proxy statement was
released to shareholders in connection with
the last annual meeting; and
- in the case of an annual meeting called for
a date not within 30 days before or after the
anniversary date, or in the case of a
special meeting of shareholders for the
purpose of electing directors, not later
than the later of (1) the 90th day before
the meeting date or (2) the close of
business on the 10th day following the day
on which public disclosure of the date of
the meeting was made.
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
APPRAISAL OR DISSENTERS' RIGHTS
- --------------------------------------------------------------------------------------------
IRON MOUNTAIN NEW IRON MOUNTAIN
- --------------------------------------------- ---------------------------------------------
Unless the certificate of incorporation Pennsylvania law does not provide for
provides otherwise, Delaware law does not dissenters' rights to holders of shares that
afford appraisal rights to holders of shares are listed on a national securities exchange
that are listed on a national securities or held of record by more than 2,000
exchange, quoted on a national market system shareholders when the plan of merger or
or held of record by more than 2,000 consolidation converts such shares into stock
stockholders unless the plan of merger or of the surviving or another corporation or
consolidation requires such stockholders to into such shares plus cash in lieu of
accept anything other than stock of the fractional shares.
surviving corporation or stock of another
corporation that is listed on a national
securities exchange, quoted on a national
market system or held of record by more than
2,000 stockholders, cash in lieu of
fractional shares or any combination of the
foregoing. Iron Mountain's certificate of
incorporation does not provide for any
additional appraisal rights.
- --------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
STOCK REPURCHASES
- --------------------------------------------------------------------------------------------
IRON MOUNTAIN NEW IRON MOUNTAIN
- --------------------------------------------- ---------------------------------------------
Under Delaware law, a corporation may not Pennsylvania law permits a corporation to
purchase or redeem its own shares when the redeem any and all classes of its shares and
capital of the corporation is impaired or treats such redemption or repurchase like a
when such purchase or redemption would cause dividend by the corporation to or for the
an impairment of the capital of the benefit of its shareholders, subject to the
corporation. A Delaware corporation may, same limitations described above under the
however, purchase or redeem any of its caption "--Dividends."
preferred shares if such shares will then be
retired.
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
VOTING RIGHTS
- --------------------------------------------------------------------------------------------
IRON MOUNTAIN NEW IRON MOUNTAIN
- --------------------------------------------- ---------------------------------------------
Although Delaware law permits cumulative Similarly, Pennsylvania law permits
voting, the Iron Mountain certificate of cumulative voting, but the New Iron Mountain
incorporation does not provide for cumulative articles of incorporation prohibit cumulative
voting in the election of directors. Pursuant voting in the election of directors. Pursuant
to the certificate of incorporation and to Pennsylvania law, holders of New Iron
bylaws, holders of Iron Mountain common stock Mountain common stock are entitled to one
are entitled to one vote per share. The Iron vote per share. The New Iron Mountain
Mountain certificate of incorporation has articles of incorporation do not authorize
authorized a class of non-voting common non-voting common stock.
stock.
- --------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
STATUTORY ANTI-TAKEOVER PROVISIONS
- --------------------------------------------------------------------------------------------
IRON MOUNTAIN NEW IRON MOUNTAIN
- --------------------------------------------- ---------------------------------------------
Section 203 of the Delaware General Subchapter 25E of the Pennsylvania Business
Corporation Law prohibits a public Delaware Corporation Law (relating to control
corporation from engaging in a "business transactions) provides generally that if any
combination" with an "interested stockholder" person or group acquires 20% or more of the
for a period of three years after the time of voting power of a publicly-traded
the transaction in which such stockholder corporation, the remaining shareholders may
became an interested stockholder, unless demand from such person or group the fair
(1) prior to such time the board of directors value of their shares, including a
approved either the business combination or proportionate amount of any control premium.
the transaction which resulted in the Subchapter 25F (relating to business
stockholder becoming an interested combinations) restricts the ability of an
stockholder, (2) upon becoming an interested "interested shareholder" to enter into
stockholder, the stockholder then owned at certain "business combinations" with the
least 85% of the voting stock of the corporation. The term "business combination"
corporation outstanding at the time the is defined broadly to include various
transaction commenced (excluding certain transactions including mergers,
shares), or (3) at or subsequent to such consolidations, asset sales and other similar
time, the business combination is approved by transactions. An "interested shareholder" is
the board of directors and authorized at an defined generally as the beneficial owner of
annual or special meeting by at least 66 2/3% at least 20% of a corporation's voting stock.
of the corporation's outstanding voting Subchapter 25G (relating to control-share
stock, excluding shares owned by the acquisitions) prevents a person who has
interested stockholder. For purposes of acquired 20% or more of the voting power of a
Section 203, the term "business combination" corporation from voting such shares unless
includes mergers, asset sales and other the "disinterested" shareholders approve such
similar transactions, and an "interested voting rights. Failure to obtain such
stockholder" is a person who, together with approval exposes the owner of such shares to
affiliates and associates, owns (or within the risk of a forced sale of his or her
the prior three years, did own) 15% or more shares to the corporation.
of the corporation's voting stock. Subchapter 25H (relating to disgorgement)
Section 203 does not apply in several applies in the event that (1) any person or
situations, including (1) if the group publicly discloses that the person or
corporation's original certificate of group may acquire control of the corporation
incorporation contains a provision expressly through any means or (2) a person or group
electing not to be so governed; (2) if the acquires (or publicly discloses an offer or
corporation, by action of the board of intent to acquire) 20% or more of the voting
directors, adopts an amendment to its by-laws power of the corporation. Any profits from
within a specified time expressly electing sales of equity securities of the corporation
not to be governed by the statute; (3) if the by the person or group during a period of
corporation, by action of a majority of the 18 months subsequent to the obtaining of the
stockholders, adopts an amendment to its status of a controlling person reverts back
certificate of incorporation or by-laws, to the corporation if the securities that
effective twelve months after adoption, were sold were acquired during such 18 month
expressly electing not to be governed by the period or within 24 months prior thereto.
statue; or (4) if the stockholder becomes an Subchapters 25E through 25H contain a wide
interested stockholder inadvertently and variety of transactional and status
divests sufficient shares so that the exemptions, exclusions and safe harbors. A
stockholder ceases to be an interested Pennsylvania corporation may opt out of any
stockholder. Iron Mountain's certificate of of these provisions. New Iron Mountain's
incorporation does not opt out of being articles of incorporation provide that
governed by Section 203. Subchapters 25E, 25G and 25H shall not be
applicable.
- --------------------------------------------------------------------------------------------
</TABLE>
97
<PAGE>
FORWARD-LOOKING STATEMENTS
We have each made statements in this joint proxy statement/prospectus or in
other documents incorporated by reference that constitute "forward-looking
statements" as that term is defined in the federal securities laws. Such
forward-looking statements concern the operations, economic performance and
financial condition of Iron Mountain, Pierce Leahy and New Iron Mountain. The
forward-looking statements are subject to various known and unknown risks,
uncertainties and other factors. When we use words such as "believes,"
"expects," "anticipates," "estimates" or similar expressions, we are making
forward-looking statements.
Although we believe that our forward-looking statements are based on
reasonable assumptions, our expected results may not be achieved and actual
results may differ materially from our expectations. Important factors that
could cause actual results to differ from expectations include, among others,
the following:
- our failure to complete the merger in a timely manner or at all;
- difficulties related to the integration of acquisitions generally and,
more specifically, the integration of the operations of Iron Mountain and
Pierce Leahy;
- our significant indebtedness and the cost and availability of financing
for contemplated growth;
- the cost and availability of appropriate storage facilities;
- changes in customer preferences and demand for our services;
- rapid and significant change in technology;
- intense competition in the industry; and
- other general economic and business conditions.
Certain of these and other factors are described more fully or set forth
under "Risk Factors" in this joint proxy statement/prospectus. These cautionary
statements should not be construed by you to be exhaustive, and they are made
only as of the date of this joint proxy statement/prospectus or, in the case of
documents incorporated by reference, the date of such documents. You should read
these cautionary statements as being applicable to all forward-looking
statements wherever they appear. We assume no obligation to update or revise the
forward-looking statements or to update the reasons why actual results could
differ from those projected in the forward-looking statements.
98
<PAGE>
LEGAL MATTERS
The validity of the common stock to be issued in connection with the merger
will be passed upon by Cozen and O'Connor, Philadelphia, Pennsylvania, counsel
for Pierce Leahy. Cozen and O'Connor will also pass upon the material federal
income tax consequences of the merger and the related transactions for Pierce
Leahy and its shareholders. Two members of Cozen and O'Connor are limited
partners in certain limited partnerships that lease facilities to Pierce Leahy.
Sullivan & Worcester LLP, Boston, Massachusetts, counsel for Iron Mountain, will
pass upon the material federal income tax consequences of the merger and the
related transactions for Iron Mountain and its stockholders. Jas. Murray Howe,
Secretary of Iron Mountain, is of counsel to Sullivan & Worcester LLP and
beneficially owns approximately 20,000 shares of Iron Mountain common stock.
EXPERTS
The consolidated financial statements and schedule of Iron Mountain
Incorporated and its subsidiaries for the three years ended December 31, 1998,
included in Iron Mountain's Current Report on Form 8-K dated July 9, 1999, and
its supplemental schedule, Valuation and Qualifying Accounts, included in its
Annual Report on Form 10-K dated March 31, 1999, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included or incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.
The consolidated financial statements and schedule of Pierce Leahy Corp. and
its subsidiaries for the three years ended December 31, 1998, included in Pierce
Leahy's Annual Report on Form 10-K dated March 26, 1999, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included or incorporated by reference
herein in reliance upon the authority of said firm as experts in giving said
reports.
The financial statements of Records Retention/FileSafe, L.P. for the two
years ended December 31, 1996, included in Iron Mountain's Current Report on
Form 8-K dated November 25, 1997, have been audited by Abbott, Stringham &
Lynch, independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said report.
The consolidated financial statements of HIMSCORP, Inc. and Subsidiaries for
the period February 1, 1995 to December 31, 1995 and for the year ended
December 31, 1996, appearing in Iron Mountain's Current Reports on Form 8-K
dated October 30, 1997 and November 25, 1997, have been audited by Ernst & Young
LLP, independent auditors, as indicated in their reports thereon included
therein, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in accounting and auditing.
The consolidated financial statements of Arcus Technology Services, Inc. for
each of the two years in the period ended December 31, 1997 and the five-month
period ended December 31, 1995 and the consolidated financial statements of
Arcus, Inc. (Predecessor Company) for the seven-month period ended July 31,
1995, appearing in Iron Mountain's Current Report on Form 8-K dated March 9,
1998, have been audited by Ernst & Young LLP, independent auditors, as indicated
in their report thereon included therein, and are incorporated by reference
herein in reliance upon such report given upon the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements of Arcus Group, Inc. for each of the
two years in the period ended December 31, 1996, appearing in Iron Mountain's
Current Reports on Form 8-K dated October 30, 1997 and November 25, 1997, have
been audited by Ernst & Young LLP, independent auditors, as indicated in their
reports thereon included therein, and are incorporated by reference
99
<PAGE>
herein in reliance upon such reports given upon the authority of said firm as
experts in accounting and auditing.
The financial statements of Midwest Records Management for the year ended
December 31, 1997, included in Iron Mountain's Current Report on Form 8-K dated
September 18, 1998, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report.
The financial statements of Sloan Vaults, Inc. and Affiliate for the year
ended December 31, 1997, included in Iron Mountain's Current Report on Form 8-K
dated September 18, 1998, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report.
The financial statements of InterMation, Inc. for the year ended
December 31, 1997, included in Iron Mountain's Current Report on Form 8-K dated
September 18, 1998, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report.
The financial statements of National Underground Storage, Inc. for the two
years ended December 31, 1997, included in Iron Mountain's Current Report on
Form 8-K/A dated August 7, 1998, have been audited by Carbis Walker &
Associates, LLP, independent public accountants, as indicated in their report
with respect thereto, and are incorporated by reference herein in reliance upon
the authority of said firm as experts in giving said report.
The financial statements of Britannia Data Management Limited for the two
years ended October 31, 1998, included in Iron Mountain's Current Report on
Form 8-K/A dated March 22, 1999, have been audited by RSM Robson Rhodes,
chartered accountants, as indicated in their report with respect thereto, and
are incorporated by reference herein in reliance upon the authority of said firm
as experts in giving said report.
The financial statements of Data Base, Inc. and Affiliate for the three
years ended December 31, 1998, included in Iron Mountain's Current Report on
Form 8-K dated April 16, 1999, have been audited by Moss Adams LLP, independent
public accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report.
The financial statements of First American Records Management for the two
years ended December 31, 1998, included in Iron Mountain's Current Report on
Form 8-K dated July 9, 1999, have been audited by Brach, Neal, Daney & Spence,
LLP, independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said report.
The financial statements of MAP, S.A. for the year ended February 28, 1999,
included in Iron Mountain's Current Report on Form 8-K dated July 9, 1999, have
been audited by Barbier Frinault & Associes, independent public accountants, as
indicated in their report with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said report.
The financial statements of Central File, Inc. for the year ended
December 31, 1998, included in Iron Mountain's Current Report on Form 8-K dated
November 23, 1999, have been audited by Fernandez & Bravo, independent public
accountants, as indicated in their report with respect thereto,
100
<PAGE>
and are incorporated by reference herein in reliance upon the authority of said
firm as experts in giving said report.
The combined audited financial statements of Sistemas de Archivo, S.A. de
C.V. and Sistemas de Archivo Mexico, S.A. de C.V. (collectively Sistemas de
Archivo) for the year ended December 31, 1998, included in Iron Mountain's
Current Report on Form 8-K dated November 23, 1999, have been audited by Arthur
Andersen, independent public accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said report.
The financial statements of Stortext (Holdings) Limited Group for the year
ended March 31, 1999, included in Iron Mountain's Current Report on Form 8-K
dated November 23, 1999 have been audited by Arthur Andersen, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report.
The financial statements of Midtown Professional Records Centre, Inc. for
the year ended December 31, 1998, included in Iron Mountain's Current Report on
Form 8-K dated November 23, 1999, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said report.
The financial statements of Archivex Inc. as of November 30, 1996 and 1997,
and for the years then ended, included in Pierce Leahy's Current Report on
Form 8-K dated July 2, 1998 have been audited by Friedman & Friedman, Chartered
Accountants, independent auditors, as stated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the report of
such firm given upon their authority as experts in giving said reports.
The financial statements of Kestrel Holdings, Inc. as of September 30, 1997,
and for the year then ended, included in Pierce Leahy's Current Report on
Form 8-K dated July 2, 1998 have been audited by James N. Howard & Associates,
P.C., independent auditors, as stated in their report with respect thereto, and
are incorporated by reference herein in reliance upon the report of such firm
given upon their authority as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
Iron Mountain and Pierce Leahy file annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy any
reports, statements or other information Iron Mountain and Pierce Leahy file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. You may access the filings of Iron Mountain and
Pierce Leahy on the SEC's website at http://www.sec.gov.
Pierce Leahy has filed a Registration Statement on Form S-4 to register with
the SEC the New Iron Mountain common stock to be issued to the holders of Iron
Mountain common stock in the merger. This joint proxy statement/prospectus is a
part of that registration statement and constitutes a prospectus of Pierce Leahy
in addition to being a proxy statement of Pierce Leahy and Iron Mountain for the
Pierce Leahy meeting and the Iron Mountain meeting. As allowed by SEC rules,
this joint proxy statement/prospectus does not contain all the information you
can find in the registration statement or the exhibits to the registration
statement.
The SEC allows Iron Mountain and Pierce Leahy to "incorporate by reference"
information into this joint proxy statement/prospectus, which means that Iron
Mountain and Pierce Leahy can disclose important information to you by referring
you to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this joint proxy
statement/prospectus,
101
<PAGE>
except for any information superseded by information included in, or
incorporated by reference in, this joint proxy statement/prospectus. This joint
proxy statement/prospectus incorporates by reference the documents listed below
filed with the SEC. These documents contain important information about our
companies and their finances.
PIERCE LEAHY SEC FILINGS
(FILE NO. 1-13045)
- Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
- Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30
and September 30, 1999.
- Current Report on Form 8-K dated October 22, 1999.
- The financial information contained in the Current Report on Form 8-K
dated July 2, 1998.
- The description of the common stock contained in Pierce Leahy's
Registration Statement on Form 8-A dated May 27, 1997, including all
amendments and reports filed for the purpose of updating such description.
IRON MOUNTAIN SEC FILINGS
(FILE NO. 0-27584 FOR DOCUMENTS FILED THROUGH JULY 31, 1999 AND FILE
NO. 1-14937 FOR ALL DOCUMENTS FILED THEREAFTER)
- Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
- Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30
and September 30, 1999.
- Current Reports on Form 8-K dated January 19 (amended by Current Report on
Form 8-K/A dated March 22), March 3, April 16, April 22, May 7, May 11,
July 9, July 29, October 21 and November 23, 1999.
- The financial information contained in Current Reports on Form 8-K dated
October 30, 1997, November 25, 1997, March 9, 1998, July 10, 1998 (amended
by Current Report on Form 8-K/A dated August 7, 1998) and September 18,
1998.
- The description of common stock contained in Registration Statement on
Form 8-A dated April 16, 1999.
We are also incorporating by reference each document of the type described
above that we will file with the SEC between the date of this joint proxy
statement/prospectus and the dates of the meetings of our shareholders.
We are also incorporating by reference each document of the type described
above that we will file with the SEC after the date of the registration
statement of which this joint proxy statement/prospectus is a part, but before
the effectiveness of the registration statement.
Pierce Leahy has supplied all information contained or incorporated by
reference in this joint proxy statement/prospectus relating to Pierce Leahy, and
Iron Mountain has supplied all such information relating to Iron Mountain.
If you are a shareholder of either Pierce Leahy or Iron Mountain, we may
have sent you some of the documents incorporated by reference, but you can
obtain any of them through us or the SEC.
102
<PAGE>
Documents incorporated by reference are available from us without charge,
excluding exhibits, unless we have specifically incorporated by reference an
exhibit in this joint proxy statement/prospectus.
You may obtain documents incorporated by reference in this joint proxy
statement/prospectus by requesting them in writing or by telephone from the
appropriate party at the following addresses and telephone numbers:
<TABLE>
<S> <C>
John F. Kenny, Jr. Douglas B. Huntley
Executive Vice President and Chief Vice President and Chief Financial
Financial Officer Officer
Iron Mountain Incorporated Pierce Leahy Corp.
745 Atlantic Avenue 631 Park Avenue
Boston, Massachusetts 02111 King of Prussia, Pennsylvania 19406
(617) 535-4766 (610) 992-8200
</TABLE>
To obtain timely delivery, please request the information by to
receive the information before the Iron Mountain and Pierce Leahy meetings.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS TO VOTE ON THE PIERCE LEAHY
PROPOSALS AND THE IRON MOUNTAIN PROPOSAL, AS THE CASE MAY BE. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS
CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THIS JOINT PROXY
STATEMENT/PROSPECTUS IS DATED , . YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED HEREIN IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE,
AND NEITHER THE MAILING OF THIS JOINT PROXY STATEMENT/PROSPECTUS TO SHAREHOLDERS
NOR THE ISSUANCE OF NEW IRON MOUNTAIN COMMON STOCK IN THE MERGER SHALL CREATE
ANY IMPLICATION TO THE CONTRARY.
103
<PAGE>
FUTURE SHAREHOLDER PROPOSALS OF NEW IRON MOUNTAIN
Assuming the merger is completed, New Iron Mountain expects to hold its year
2000 annual meeting on June 1, 2000. The deadline for notice of a proposal for
which a shareholder will conduct his or her own solicitation is February 6,
2000. In order for the proposal to be included in the proxy statement, the
shareholder submitting the proposal must meet certain eligibility standards and
comply with the procedures established by the SEC, and the proposal must comply
with the requirements as to form and substance established by applicable laws
and regulations. The proposal must be mailed to the attention of the Chief
Financial Officer, Iron Mountain Incorporated, 745 Atlantic Avenue, Boston,
Massachusetts 02111.
104
<PAGE>
IRON MOUNTAIN INCORPORATED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
FINANCIAL STATEMENTS OF IRON MOUNTAIN INCORPORATED:
Interim Financial Statements (Unaudited).................. F-2
Annual Financial Statements............................... F-15
FINANCIAL STATEMENTS OF PIERCE LEAHY CORP.:
Interim Financial Statements (Unaudited).................. F-43
Annual Financial Statements............................... F-52
</TABLE>
F-1
<PAGE>
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash Equivalents................................. $ 1,715 $ 3,472
Accounts receivable (less allowances of $3,316 and $4,475
respectively)........................................... 75,565 106,115
Foreign currency transaction receivable................... 45,885 --
Deferred income taxes..................................... 10,474 12,528
Prepaid expenses and other................................ 10,298 22,873
-------- ----------
Total Current Assets.................................... 143,937 144,988
Property, Plant and Equipment:
Property, plant and equipment............................. 354,101 477,889
Less--accumulated depreciation............................ (87,358) (98,640)
-------- ----------
Net Property, Plant and Equipment....................... 266,743 379,249
Other Assets:
Goodwill, net............................................. 527,235 724,578
Customer acquisition costs, net........................... 9,574 14,985
Deferred financing costs, net............................. 13,392 17,014
Other..................................................... 6,504 7,110
-------- ----------
Total Other Assets...................................... 556,705 763,687
-------- ----------
Total Assets............................................ $967,385 $1,287,924
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt......................... $ 1,731 $ 4,570
Accounts payable.......................................... 20,620 19,543
Accrued expenses and other................................ 48,878 60,776
Foreign currency transaction payable...................... 46,200 --
Deferred income........................................... 26,043 31,579
-------- ----------
Total Current Liabilities............................... 143,472 116,468
Long-term debt, net of current portion...................... 454,447 598,493
Other Long-Term Liabilities................................. 8,925 8,914
Deferred Rent............................................... 9,616 10,591
Deferred Income Taxes....................................... 12,043 20,946
Minority Interest........................................... -- 48,357
Stockholders' Equity:
Common stock.............................................. 294 368
Additional paid-in capital................................ 355,927 556,360
Accumulated deficit....................................... (17,339) (31,142)
Accumulated other comprehensive income.................... -- (1,947)
Treasury stock............................................ -- (39,484)
-------- ----------
Total Stockholders' Equity.............................. 338,882 484,155
-------- ----------
Total Liabilities and Stockholders' Equity.............. $967,385 $1,287,924
======== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-2
<PAGE>
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Revenues:
Storage................................................... $59,506 $ 82,339
Service and storage material sales........................ 39,038 54,568
------- --------
Total Revenues........................................ 98,544 136,907
Operating Expenses:
Cost of sales (excluding depreciation).................... 49,506 69,226
Selling, general and administrative....................... 24,069 33,381
Depreciation and amortization............................. 12,630 16,338
------- --------
Total Operating Expenses.................................... 86,205 118,945
------- --------
Operating Income............................................ 12,339 17,962
Interest Expense............................................ 10,979 14,075
Other Income................................................ -- 115
------- --------
Income from Continuing Operations Before Provision for
Income Taxes and Minority Interest...................... 1,360 4,002
Provision for Income Taxes.................................. 2,378 2,953
Minority Interest........................................... -- 50
------- --------
Income (Loss) from Continuing Operations.................. (1,018) 999
Loss from Discontinued Operations (net of applicable
taxes).................................................... (51) --
Loss on Sale of Discontinued Operations................... -- (4,000)
------- --------
Net Loss.............................................. $(1,069) $ (3,001)
======= ========
Net Loss per Common Share--Basic and Diluted:
Income (loss) from Continuing Operations.................. $ (0.03) $ 0.03
Loss from Discontinued Operations (net of applicable
taxes).................................................... (0.01) --
Loss on Sale of Discontinued Operations................... -- (0.11)
------- --------
Net Loss Per Common Share--Basic and Diluted.............. $ (0.04) $ (0.08)
======= ========
Weighted Average Common Shares Outstanding:
Basic................................................. 29,209 35,331
======= ========
Diluted............................................... 29,209 36,196
======= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-3
<PAGE>
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Revenues:
Storage................................................... $168,046 $229,989
Service and storage material sales........................ 113,018 148,054
-------- --------
Total Revenues........................................ 281,064 378,043
Operating Expenses:
Cost of sales (excluding depreciation).................... 141,179 189,828
Selling, general and administrative....................... 70,067 94,194
Depreciation and amortization............................. 35,591 46,214
-------- --------
Total Operating Expenses.................................... 246,837 330,236
-------- --------
Operating Income............................................ 34,227 47,807
Interest Expense............................................ 34,166 40,246
Other Income................................................ 1,700 115
-------- --------
Income from Continuing Operations Before Provision for
Income Taxes and Minority Interest.................... 1,761 7,676
Provision for Income Taxes.................................. 3,720 7,805
Minority Interest........................................... -- 515
-------- --------
Loss from Continuing Operations......................... (1,959) (644)
Income from Discontinued Operations (net of applicable
taxes).................................................. 315 241
Loss on Sale of Discontinued Operations................. -- (13,400)
-------- --------
Net Loss.............................................. $ (1,644) $(13,803)
======== ========
Net Loss Per Common Share--Basic and Diluted:
Loss from Continuing Operations........................... $ (0.07) $ (0.02)
Income from Discontinued Operations (net of applicable
taxes).................................................. 0.01 0.01
Loss on Sale of Discontinued Operations................... -- (0.41)
-------- --------
Net Loss Per Common Share--Basic and Diluted.............. $ (0.06) $ (0.42)
======== ========
Weighted Average Common Shares Outstanding--Basic and
Diluted................................................... 26,848 32,641
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
<PAGE>
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
----------------------
1998 1999
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss.................................................. $ (1,644) $(13,803)
Adjustments to reconcile net loss to loss from continuing
operations:
Income from discontinued operations..................... (315) (241)
Loss on sale of Discontinued Operations................. -- 13,400
-------- --------
Loss from continuing operations........................... (1,959) (644)
Adjustments to reconcile loss from continuing operations
to cash flows provided by operating activities of
continuing operations:
Minority interest....................................... -- 5,295
Depreciation and amortization........................... 35,591 46,214
Amortization of financing costs......................... 1,350 1,455
Provision for doubtful accounts......................... 1,236 1,580
Other, net.............................................. -- (97)
Changes in Assets and Liabilities (exclusive of
acquisitions):
Accounts receivable..................................... (6,305) (18,653)
Prepaid expenses and other current assets............... 8,196 (10,186)
Deferred income taxes................................... 2,490 7,248
Other assets............................................ 967 139
Accounts payable........................................ (5,709) (4,947)
Accrued expenses and other current liabilities.......... 1,889 (1,283)
Deferred income......................................... 537 1,422
Deferred rent........................................... 1,107 975
Other long-term liabilities............................. 4,170 (9)
-------- --------
Cash Flows Provided by Continuing Operations........ 43,560 28,509
Cash Flows Provided by Discontinued Operations...... 1,171 790
-------- --------
Cash Flows Provided by Operating Activities......... 44,731 29,299
Cash Flows from Investing Activities:
Cash paid for acquisitions................................ (175,029) (187,513)
Capital expenditures...................................... (36,957) (72,769)
Additions to customer acquisition costs................... (2,326) (6,061)
-------- --------
Cash Flows Used in Continuing Operations............ (214,312) (266,343)
Cash Flows Used in Discontinued Operations.......... (262) (409)
-------- --------
Cash Flows Used in Investing Activities............. (214,574) (266,752)
Cash Flows From Financing Activities:
Repayment of debt......................................... (142,286) (236,420)
Proceeds from borrowings.................................. 153,600 216,744
Net proceeds from sale of senior subordinated notes....... -- 149,460
Financing costs........................................... (344) (5,077)
Net proceeds from equity offering......................... 132,905 153,755
Repurchase of common stock................................ -- (39,484)
Proceeds from exercise of stock options................... 2,961 1,518
Stock issuance costs...................................... (981) (1,220)
-------- --------
Cash Flows Provided by Continuing Operations........ 145,855 239,276
Cash Flows Provided by Discontinued Operations...... -- --
-------- --------
Cash Flows Provided by Financing Activities......... 145,855 239,276
Effect of Exchange rates on Cash and Cash Equivalents....... -- (66)
-------- --------
Increase (decrease) in Cash and Cash Equivalents............ (23,988) 1,757
Cash and Cash Equivalents, Beginning of Period.............. 24,510 1,715
-------- --------
Cash and Cash Equivalents, End of Period.................... $ 522 $ 3,472
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-5
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
1. GENERAL
The interim condensed consolidated financial statements presented herein
have been prepared by Iron Mountain Incorporated ("Iron Mountain" or the
"Company") without audit and, in the opinion of management, reflect all
adjustments of a normal recurring nature necessary for a fair presentation.
Interim results are not necessarily indicative of results for a full year.
The condensed consolidated balance sheet presented as of December 31, 1998,
has been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The unaudited condensed
consolidated financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in the annual financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to those rules and regulations, but the Company believes that
the disclosures are adequate to make the information presented not misleading.
The condensed consolidated financial statements and notes included herein should
be read in conjunction with the consolidated financial statements and related
notes for the year ended December 31, 1998 included in the Company's Current
Report on Form 8-K filed with the Securities and Exchange Commission on July 9,
1999.
2. COMPREHENSIVE INCOME (LOSS)
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," requires presentation of the components of comprehensive
income (loss), including the changes in equity from non-owner sources such as
unrealized gains (losses) on securities and foreign currency translation
adjustments. The Company's total comprehensive income (loss) is as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Comprehensive Loss:
Net Loss......................................... $(1,069) $(3,001) $(1,644) $(13,803)
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustment........ -- 340 -- (1,947)
------- ------- ------- --------
Comprehensive Loss................................. $(1,069) $(2,661) $(1,644) $(15,750)
======= ======= ======= ========
</TABLE>
3. ACQUISITIONS
During the nine months ended September 30, 1999, the Company: (i) purchased
a controlling 50.1% interest in Britannia Data Management Limited ("BDM"), a
provider of records and information management services in the United Kingdom;
(ii) purchased substantially all of the assets, and assumed certain liabilities,
of 11 records and information management businesses, including BDM's acquisition
of Memogarde, S.A.; and (iii) invested in Sistemas de Archivo Corporativo
("SAC"), a provider of records and information management services in Mexico, to
gain a controlling 50.1% interest and to infuse growth capital (collectively,
the "1999 Acquisitions"). Each of the 1999 Acquisitions and all 15 of the
records and information management businesses acquired during 1998
F-6
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
3. ACQUISITIONS (CONTINUED)
(the "1998 Acquisitions"), were accounted for using the purchase method of
accounting and, accordingly, the results of operations for each acquisition have
been included in the consolidated results of the Company from their respective
acquisition dates. In connection with certain 1999 and 1998 acquisitions,
related real estate was also purchased. The aggregate purchase price for the
1999 Acquisitions was comprised of cash, the Company's common stock and the
capital stock of Arcus Data Security Limited ("ADS"), the Company's existing
data security business in London, and exceeded the underlying fair value of the
net assets acquired by $165,458, which has been assigned to goodwill and is
being amortized over 25 to 30 years. The $63,586 of goodwill recorded by BDM
relates to the 1996 acquisition of BDM by Mentmore Abbey plc. The purchase price
allocations are preliminary and subject to adjustment.
A summary of the total consideration and the preliminary allocation of the
aggregate purchase price of the 1999 Acquisitions, as of the acquisition dates,
is as follows:
<TABLE>
<S> <C>
Purchase Price:
Cash Paid.......................................... $187,513
Fair Value of Common Stock Issued.................. 46,000
Fair Value of ADS Capital Stock.................... 2,489
--------
Total Purchase Price............................. $236,002
========
Allocation of Purchase Price:
Current Assets..................................... $ 23,331
Property, Plant & Equipment........................ 64,561
Other Assets....................................... 1,647
Fair Value of ADS Net Assets....................... 2,489
Goodwill Recorded by BDM........................... 63,586
Goodwill Recorded by Iron Mountain................. 165,458
Liabilities Assumed................................ (45,747)
Minority Interest.................................. (39,323)
--------
Total Allocation of Purchase Price............. $236,002
========
</TABLE>
In May 1999, the Company repurchased for $39,484 all of the 1,476,577 shares
of its common stock issued in connection with a certain 1999 Acquisition. These
shares had a fair value of $46,000 when issued.
In September 1999, BDM acquired Stortext (Holdings) Limited and Datavault,
S.A. for approximately $22 million in cash and assumed debt. Stortext operates
seven facilities in Edinburgh and Glasgow, Scotland and Datavault operates seven
facilities in five markets in Spain including Madrid and Bilbao. Due to the
two-month difference in fiscal year ends between the Company and BDM, BDM's
acquisitions of Stortext and Datavault are not reflected in the accompanying
condensed consolidated financial statements and notes thereto.
The following unaudited pro forma information shows the results of the
Company's operations for the year ended December 31, 1998 and the nine months
ended September 30, 1999, as though each of
F-7
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
3. ACQUISITIONS (CONTINUED)
the 1998 and 1999 Acquisitions, except Stortext (Holdings) Limited and
Datavault, S.A., had occurred as of the beginning of the respective period:
<TABLE>
<CAPTION>
YEAR NINE MONTHS
ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Revenues.................................................... $480,843 $399,320
Loss from Continuing Operations............................. (10,003) (1,540)
Loss from Continuing Operations Per Share--Basic and
Diluted................................................... (0.34) (0.05)
</TABLE>
The pro forma results have been prepared for comparative purposes only and
are not necessarily indicative of the actual results of operations had the
acquisitions taken place as of the beginning of each period or the results that
may occur in the future. Furthermore, the pro forma results do not give effect
to all cost savings or incremental costs which may occur as a result of the
integration and consolidation of the businesses.
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 SEPTEMBER 30, 1999
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
8 1/4% Senior Subordinated Notes (the "1999
Notes")............................................. $ -- $ -- $149,479 $135,750
8 3/4% Senior Subordinated Notes (the "1997
Notes")............................................. 249,566 257,500 249,596 235,000
10 1/8% Senior Subordinated Notes (the "1996
Notes")............................................. 165,000 178,200 165,000 167,475
Revolving Credit Facility............................ 35,300 35,300 -- --
Real Estate Mortgages................................ 2,349 2,349 2,123 2,123
Other................................................ 3,963 3,963 36,865 36,865
-------- --------
Total Long-term Debt............................... 456,178 603,063
Less: Current Portion................................ (1,731) (4,570)
-------- --------
Long-term Debt, Net of Current Portion............... $454,447 $598,493
======== ========
</TABLE>
The estimated fair values for the long-term debt are based on the borrowing
rates available to the Company at December 31, 1998 and September 30, 1999 for
loans with similar terms and average maturities. The fair values of the 1996
Notes, 1997 Notes and 1999 Notes are based on the quoted market prices for those
notes on December 31, 1998 and September 30, 1999.
F-8
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
5. SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS
The 1996 Notes, the 1997 Notes and the 1999 Notes are fully and
unconditionally guaranteed, on a joint and several senior subordinated basis, by
most, but not all, of the Company's direct and indirect subsidiaries (the
"Guarantors"). Currently, BDM and its subsidiaries, SAC and its subsidiaries,
Iron Mountain (Puerto Rico), Inc. and certain parent holding companies (the
"Non-Guarantors") are the only subsidiaries that do not guarantee the 1996
Notes, the 1997 Notes or the 1999 Notes.
Prior to the acquisition of BDM in January 1999, substantially all of the
Company's operations were conducted by its direct and indirect wholly owned
subsidiaries, all of which, other than ADS, were guarantors of the 1996 Notes
and 1997 Notes. ADS represented less than 1% of the Company's consolidated
revenues and was not material to its results of operations. The Company's
management does not believe that separate financial statements of, and other
disclosures with respect to, the Guarantors for periods prior to 1999 are
meaningful or material to investors. Accordingly, no such financial statements
were provided.
F-9
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
5. SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
The following financial data summarizes the consolidating Company on the
equity method of accounting as of and for the three and nine month periods
September 30, 1999:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
------------------------------------------------------------------
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents........ $ -- $ 1,422 $ 2,050 $ -- $ 3,472
Accounts Receivable.............. -- 98,425 7,690 -- 106,115
Other Current Assets............. -- 30,741 5,325 (665) 35,401
---------- ---------- -------- ----------- ----------
Total Current Assets........... -- 130,588 15,065 (665) 144,988
Property, Plant and Equipment,
net.............................. -- 334,688 44,561 -- 379,249
Other Assets:
Due From Affiliates.............. 214,543 -- -- (214,543) --
Long-term Notes Receivable from
Affiliates..................... 549,867 -- -- (549,867) --
Investment in Subsidiaries....... 279,818 56,583 -- (336,401) --
Goodwill, net.................... -- 634,033 90,545 -- 724,578
Other............................ 16,297 22,209 603 -- 39,109
---------- ---------- -------- ----------- ----------
Total Other Assets............. 1,060,525 712,825 91,148 (1,100,811) 763,687
---------- ---------- -------- ----------- ----------
Total Assets................... $1,060,525 $1,178,101 $150,774 $(1,101,476) $1,287,924
========== ========== ======== =========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Total Current Liabilities........ $ 11,395 $ 93,865 $ 11,873 $ (665) $ 116,468
Long-term Debt, Net of Current
Portion........................ 564,975 3,206 30,312 -- 598,493
Due to Affiliates................ -- 214,543 -- (214,543) --
Long-term Notes Payable to
Affiliates..................... -- 549,867 -- (549,867) --
Other Long-term Liabilities...... -- 39,397 1,054 -- 40,451
Minority Interest................ -- -- 48,357 -- 48,357
Stockholders' Equity............. 484,155 277,223 59,178 (336,401) 484,155
---------- ---------- -------- ----------- ----------
Total Liabilities and
Stockholders' Equity......... $1,060,525 $1,178,101 $150,774 $(1,101,476) $1,287,924
========== ========== ======== =========== ==========
</TABLE>
F-10
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
5. SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------------------------------
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Storage.............................. $ -- $76,880 $5,459 $ -- $82,339
Service and Storage Material Sales... -- 50,711 3,857 -- 54,568
------- ------- ------ ------- -------
Total Revenues..................... -- 127,591 9,316 -- 136,907
Operating Expenses:
Cost of Sales (excluding
depreciation)...................... -- 64,044 5,182 -- 69,226
Selling, General and
Administrative..................... 31 31,298 2,052 -- 33,381
Depreciation and Amortization........ -- 15,180 1,158 -- 16,338
------- ------- ------ ------- -------
Total Operating Expenses........... 31 110,522 8,392 -- 118,945
------- ------- ------ ------- -------
Operating Income (Loss)................ (31) 17,069 924 -- 17,962
Interest Income........................ (13,746) -- -- 13,746 --
Interest Expense....................... 13,553 13,932 336 (13,746) 14,075
Equity in the (Earnings) Losses of
Subsidiaries......................... 3,163 32 -- (3,195) --
Other Income........................... -- 115 -- -- 115
------- ------- ------ ------- -------
Income (Loss) from Continuing
Operations Before Provision for
Income Taxes and Minority
Interest........................... (3,001) 3,220 588 3,195 4,002
Provision for Income Taxes............. -- 2,553 400 -- 2,953
Minority Interest in Net Income of
Consolidated Subsidiaries............ -- -- 50 -- 50
------- ------- ------ ------- -------
Income (Loss) from Continuing
Operations......................... (3,001) 667 138 3,195 999
Loss on Sale of Discontinued
Operations........................... -- (4,000) -- -- (4,000)
------- ------- ------ ------- -------
Net Income (Loss)................ $(3,001) $(3,333) $ 138 $ 3,195 $(3,001)
======= ======= ====== ======= =======
</TABLE>
F-11
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
5. SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------------------------------
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Storage............................. $ -- $217,914 $12,075 $ -- $229,989
Service and Storage Material
Sales............................. -- 139,081 8,973 -- 148,054
-------- -------- ------- ------- --------
Total Revenues.................... -- 356,995 21,048 -- 378,043
Operating Expenses:
Cost of Sales (excluding
depreciation)..................... -- 177,861 11,967 -- 189,828
Selling, General and
Administrative.................... 216 90,125 3,853 -- 94,194
Depreciation and Amortization....... -- 43,653 2,561 -- 46,214
-------- -------- ------- ------- --------
Total Operating Expenses.......... 216 311,639 18,381 -- 330,236
-------- -------- ------- ------- --------
Operating Income (Loss)............... (216) 45,356 2,667 -- 47,807
Interest Income....................... (37,858) -- -- 37,858 --
Interest Expense...................... 39,142 38,309 653 (37,858) 40,246
Equity in the (Earnings) Losses of
Subsidiaries........................ 12,303 (328) -- (11,975) --
Other Income.......................... -- 115 -- -- 115
-------- -------- ------- ------- --------
Income (Loss) from Continuing
Operations Before Provision for
Income Taxes and Minority
Interest.......................... (13,803) 7,490 2,014 11,975 7,676
Provision for Income Taxes............ -- 6,831 974 -- 7,805
Minority Interest in Net Income of
Consolidated Subsidiaries........... -- -- 515 -- 515
-------- -------- ------- ------- --------
Income (Loss) from Continuing
Operations........................ (13,803) 659 525 11,975 (644)
Income from Discontinued Operations
(Net of applicable taxes)........... -- 241 -- -- 241
Loss on Sale of Discontinued
Operations.......................... -- (13,400) -- -- (13,400)
-------- -------- ------- ------- --------
Net Income (Loss)................. $(13,803) $(12,500) $ 525 $11,975 $(13,803)
======== ======== ======= ======= ========
</TABLE>
F-12
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
5. SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
------------------------------------------------------------------
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Flows (Used in) Provided by Continuing
Operations.................................... $(27,505) $ 53,581 $ 2,433 $ -- $ 28,509
Cash Flows Provided by Discontinued
Operations.................................... -- 790 -- -- 790
-------- -------- ------- -------- --------
Cash Flows (Used in) Provided by Operating
Activities.................................. (27,505) 54,371 2,433 -- 29,299
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash Paid for Acquisitions...................... (2,398) (125,327) (59,788) -- (187,513)
Capital Expenditures............................ -- (60,497) (12,272) -- (72,769)
Intercompany Loans to Subsidiaries.............. (139,129) -- -- 139,129 --
Investment in Subsidiaries...................... (55,599) (55,599) -- 111,198 --
Additions to Customer Acquisition Costs......... -- (6,061) -- -- (6,061)
-------- -------- ------- -------- --------
Cash Flows Used in Continuing Operations...... (197,126) (247,484) (72,060) 250,327 (266,343)
Cash Flows Used in Discontinued Operations.... -- (409) -- -- (409)
-------- -------- ------- -------- --------
Cash Flows Used in Investing Activities....... (197,126) (247,893) (72,060) 250,327 (266,752)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Debt............................... (235,000) (1,420) -- -- (236,420)
Net Proceeds from Borrowings.................... 200,600 -- 16,144 -- 216,744
Net Proceeds from Sale of Senior Subordinated
Notes......................................... 149,460 -- -- -- 149,460
Net Proceeds from Equity Offering............... 153,755 -- -- -- 153,755
Repurchase of Common Stock...................... (39,484) -- -- -- (39,484)
Intercompany Loans from Parent.................. -- 139,129 -- (139,129) --
Equity Contribution from Parent................. -- 55,599 55,599 (111,198) --
Proceeds from Exercise of Stock Options......... 1,518 -- -- -- 1,518
Debt Financing and Stock Issuance Costs......... (6,230) (67) -- -- (6,297)
-------- -------- ------- -------- --------
Cash Flows Provided by Continuing Operations.... 224,619 193,241 71,743 (250,327) 239,276
Cash Flows Provided by Discontinued
Operations.................................... -- -- -- -- --
-------- -------- ------- -------- --------
Cash Flows Provided by Financing Activities..... 224,619 193,241 71,743 (250,327) 239,276
Effect of Exchange Rates on Cash and Cash
Equivalents..................................... -- -- (66) -- (66)
-------- -------- ------- -------- --------
Increase (Decrease) in Cash and Cash
Equivalents..................................... (12) (281) 2,050 -- 1,757
Cash and Cash Equivalents, Beginning of Period.... 12 1,703 -- -- 1,715
-------- -------- ------- -------- --------
Cash and Cash Equivalents, End of Period.......... $ -- $ 1,422 $ 2,050 $ -- $ 3,472
======== ======== ======= ======== ========
</TABLE>
6. EARNINGS PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128,
basic net income (loss) per common share is calculated by dividing net income
(loss) by the weighted average number of common shares outstanding. The
calculation of diluted net income (loss) per share is consistent with
F-13
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
6. EARNINGS PER SHARE (CONTINUED)
that of basic net income (loss) per share but gives effect to all dilutive
potential common shares (that is, securities such as options, warrants or
convertible securities) that were outstanding during the period, unless the
effect is antidilutive. For the nine months ended September 30, 1998 and 1999
and the three months ended September 30, 1998, 2,341, 2,344, and 2,341 potential
common shares, respectively, have been excluded from the calculation of diluted
net income (loss) per share, as their effects are antidilutive.
7. DISCONTINUED OPERATIONS
In June 1999, the Company decided to sell its information technology
staffing business, Arcus Staffing Resources, Inc. ("Arcus Staffing"). Arcus
Staffing was acquired in January 1998 as part of the acquisition of Arcus
Group, Inc. In accordance with the provisions of Accounting Principles Board
Opinion No. 30 concerning reporting the effect of the disposal of a business,
the results of operations of Arcus Staffing have been classified as discontinued
in the accompanying statements of operations for the three and nine month
periods ended September 30, 1998 and 1999. The following table sets forth the
revenue and net income (loss) from discontinued operations for all of the
periods presented:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues....................................... $9,416 $10,196 $29,443 $32,188
Net Income (Loss) from Discontinued
Operations................................... (51) -- 315 241
</TABLE>
The Company has recorded an estimated loss on the sale of Arcus Staffing of
$13,400. The estimated loss is comprised of a write-off of nondeductible and
deductible goodwill, a deferred tax benefit and estimated expenses directly
related to the transaction partially offset by the estimated income from
operations of Arcus Staffing through the date of disposition. Effective
November 1, 1999, the Company completed the sale of substantially all of the
assets of Arcus Staffing.
8. SUBSEQUENT EVENTS
In October 1999, the Company acquired substantially all of the assets of one
records and information management business for approximately $8 million in
cash.
On October 21, 1999, the Company announced the execution of a definitive
agreement to acquire Pierce Leahy Corp. in a stock-for-stock merger valued at
approximately $1.1 billion including the assumption of approximately
$587 million in outstanding Pierce Leahy debt. The merger consideration will
result in the equivalent of a fixed exchange ratio of 1.1 shares of Iron
Mountain common stock for each share of Pierce Leahy common stock. The proposed
transaction is subject to approval by the shareholders of both companies, the
completion of regulatory review and other customary conditions. The transaction
is expected to be completed in early 2000 and will be accounted for as a
purchase.
F-14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Iron Mountain Incorporated:
We have audited the accompanying consolidated balance sheets of Iron
Mountain Incorporated (a Delaware corporation) and its subsidiaries as of
December 31, 1997 and 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Iron Mountain Incorporated
and its subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
July 2, 1999
F-15
<PAGE>
IRON MOUNTAIN INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 24,510 $ 1,715
Accounts receivable (less allowances of $1,929 and $3,316
as of 1997 and 1998, respectively)...................... 40,545 75,565
Receivable from insurance company......................... 5,410 329
Foreign currency transaction receivable................... -- 45,885
Deferred income taxes..................................... 5,896 10,474
Prepaid expenses and other................................ 5,566 9,969
-------- --------
Total Current Assets.................................... 81,927 143,937
Property, Plant and Equipment:
Property, plant and equipment............................. 245,174 354,101
Less--Accumulated depreciation............................ (61,276) (87,358)
-------- --------
Net Property, Plant and Equipment......................... 183,898 266,743
Other Assets:
Goodwill, net............................................. 340,852 527,235
Customer acquisition costs, net........................... 7,319 9,574
Deferred financing costs, net............................. 14,429 13,392
Other..................................................... 8,361 6,504
-------- --------
Total Other Assets...................................... 370,961 556,705
-------- --------
Total Assets............................................ $636,786 $967,385
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt......................... $ 520 $ 1,731
Note payable.............................................. 3,000 --
Accounts payable.......................................... 11,022 20,620
Accrued expenses.......................................... 28,131 48,539
Foreign currency transaction payable...................... -- 46,200
Deferred income........................................... 11,931 26,043
Other current liabilities................................. 1,149 339
-------- --------
Total Current Liabilities............................... 55,753 143,472
Long-term Debt, net of current portion...................... 424,498 454,447
Other Long-Term Liabilities................................. 5,336 8,925
Deferred Rent............................................... 8,202 9,616
Deferred Income Taxes....................................... 5,264 12,043
Commitments and Contingencies (see Note 11)
Stockholders' Equity:
Preferred stock........................................... -- --
Common stock.............................................. 202 294
Additional paid-in capital................................ 151,904 355,927
Accumulated deficit....................................... (14,373) (17,339)
-------- --------
Total Stockholders' Equity.............................. 137,733 338,882
-------- --------
Total Liabilities and Stockholders' Equity.............. $636,786 $967,385
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-16
<PAGE>
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Storage................................................... $ 85,826 $125,968 $230,702
Service and storage material sales........................ 52,892 82,797 153,259
-------- -------- --------
Total Revenues.......................................... 138,718 208,765 383,961
Operating Expenses:
Cost of sales (excluding depreciation).................... 70,747 106,879 192,113
Selling, general and administrative....................... 34,342 51,668 95,867
Depreciation and amortization............................. 16,936 27,107 48,301
-------- -------- --------
Total Operating Expenses.................................... 122,025 185,654 336,281
-------- -------- --------
Operating Income............................................ 16,693 23,111 47,680
Interest Expense............................................ 14,901 27,712 45,673
Other Income, net........................................... -- -- 1,384
-------- -------- --------
Income (Loss) from Continuing Operations Before Provision
(Benefit) for Income Taxes.............................. 1,792 (4,601) 3,391
Provision (Benefit) for Income Taxes........................ 1,435 (80) 6,558
-------- -------- --------
Income (Loss) from Continuing Operations.................. 357 (4,521) (3,167)
Income from Discontinued Operations (net of tax provision
of $391) (Note 15)...................................... -- -- 201
-------- -------- --------
Income (Loss) Before Extraordinary Charge................. 357 (4,521) (2,966)
Extraordinary Charge from Early Retirement of Debt (net of
tax benefit of $1,413).................................... 2,126 -- --
-------- -------- --------
Net Loss................................................ (1,769) (4,521) (2,966)
Accretion of Redeemable Put Warrant......................... 280 -- --
-------- -------- --------
Net Loss Applicable to Common Stockholders................ $ (2,049) $ (4,521) $ (2,966)
======== ======== ========
Income (Loss) per Common Share--Basic and Diluted
(See Notes 6 and 7):
Income (Loss) from Continuing Operations.................. $ 0.00 $ (0.26) $ (0.12)
Income from Discontinued Operations....................... 0.00 0.00 0.01
-------- -------- --------
Income (Loss) Before Extraordinary Charge................. 0.00 (0.26) (0.11)
Extraordinary Charge (net of tax benefit)................. (0.15) -- --
-------- -------- --------
Net Loss Applicable to Common Stockholders................ $ (0.15) $ (0.26) $ (0.11)
======== ======== ========
Weighted Average Common Shares Outstanding.................. 13,911 17,172 27,470
======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-17
<PAGE>
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------------------------
PREFERRED STOCK CLASS A VOTING VOTING NON-VOTING ADDITIONAL
------------------- ------------------- --------------------- ------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
-------- -------- -------- -------- ---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995... 499,395 $ 5 44,888 $-- -- $ -- -- $-- $ 28,809
Conversion of preferred stock
to common stock............ (499,395) (5) (44,888) -- 10,915,712 109 750,000 7 (111)
Issuance of shares in initial
public offering............ -- -- -- -- 3,525,000 36 -- -- 33,249
Exercise of stock options.... -- -- -- -- 10,344 -- -- -- 118
Issuance of shares for
services................... -- -- -- -- 1,372 -- -- -- 19
Conversion of common stock--
nonvoting to common stock--
voting..................... -- -- -- -- 34,058 -- (34,058) -- --
Net loss..................... -- -- -- -- -- -- -- -- --
Warrant accretion............ -- -- -- -- -- -- -- -- --
-------- --- ------- --- ---------- ---- -------- --- --------
Balance, December 31, 1996... -- -- -- -- 14,486,486 145 715,942 7 62,084
Exercise of stock options.... -- -- -- -- 123,657 1 -- -- 1,532
Issuance of shares for
services................... -- -- -- -- 2,751 -- -- -- 52
Shares and options issued in
connection with
acquisitions, net of
issuance costs............. -- -- -- -- 4,851,341 49 -- -- 88,236
Conversion of common stock--
nonvoting to Common
Stock--voting.............. -- -- -- -- 715,942 7 (715,942) (7) --
Net loss..................... -- -- -- -- -- -- -- -- --
-------- --- ------- --- ---------- ---- -------- --- --------
Balance, December 31, 1997... -- -- -- -- 20,180,177 202 -- -- 151,904
Shares and options issued in
connection with
acquisitions, net of
issuance costs............. -- -- -- -- 2,645,913 26 -- -- 66,888
Issuance of shares in
secondary public
offering................... -- -- -- -- 6,037,500 60 -- -- 131,961
Exercise of stock options.... -- -- -- -- 566,615 6 -- -- 5,174
Net loss..................... -- -- -- -- -- -- -- -- --
-------- --- ------- --- ---------- ---- -------- --- --------
Balance, December 31, 1998... -- $-- -- $-- 29,430,205 $294 -- $-- $355,927
======== === ======= === ========== ==== ======== === ========
<CAPTION>
TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY
------------ -------------
<S> <C> <C>
Balance, December 31, 1995... $ (7,803) $ 21,011
Conversion of preferred stock
to common stock............ -- --
Issuance of shares in initial
public offering............ -- 33,285
Exercise of stock options.... -- 118
Issuance of shares for
services................... -- 19
Conversion of common stock--
nonvoting to common stock--
voting..................... -- --
Net loss..................... (1,769) (1,769)
Warrant accretion............ (280) (280)
-------- --------
Balance, December 31, 1996... (9,852) 52,384
Exercise of stock options.... -- 1,533
Issuance of shares for
services................... -- 52
Shares and options issued in
connection with
acquisitions, net of
issuance costs............. -- 88,285
Conversion of common stock--
nonvoting to Common
Stock--voting.............. -- --
Net loss..................... (4,521) (4,521)
-------- --------
Balance, December 31, 1997... (14,373) 137,733
Shares and options issued in
connection with
acquisitions, net of
issuance costs............. -- 66,914
Issuance of shares in
secondary public
offering................... -- 132,021
Exercise of stock options.... -- 5,180
Net loss..................... (2,966) (2,966)
-------- --------
Balance, December 31, 1998... $(17,339) $338,882
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-18
<PAGE>
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss................................................ $ (1,769) $ (4,521) $ (2,966)
Adjustments to reconcile net loss to loss from continuing
operations:
Income from discontinued operations (Note 15)........... -- -- 201
-------- -------- --------
Loss from continuing operations........................... (1,769) (4,521) (3,167)
Adjustments to reconcile loss from continuing operations
to net cash provided by operating activities of
continuing operations:
Depreciation and amortization........................... 16,936 27,107 48,301
Amortization of financing costs......................... 857 1,095 1,801
Provision for doubtful accounts......................... 639 874 1,730
Extraordinary loss on early retirement of debt.......... 3,539 -- --
Loss on foreign currency transaction.................... -- -- 316
Other, net.............................................. -- 52 --
Changes in Assets and Liabilities (exclusive of
acquisitions):
Accounts receivable..................................... (4,395) (4,433) (12,924)
Inventory, prepaid expenses and other assets............ (878) (2,949) 4,410
Deferred income taxes................................... (973) 1,190 9,058
Other assets............................................ -- -- 13
Accounts payable........................................ (1,278) 4,653 5,282
Accrued expenses........................................ 3,642 (1,115) (127)
Other long-term liabilities............................. (193) (1,240) 3,587
Deferred rent........................................... (332) 551 1,414
Deferred income......................................... 161 671 7,369
Other liabilities....................................... (56) 485 --
-------- -------- --------
Cash Flows Provided by Continuing Operations............ 15,900 22,420 67,063
Cash Flows Provided by Discontinued Operations.......... -- -- 67
-------- -------- --------
Cash Flows Provided by Operating Activities............. 15,900 22,420 67,130
-------- -------- --------
Cash Flows from Investing Activities:
Cash paid for acquisitions................................ (68,496) (192,230) (189,729)
Capital expenditures...................................... (24,446) (38,320) (55,927)
Additions to customer acquisition costs................... (1,642) (1,635) (3,024)
Other, net................................................ (25) (333) --
-------- -------- --------
Cash Flows Used in Continuing Operations................ (94,609) (232,518) (248,680)
Cash Flows Used in Discontinued Operations.............. -- -- (527)
-------- -------- --------
Cash Flows Used in Investing Activities................. (94,609) (232,518) (249,207)
-------- -------- --------
Cash Flows from Financing Activities:
Repayment of debt......................................... (171,730) (178,181) (171,080)
Net proceeds from borrowings.............................. 69,570 167,850 194,811
Net proceeds from sale of senior subordinated notes....... 160,050 242,640 --
Net proceeds from initial public offering................. 33,285 -- --
Proceeds from secondary equity offering, net of
underwriting discount................................... -- -- 132,905
Retirement of redeemable put warrant...................... (6,612) -- --
Prepayment penalties on early retirement of debt.......... (1,785) -- --
Exercise of stock options................................. 66 786 4,482
Financing costs........................................... (2,267) (1,291) (764)
Stock issuance costs...................................... -- (649) (1,072)
-------- -------- --------
Cash Flows Provided by Continuing Operations............ 80,577 231,155 159,282
Cash Flows Provided by Discontinued Operations.......... -- -- --
-------- -------- --------
Cash Flows Provided by Financing Activities............. 80,577 231,155 159,282
-------- -------- --------
Increase (decrease) in Cash and Cash Equivalents............ 1,868 21,057 (22,795)
Cash and Cash Equivalents, Beginning of Year................ 1,585 3,453 24,510
-------- -------- --------
Cash and Cash Equivalents, End of Year...................... $ 3,453 $ 24,510 $ 1,715
======== ======== ========
Supplemental Information:
Cash Paid for Interest...................................... $ 11,590 $ 22,440 $ 42,407
======== ======== ========
Cash Paid for Income Taxes.................................. $ 197 $ 1,306 $ 1,700
======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-19
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(IN THOUSANDS EXCEPT SHARE DATA)
1. NATURE OF BUSINESS
The accompanying financial statements represent the consolidated accounts of
Iron Mountain Incorporated and its subsidiaries (collectively "Iron Mountain" or
the "Company"). Iron Mountain is an international full-service provider of
records and information management and related services for all media in various
locations throughout the United States and the United Kingdom to Fortune 500
companies and numerous legal, banking, health care, accounting, insurance,
entertainment and government organizations. The Company also provides
information technology staffing ("IT Staffing") services.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRINCIPLES OF CONSOLIDATION
The accompanying financial statements reflect the financial position and
results of operations of Iron Mountain on a consolidated basis. All significant
intercompany account balances have been eliminated.
B. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
C. CASH AND CASH EQUIVALENTS
The Company defines cash and cash equivalents to include cash on hand and
cash invested in short-term securities which have original maturities of less
than 90 days. Cash and cash equivalents are carried at cost, which approximates
fair market value.
D. FOREIGN CURRENCY TRANSACTION
On December 31, 1998, the Company had a receivable denominated in British
pounds from, and a payable in U.S. dollars to, a bank as a result of exercising
a foreign exchange agreement on December 30, 1998. Included in other income,
net, for the year ended December 31, 1998 is a $316 loss on the remeasurement of
the receivable based on the applicable exchange rate on December 31, 1998. The
British pounds were being acquired to finance the BDM acquisition discussed in
Note 15.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes new standards
regarding accounting and reporting requirements for derivative instruments and
hedging activities. It requires that entities recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The new standard is effective for fiscal years
beginning after June 15, 1999. The Company is presently studying
F-20
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the effect of the new pronouncement and, as required, expects to adopt SFAS No.
133 beginning January 1, 2000. As of December 31, 1998, the Company did not own
any derivative instruments.
E. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and depreciated using the
straight-line method with the following useful lives:
<TABLE>
<S> <C>
Buildings............................ 40 to 50 years
Leasehold improvements............... 8 to 10 years or the life of the
lease, whichever is shorter
Racking.............................. 10 to 20 years
Warehouse equipment/vehicles......... 5 to 10 years
Furniture and fixtures............... 3 to 5 years
Computer hardware and software....... 3 years
</TABLE>
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Land and buildings...................................... $ 67,870 $ 99,678
Leasehold improvements.................................. 19,583 27,509
Racking................................................. 94,960 127,287
Warehouse equipment/vehicles............................ 12,290 23,239
Furniture and fixtures.................................. 4,875 9,241
Computer hardware and software.......................... 29,913 47,400
Construction in progress................................ 15,683 19,747
-------- --------
$245,174 $354,101
======== ========
</TABLE>
The Company develops various software applications for internal use. Payroll
and related costs for employees who are directly associated with and who devote
time to the development of internal-use computer software projects (to the
extent of the time spent directly on the project) are capitalized and amortized
over the useful life of the software. Capitalization begins when the design
stage of the application has been completed, it is probable that the project
will be completed and the application will be used to perform the function
intended. Amortization begins when the software is placed in service.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 requires computer
software costs associated with internal use software to be expensed as incurred
until certain capitalization criteria are met. SOP 98-1 also defines which types
of costs should be capitalized and which should be expensed. The Company will
adopt SOP 98-1 prospectively beginning January 1, 1999. The new accounting will
result in certain costs being expensed starting in 1999 that would have been
capitalized under the previous policy.
F-21
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Minor maintenance costs are expensed as incurred. Major improvements to the
leased buildings are capitalized as leasehold improvements and depreciated.
F. GOODWILL
Goodwill reflects the cost in excess of fair value of the net assets of
companies acquired in purchase transactions. Goodwill is amortized using the
straight-line method from the date of acquisition over the expected period to be
benefited, currently estimated at 25 to 30 years. The Company assesses the
recoverability of goodwill, as well as other long-lived assets based upon
expectations of future undiscounted cash flows in accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." Accumulated amortization of goodwill was $26,931 and $46,333 as
of December 31, 1997 and 1998, respectively.
G. CUSTOMER ACQUISITION COSTS
Costs related to the acquisition of large volume accounts, net of revenues
received for the initial transfer of the records, are capitalized and amortized
for an appropriate period not to exceed 12 years. If the customer terminates its
relationship with the Company, the unamortized cost is charged to expense.
However, in the event of such termination, the Company collects, and records as
income, permanent removal fees that generally equal or exceed the amount of the
unamortized costs. As of December 31, 1997 and 1998, those costs were $9,769 and
$12,793, respectively, and accumulated amortization of those costs were $2,450
and $3,219, respectively.
H. DEFERRED FINANCING COSTS
Deferred financing costs are amortized over the life of the related debt
using the effective interest rate method. If debt is retired early, unamortized
deferred financing costs are written off as an extraordinary charge in the
period the debt is retired. As of December 31, 1997 and 1998, deferred financing
costs were $16,163 and $16,928, respectively, and accumulated amortization of
those costs were $1,734 and $3,536, respectively.
I. OTHER ASSETS
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities"
("SOP 98-5"). SOP 98-5 requires the costs of start-up activities, including
organization costs, to be expensed as incurred. The Company will adopt SOP 98-5
beginning January 1, 1999. Management believes that the adoption of SOP 98-5
will not have a material impact on the Company's financial statements.
F-22
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
J. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Incentive compensation.................................... $ 3,932 $ 5,934
Interest.................................................. 8,427 9,975
Workers' compensation..................................... 3,022 2,948
Payroll and vacation...................................... 3,432 7,451
Restructuring costs....................................... 5,443 10,482
Other..................................................... 3,875 11,749
------- -------
$28,131 $48,539
======= =======
</TABLE>
K. REVENUES
The Company's revenues consist of storage revenues and service and storage
material sales revenues. Storage revenues consist of periodic charges related to
the storage of materials (either on a per unit or per cubic foot of records
basis). In certain circumstances, based upon customer requirements, storage
revenues include periodic charges associated with normal, recurring service
activities. Service and storage material sales revenues are comprised of charges
for related service activities and the sale of storage materials. In certain
circumstances, storage material sales are recorded net of product costs when the
Company functions as a sales representative of the product manufacturer and does
not receive or take title to the products. Customers are generally billed on a
monthly basis on contractually agreed-upon terms.
Storage and service revenues are recognized in the month the respective
service is provided. Storage material sales are recognized when shipped to the
customer. Amounts related to future storage for customers where storage fees are
billed in advance are accounted for as deferred income and amortized over the
applicable period.
L. DEFERRED RENT
The Company has entered into various leases for buildings used in the
storage of records. Certain leases have fixed escalation clauses or other
features which require normalization of the rental expense over the life of the
lease resulting in deferred rent being reflected in the accompanying balance
sheets. In addition, the Company has assumed various unfavorable leases in
connection with certain of its acquisitions. The discounted present value of
these lease obligations in excess of market rate at the date of the acquisition
was recorded as a deferred rent liability and is being amortized over the
remaining lives of the respective leases.
M. STOCK-BASED COMPENSATION
Effective January 1, 1996, the Company adopted the provisions of SFAS No.
123, "Accounting for Stock-Based Compensation." The Company has elected to
continue to account for stock options at
F-23
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
their intrinsic value with disclosure of the effects of fair value accounting on
net income (loss) and earnings (loss) per share on a pro forma basis.
N. INTEREST RATE CAPS
Premiums paid for interest rate cap agreements are amortized to interest
expense over the terms of the cap. Unamortized premiums are included in other
assets in the accompanying consolidated balance sheets. Amounts receivable, if
any, under cap agreements are accounted for as a reduction of interest expense.
As of December 31, 1998, there were no interest rate cap agreements outstanding.
O. INCOME (LOSS) PER COMMON SHARE
During 1997, the Company adopted SFAS No. 128, "Earnings Per Share," and
restated its net income (loss) per share for the year ended 1996 (see Note 7).
P. RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 and 1997 financial
statements to conform to the 1998 presentation.
3. COMMON STOCK SPLIT
On June 30, 1998, the Company's Board of Directors authorized and approved a
three-for-two stock split effected in the form of a dividend on the Company's
Common Stock. Such additional shares of Common Stock were issued on July 31,
1998 to all stockholders of record as of the close of business on July 17, 1998.
All issued and outstanding share and per share amounts in the accompanying
financial statements and Notes thereto have been restated to reflect the stock
split.
4. DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Revolving Credit Facility............................... $ -- $ 35,300
10 1/8% Senior Subordinated Notes due 2006
(the "1996 Notes")..................................... 165,000 165,000
8 3/4% Senior Subordinated Notes due 2009
(the "1997 Notes")..................................... 249,525 249,566
Real Estate Mortgages................................... 10,312 2,349
Other................................................... 181 3,963
-------- --------
Long-term debt.......................................... 425,018 456,178
Less current portion.................................... (520) (1,731)
-------- --------
Long-term debt, net of current portion.................. $424,498 $454,447
======== ========
</TABLE>
F-24
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
4. DEBT (CONTINUED)
A. REVOLVING CREDIT FACILITY
Iron Mountain has a $250 million revolving credit facility, as amended (the
"Credit Agreement"), which is scheduled to mature on September 30, 2002. The
amendments amended and restated, among other terms, interest rates, commitment
fees and financial covenants.
The Credit Agreement specifies certain minimum or maximum relationships
between operating cash flows (earnings before interest, taxes, depreciation,
amortization, extraordinary charges and other income) and interest, total debt
and fixed charges. There are restrictions on dividends declared by the Company,
sales or pledging of assets, acquisitions, capital expenditures and changes in
business and ownership; cash dividends are effectively prohibited. As of
December 31, 1998, the Company was in compliance with all of its debt covenants.
Loans under the Credit Agreement are secured by the capital stock of all of the
Company's domestic subsidiaries.
The interest rate on loans under the Credit Agreement varies, at the
Company's option, on a choice of base rates plus an applicable margin. The
applicable margin varies depending on the base rate selected and certain debt
ratios. The timing of interest payments also varies with the base rate selected.
At December 31, 1998, the effective interest rate was 6.45%.
B. 1996 NOTES
On October 1, 1996, the Company issued $165 million of 10 1/8% Senior
Subordinated Notes due 2006. Interest on the 1996 Notes is payable semiannually
on April 1 and October 1 and commenced on April 1, 1997. The net proceeds of
$160.1 million after underwriting discounts and commissions were used to repay
outstanding bank debt under the Credit Agreement and certain other indebtedness,
to fund the purchase price of an acquisition and for general corporate purposes.
In connection with the prepayment of such indebtedness, the Company incurred an
extraordinary charge of $3,539, not including related tax benefit of $1,413,
during the fourth quarter of 1996. The charge consists of a prepayment penalty,
the write-off of deferred financing costs and an original issue discount and a
loss on the termination of interest rate protection agreements.
The 1996 Notes contain covenants and restrictions similar to, or less
restrictive than, the Credit Agreement. During the first 36 months after the
date of issuance of the 1996 Notes, and subject to certain restrictions, the
Company may, with the net proceeds of one or more Qualified Equity Offerings, as
defined, redeem up to 35% of the 1996 Notes at a redemption price of 109.125% of
their initial principal amount. After September 30, 2001, and subject to certain
restrictions, the Company may, at its option, redeem any or all of the 1996
Notes at face value, plus a premium ranging from approximately 2% to 5% through
September 30, 2004. Thereafter, the 1996 Notes may be redeemed at face value.
Additionally, under certain circumstances, including a change of control or
following certain asset sales, the holders of the 1996 Notes may require the
Company to repurchase the 1996 Notes.
C. 1997 NOTES
On October 24, 1997, the Company issued $250 million of 8 3/4% Senior
Subordinated Notes due 2009. Interest on the 1997 Notes is payable semiannually
on March 31 and September 30 and commenced on March 31, 1998. The net proceeds
were $242.6 million after an original issue discount of $485 and underwriting
discounts and commissions.
F-25
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
4. DEBT (CONTINUED)
The 1997 Notes contain covenants and restrictions similar to, or less
restrictive than, the Credit Agreement. Prior to September 30, 2002, and subject
to certain restrictions, the Company may, at its option, redeem any or all of
the 1997 Notes at a make-whole price, as defined. On or after September 30,
2002, and subject to certain restrictions, the Company may, at its option,
redeem any or all of the 1997 Notes at face value, plus a premium of up to
approximately 4% through September 30, 2005. Thereafter, the 1997 Notes may be
redeemed at face value. Also, any time through October 23, 2000, the Company may
redeem a portion of the 1997 Notes, subject to restrictions, with the net
proceeds of one or more Qualified Equity Offerings, as defined, at a redemption
price of 108.75% of the principal amount of such 1997 Notes. Additionally, under
certain circumstances, including a change of control or following certain asset
sales, the holders of the 1997 Notes may require the Company to repurchase the
1997 Notes.
D. REAL ESTATE MORTGAGES
The real estate mortgages include an $8,037, 10 year, 11% mortgage based on
a 30 year amortization with a $7,495 balloon payment due October 2000. The
mortgage was repaid in full during 1998. Also included in real estate mortgages
is a $3,000, 8% note that is payable in various installments commencing in 1997
and maturing in November 2006.
E. OTHER
Other long-term debt includes various notes and obligations assumed by the
Company as a result of certain acquisitions completed by the Company during
1998.
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- --------
<S> <C>
1999........................................................ $ 1,731
2000........................................................ 807
2001........................................................ 1,661
2002........................................................ 35,899
2003........................................................ 419
Thereafter.................................................. 415,661
--------
$456,178
========
</TABLE>
As of December 31, 1998, the 1996 and 1997 Notes were fully and
unconditionally guaranteed, on a joint and several basis, on a senior
subordinated basis, by all of the Company's direct and indirect domestic
subsidiaries (the "Subsidiary Guarantors"). The Company is a holding company and
during the periods presented substantially all of the assets of which were the
stock of the Subsidiary Guarantors, and substantially all of the operations of
which were conducted by the Subsidiary Guarantors. Accordingly, the aggregate
assets, liabilities, earnings and equity of the Subsidiary Guarantors were
substantially equivalent to the assets, liabilities, earnings and equity of the
Company on a consolidated basis. Management of the Company believes that
separate financial statements of, and other disclosures with respect to, the
Subsidiary Guarantors are not meaningful or material to investors.
F-26
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
4. DEBT (CONTINUED)
Based on the borrowing rates currently available to the Company for loans
with similar terms and average maturities, the Company has estimated the
following fair values for its long-term debt as of December 31:
<TABLE>
<CAPTION>
1997 1998
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revolving Credit Facility.............................. $ -- $ -- $35,300 $35,300
1996 Notes............................................. 165,000 179,850 165,000 178,200
1997 Notes............................................. 249,525 255,000 249,566 257,500
Real estate mortgages.................................. 10,312 11,322 2,349 2,349
Other.................................................. 181 181 3,963 3,963
</TABLE>
5. ACQUISITIONS
The Company purchased substantially all of the assets and assumed certain
liabilities of 16, 18 and 15 records management businesses during 1996, 1997 and
1998, respectively. Each of these acquisitions was accounted for using the
purchase method of accounting, and accordingly, the results of operations for
each acquisition have been included in the consolidated results of the Company
from their respective acquisition dates. The excess of the purchase price over
the underlying fair value of the assets and liabilities of each acquisition has
been assigned to goodwill and is being amortized over the estimated benefit
period of 25 to 30 years. Consideration for the various acquisitions included:
(i) cash which was provided through the Company's Credit Agreement, a portion of
the net proceeds from the initial public offering of its common stock (the
"Initial Public Offering"), the Company's 1998 equity offering and the issuance
of the 1996 Notes and the 1997 Notes; (ii) issuance of the Company's common
stock and options to purchase the Company's common stock; and (iii) certain net
assets of a business acquired in 1997.
A summary of the consideration paid and the allocation of the purchase price
of the acquisitions is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Cash Paid................................................... $68,496 $192,230 $189,729
Fair Value of Common Stock Issued........................... -- 85,863 51,448
Fair Value of Options Issued................................ -- 3,071 15,655
Fair Value of Certain Net Assets of a Business Acquired in
1997...................................................... -- -- 3,000
------- -------- --------
Total Consideration....................................... 68,496 281,164 259,832
------- -------- --------
Fair Value of Assets Acquired............................... 19,476 68,774 89,053
Liabilities Assumed......................................... (4,874) (26,932) (38,165)
------- -------- --------
Fair Value of Net Assets Acquired......................... 14,602 41,842 50,888
------- -------- --------
Recorded Goodwill........................................... $53,894 $239,322 $208,944
======= ======== ========
</TABLE>
F-27
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
5. ACQUISITIONS (CONTINUED)
The following unaudited pro forma combined information shows the results of
the Company's operations for the years ended December 31, 1997 and 1998 as
though each of the significant acquisitions completed during 1997 and 1998 had
occurred on January 1, 1997:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Revenues.................................................... $393,753 $400,128
Loss from Continuing Operations............................. (9,013) (4,805)
Net Loss.................................................... (9,013) (4,604)
Loss Per Common Share from Continuing Operations--Basic and
Diluted................................................... (0.31) (0.17)
Net Loss Per Common Share--Basic and Diluted................ (0.31) (0.16)
</TABLE>
The pro forma results have been prepared for comparative purposes only and
are not necessarily indicative of the actual results of operations had the
acquisitions taken place as of January 1, 1997 or the results that may occur in
the future. Furthermore, the pro forma results do not give effect to all cost
savings or incremental costs which may occur as a result of the integration and
consolidation of the acquired businesses. Certain acquisitions completed in 1997
are not included in the pro forma results as their effect was immaterial.
In connection with the acquisitions completed in 1997 and 1998, the Company
has undertaken certain restructurings of the acquired businesses. The
restructuring activities include certain reductions in staffing levels,
elimination of duplicate facilities, and other costs associated with exiting
certain activities of the acquired businesses. These restructuring activities
were recorded as costs of the acquisitions and were provided in accordance with
Emerging Issues Task Force Issue No. 95-3, "Recognition of Liabilities in
Connection with a Purchase Business Combination."
The following is a summary of reserves related to such restructuring
activities:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Reserves, beginning of the year............................. $1,340 $ 5,443
Reserves established........................................ 6,574 11,368
Expenditures................................................ (2,163) (4,690)
Adjustments to goodwill..................................... (308) (1,639)
------ -------
Reserves, end of the year................................... $5,443 $10,482
====== =======
</TABLE>
6. CAPITAL STOCK, REDEEMABLE PUT WARRANT AND STOCK OPTIONS
A. CAPITAL STOCK
On February 6, 1996, the Company completed its Initial Public Offering and
issued 3,525,000 shares of common stock--voting.
F-28
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. CAPITAL STOCK, REDEEMABLE PUT WARRANT AND STOCK OPTIONS (CONTINUED)
In connection with the Initial Public Offering, the Board of Directors
approved, and the stockholders ratified, a recapitalization and the designation
of three new classes of stock as follows:
<TABLE>
<CAPTION>
AUTHORIZED
CLASS SHARES
- ----- ----------
<S> <C>
Preferred stock, $.01 par value............................. 2,000,000
Common stock--voting, $.01 par value........................ 13,000,000
Common stock--nonvoting, $.01 par value..................... 1,000,000
</TABLE>
Upon consummation of the Initial Public Offering, all shares of capital
stock were automatically converted into shares of common stock--voting and, in
the case of one stockholder, common stock--nonvoting. The number of common
shares received upon conversion were as follows:
<TABLE>
<CAPTION>
COMMON
----------------------
PREFERRED VOTING NONVOTING
--------- ---------- ---------
<S> <C> <C> <C>
Series A1 and Series A3..................................... 50,000 1,480,971 --
Series A2................................................... 98,000 2,152,719 750,000
Series C.................................................... 351,395 7,214,690 --
------- ---------- -------
Total....................................................... 499,395 10,848,380 750,000
======= ========== =======
</TABLE>
On March 3, 1997, the Board of Directors approved, and the stockholders
ratified, an increase in the number of authorized shares of common
stock--voting, $.01 par value, from 13,000,000 shares to 20,000,000 shares. On
January 5, 1998, the stockholders voted to increase the number of authorized
shares of common stock to 100,000,000 shares.
On April 3, 1998, the Company issued and sold an aggregate of 6,037,500
shares (including 787,500 to cover over-allotments) of its Common Stock in an
underwritten public offering. Net proceeds to the Company after deducting
underwriters' discounts and commissions were $132.9 million and were used to
repay outstanding bank debt, to fund the cash portion of the purchase price of
certain acquisitions completed in 1998 and for general corporate purposes.
The following table summarizes the number of shares authorized, issued and
outstanding for each issue of the Company's capital stock as of December 31:
<TABLE>
<CAPTION>
NUMBER OF SHARES
--------------------------------------------------------
AUTHORIZED ISSUED AND OUTSTANDING
PAR ------------------------ -----------------------------
EQUITY TYPE VALUE 1997 1998 1997 1998
- ------------------------------------ -------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Preferred stock..................... $.01 2,000,000 2,000,000 -- --
Common stock--voting................ .01 20,000,000 100,000,000 20,180,177(1) 29,430,205
Common stock--nonvoting............. .01 1,000,000 1,000,000 -- --
</TABLE>
- ------------------------
(1) This amount gives effect to the stock dividend discussed in Note 3. The
actual number of issued and outstanding shares as of December 31, 1997 was
13,453,451.
F-29
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. CAPITAL STOCK, REDEEMABLE PUT WARRANT AND STOCK OPTIONS (CONTINUED)
B. REDEEMABLE PUT WARRANT
In connection with the issuance of certain debt, the Company also issued a
put warrant, dated December 14, 1990 (the "Warrant"), exercisable for 666,578
shares of common stock for nominal consideration upon the occurrence of certain
specified events. On February 7, 1996, in connection with the Initial Public
Offering, the Warrant was redeemed for $6,612. This Warrant was accreted each
year using the effective interest rate method based on the Warrant's estimated
redemption value at its estimated redemption date of February 15, 1996.
C. STOCK OPTIONS
Effective November 30, 1995, the Board of Directors approved the adoption of
the 1995 Stock Incentive Plan (the "Stock Incentive Plan"). A total of 1,500,000
shares of common stock were available for grant as options and other rights
under the Stock Incentive Plan. On March 3, 1997 and March 23, 1998, the number
of shares of common stock available for grant as options under the Stock
Incentive Plan increased to 2,100,000 and 3,000,000, respectively.
Effective December 21, 1995, the Board of Directors approved the 1995 Stock
Option Plan for Non-Employee Directors (the "Non-Employee Director Plan") that
permitted non-employee directors to elect to receive all or a portion of their
compensation in the form of common stock. Directors electing to receive common
stock received, as an incentive, an amount of stock equivalent to 110% of the
director's compensation otherwise due to be paid in cash. During 1997, the
Company issued 2,226 shares under the Non-Employee Director Plan. On June 30,
1997, the Non-Employee Director Plan was terminated.
F-30
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. CAPITAL STOCK, REDEEMABLE PUT WARRANT AND STOCK OPTIONS (CONTINUED)
During 1997, the Company issued options to employees of two acquired
companies to purchase 218,879 shares of the Company's common stock. The options
replaced options held by the employees for the acquired companies' common stock.
The options were accounted for as additional purchase price based on the fair
value of the options when issued.
During 1998, the Company assumed two existing stock option plans from an
acquired company and options under the existing plans were converted into
options to purchase 885,000 shares of the Company's common stock under such
plans. No new options may be issued under these plans. The options were
accounted for as additional purchase price based on the fair value of the
options when issued.
The following is a summary of stock option transactions, including those
issued to employees of acquired companies, during the applicable periods:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Options outstanding, December 31, 1995...................... 501,461 $ 5.44
Granted..................................................... 680,781 10.99
Exercised................................................... (10,344) 6.39
Canceled.................................................... (27,606) 7.84
--------- ------
Options outstanding, December 31, 1996...................... 1,144,292 8.68
Granted..................................................... 703,670 17.01
Exercised................................................... (125,711) 6.59
Canceled.................................................... (46,203) 14.73
--------- ------
Options outstanding, December 31, 1997...................... 1,676,048 12.17
Granted..................................................... 1,173,018 12.02
Exercised................................................... (566,615) 7.88
Canceled.................................................... (116,132) 12.36
--------- ------
Options outstanding, December 31, 1998...................... 2,166,319 $13.21
========= ======
</TABLE>
Except for the options granted in connection with acquisitions, the stock
options were granted with exercise prices equal to or greater than the market
price of the stock at the date of grant. The majority of options become
exercisable ratably over a period of five years unless the holder terminates
employment. The number of options available for grant at December 31, 1998 was
894,994.
Effective January 1, 1996, the Company adopted the provisions of SFAS No.
123, "Accounting for Stock-Based Compensation." The Company has elected to
continue to account for stock options issued to employees at their intrinsic
value with disclosure of fair value accounting on net income (loss) and earnings
(loss) per share on a pro forma basis. Had the Company elected to recognize
compensation cost based on the fair value of the options granted at grant date
as prescribed by SFAS No. 123, net
F-31
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. CAPITAL STOCK, REDEEMABLE PUT WARRANT AND STOCK OPTIONS (CONTINUED)
loss applicable to common stockholders and net loss per common share would have
been increased to the pro forma amounts indicated in the table below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Loss from continuing operations, as reported................ $(2,049) $(4,521) $(3,167)
Income from discontinued operations, as reported............ -- -- 201
------- ------- -------
Net loss applicable to common stockholders, as reported..... $(2,049) $(4,521) $(2,966)
======= ======= =======
Loss from continuing operations, pro forma.................. $(2,614) $(5,411) $(4,071)
Income from discontinued operations, pro forma.............. -- -- 201
------- ------- -------
Net loss applicable to common stockholders, pro forma....... $(2,614) $(5,411) $(3,870)
======= ======= =======
Loss from continuing operations per common share - basic and
diluted, as reported....................................... $ (0.15) $ (0.26) $ (0.12)
Income from discontinued operations per common share - basic
and diluted, as reported................................... -- -- 0.01
------- ------- -------
Net loss per common share - basic and diluted, as
reported................................................... $ (0.15) $ (0.26) $ (0.11)
======= ======= =======
Loss from continuing operations per common share - basic and
diluted, pro forma......................................... $ (0.19) $ (0.31) $ (0.15)
Income from discontinued operations per common share - basic
and diluted, pro forma..................................... -- -- 0.01
------- ------- -------
Net loss per common share - basic and diluted, pro forma.... $ (0.19) $ (0.31) $ (0.14)
======= ======= =======
</TABLE>
The weighted average fair value of options granted in 1996, 1997 and 1998
was $4.92, $11.06 and $8.92 per share, respectively. The values were estimated
on the date of grant using the Black-Scholes option pricing model. The following
table summarizes the weighted average assumptions used for grants in the year
ended December 31:
<TABLE>
<CAPTION>
ASSUMPTION 1996 1997 1998
- ---------- --------- --------- ---------
<S> <C> <C> <C>
Expected volatility......................................... 24.2% 29.2% 28.4%
Risk-free interest rate..................................... 6.34 5.91 5.11
Expected dividend yield..................................... None None None
Expected life of the option................................. 7.5 years 7.0 years 5.0 years
</TABLE>
F-32
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. CAPITAL STOCK, REDEEMABLE PUT WARRANT AND STOCK OPTIONS (CONTINUED)
The following table summarizes additional information regarding options
outstanding and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
--------------------------------------- --------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF CONTRACTUAL LIFE EXERCISE EXERCISE
EXERCISE PRICES NUMBER (IN YEARS) PRICE NUMBER PRICE
- --------------------------------------- --------- ---------------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$0.75 to $0.87......................... 31,374 8.0 $ 0.87 18,241 $ 0.87
$4.32 to $5.77......................... 486,771 3.6 4.86 455,699 4.80
$6.63 to $9.10......................... 232,971 6.9 8.02 130,391 8.07
$10.25 to $10.94....................... 633,993 7.4 10.42 296,739 10.50
$17.17 to $25.03....................... 668,475 8.8 21.83 111,487 21.21
$26.79 to $29.19....................... 112,735 9.5 28.03 4,291 27.17
--------- --- ------ --------- ------
2,166,319 7.0 $13.21 1,016,848 $ 8.71
========= === ====== ========= ======
</TABLE>
7. INCOME (LOSS) PER COMMON SHARE--BASIC AND DILUTED
In accordance with SFAS No. 128, basic income (loss) per common share is
calculated by dividing income (loss) available to common stockholders by the
weighted average number of common shares outstanding. The calculation of diluted
income (loss) per share is consistent with that of basic income (loss) per share
but gives effect to all dilutive potential common shares (that is, securities
such as options, warrants or convertible securities) that were outstanding
during the period, unless the effect is antidilutive.
F-33
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME (LOSS) PER COMMON SHARE--BASIC AND DILUTED (CONTINUED)
Income (loss) per common share--basic and diluted has been calculated as
follows:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Income (loss) from continuing operations, before accretion
of put warrant............................................. $ 357 (4,521) (3,167)
Accretion of redeemable put warrant......................... (280) 0 0
-------- -------- --------
Income (loss) from continuing operations.................... 77 (4,521) (3,167)
Income from discontinued operations......................... 0 0 201
-------- -------- --------
Income (loss) applicable to common stockholders, before
extraordinary charge....................................... 77 (4,521) (2,966)
Extraordinary charge (net of tax benefit)................... (2,126) -- --
-------- -------- --------
Net loss applicable to common stockholders.................. $ (2,049) $ (4,521) $ (2,966)
======== ======== ========
Weighted average common shares outstanding (in thousands)... 13,911 17,172 27,470
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Income (loss) per common share--basic and diluted:
Loss from continuing operations........................... $ 0.00 $ (0.26) $ (0.12)
Net income from discontinued operations................... 0.00 0.00 0.01
-------- -------- --------
Income (loss) before extraordinary charge................. 0.00 (0.26) (0.11)
Extraordinary charge (net of tax benefit)................. (0.15) -- --
-------- -------- --------
Net loss applicable to common stockholders.................. $ (0.15) $ (0.26) $ (0.11)
======== ======== ========
</TABLE>
Because their effect is antidilutive, 1,144,929, 1,676,048 and 2,166,319
shares of common stock underlying outstanding options have been excluded from
the above calculation for the years ended December 31, 1996, 1997 and 1998,
respectively.
The effect of adopting SFAS No.128 on the previously reported loss per share
data for the year ended 1996 was as follows:
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Primary and fully diluted net loss per share (as previously
reported).................................................. $(0.14)
Effect of SFAS No. 128...................................... (0.01)
------
Net loss per common share--basic and diluted................ $(0.15)
======
</TABLE>
8. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109, which
requires the recognition of deferred tax assets and liabilities for the expected
tax consequences of temporary differences between the tax and financial
reporting bases of assets and liabilities.
The Company has estimated federal net operating loss carryforwards of
$46,153 at December 31, 1998 to reduce future federal income taxes, if any,
which begin to expire in 2005. The preceding net operating loss carryforwards do
not include preacquisition net operating loss carryforwards of Arcus Group. As a
result of the litigation relating to Arcus Group's net operating loss
carryforwards, the
F-34
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES (CONTINUED)
Company has not recognized the deferred tax asset generated by such loss
carryforwards. If the litigation is resolved favorably, any tax benefit realized
will be recorded as a reduction of goodwill. The Company also has estimated
state net operating loss carryforwards of approximately $17,951 to reduce future
state income taxes, if any. Additionally, the Company has alternative minimum
tax credit carryforwards of $587, which have no expiration date and are
available to reduce future income taxes, if any.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Deferred Tax Assets:
Accrued liabilities................................... $ 4,726 $ 8,033
Deferred rent......................................... 3,411 3,767
Net operating loss carryforwards...................... 7,360 16,759
AMT credit............................................ 587 587
Other................................................. 2,317 6,151
-------- --------
18,401 35,297
Valuation Allowance................................... -- (4,369)
-------- --------
18,401 30,928
-------- --------
Deferred Tax Liabilities:
Other assets, principally due to differences in
amortization........................................ (2,693) (6,389)
Plant and equipment, principally due to differences in
depreciation........................................ (11,217) (22,284)
Customer acquisition costs............................ (3,859) (3,824)
-------- --------
(17,769) (32,497)
-------- --------
Net deferred tax asset (liability)...................... $ 632 $ (1,569)
======== ========
</TABLE>
The Company receives a tax deduction upon exercise of non-qualified stock
options by employees for the difference between the exercise price and the
market price of the underlying common stock on the date of exercise which is
included in the net operating loss carryforwards above. A valuation allowance
has been recorded for this tax asset because of uncertainty of its realization.
If the assets are realized, they will be credited to either additional paid-in
capital ($1,873) or, for options granted for acquisitions, to goodwill ($2,496).
F-35
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES (CONTINUED)
The Company and its subsidiaries file a consolidated federal income tax
return. The provision (benefit) for income tax consists of the following
components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Federal--current.................................... $ 958 $ -- $ --
Federal--deferred................................... 57 (459) 4,509
State--current...................................... 1,450 399 505
State--deferred..................................... (1,030) (20) 1,544
------- ----- ------
$ 1,435 $ (80) $6,558
======= ===== ======
</TABLE>
A reconciliation of total income tax expense (benefit) and the amount
computed by applying the federal income tax rate of 34% to income (loss) before
income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Computed "expected" tax provision (benefit)....... $ 609 $(1,564) $1,153
Increase in income taxes resulting from:
State taxes (net of federal tax benefit)........ 278 250 1,367
Nondeductible goodwill amortization............. 602 1,221 3,675
Other........................................... (54) 13 363
------- ------- ------
$ 1,435 $ (80) $6,558
======= ======= ======
</TABLE>
9. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- ---------------------------------------------------- -------- -------- -------- ---------
<S> <C> <C> <C> <C>
1997
Revenues............................................ $ 42,154 $ 46,585 $ 54,655 $ 65,371
Gross profit........................................ 20,390 22,477 26,785 32,233
Net loss............................................ (516) (969) (325) (2,711)
Net loss per common share--basic and diluted........ (0.04) (0.06) (0.02) (0.14)
1998
Revenues............................................ $ 89,056 $ 93,464 $ 98,544 $ 102,897
Gross profit........................................ 44,139 46,708 49,038 51,963
Loss from continuing operations..................... (548) (395) (1,019) (1,205)
Net loss............................................ (314) (261) (1,069) (1,322)
Loss per common share from continuing operations -
basic and diluted.................................. (0.02) (0.01) (0.04) (0.05)
Net loss per common share - basic and diluted....... (0.01) (0.01) (0.04) (0.05)
</TABLE>
10. SEGMENT INFORMATION
On December 31, 1998, Iron Mountain adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131"). The new
rules establish revised standards for
F-36
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. SEGMENT INFORMATION (CONTINUED)
public companies relating to the reporting of financial and descriptive
information about their operating segments in financial statements. The adoption
of SFAS 131 did not have a material effect on the Company's primary financial
statements, but did affect the disclosure of segment information contained
herein.
Iron Mountain classifies its operations into two fundamental businesses:
records and information management services ("RIMS") and information technology
staffing ("IT Staffing"). As discussed in Note 15, Iron Mountain decided to sell
the IT Staffing operations and has classified operations from this business
segment as a discontinued operation on the condensed consolidated statements of
operations and cash flows. The reportable segments are managed separately since
each business has different economic characteristics based on the differing
customer requirements and the nature of the services provided. The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies (see Note 2). The Company assesses performance
based on earnings before interest, taxes, depreciation, amortization,
extraordinary items and other income ("EBITDA").
<TABLE>
<CAPTION>
IT
RIMS STAFFING TOTAL
-------- -------- --------
<S> <C> <C> <C>
1998:
Revenues from External Customers............................ $383,961 $39,551 $423,512
Revenues from Other Operating Segments...................... -- 268 268
-------- ------- --------
Total Reportable Segment Revenues........................... $383,961 $39,819 $423,780
======== ======= ========
EBITDA...................................................... $ 95,981 $ 1,526 $ 97,507
Segment Assets.............................................. 940,698 26,687 967,385
Capital Expenditures, Exclusive of Acquisitions............. 55,898 556 56,454
</TABLE>
A reconciliation of the totals reported for the reportable operating
segments to the applicable line items in the consolidated financial statements
for the year ended December 31, 1998 is as follows:
<TABLE>
<CAPTION>
<S> <C>
TOTAL REVENUES:
Total Revenues from Reportable Segments..................... $423,780
Revenues from Discontinued Operations....................... (39,551)
Intercompany Eliminations and Other Revenues................ (268)
--------
Total Consolidated Revenues from Continuing Operations.... $383,961
========
INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR
INCOME TAXES:
Total EBITDA from Continuing Operations..................... $ 95,981
Depreciation and Amortization............................... (48,301)
Interest Expense............................................ (45,673)
Other Income, net........................................... 1,384
--------
Income from Continuing Operations Before Provision for
Income Taxes............................................ $ 3,391
========
</TABLE>
F-37
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. SEGMENT INFORMATION (CONTINUED)
Information as to Iron Mountain's products and services and operations in
different geographical areas is as follows:
<TABLE>
<CAPTION>
<S> <C>
REVENUES BY PRODUCT AND SERVICES:
Storage Revenues............................................ $230,702
Service and Storage Material Sales.......................... 153,259
--------
Total Revenues............................................ $383,961
========
REVENUES:
United States............................................... $381,959
International............................................... 2,002
--------
Total Revenues............................................ $383,961
========
LONG-LIVED ASSETS:
United States............................................... $821,929
International............................................... 485
--------
Total Long-lived Assets................................... $822,414
========
</TABLE>
Information is not provided for 1996 and 1997 because the IT Staffing
business was not acquired until 1998 and the Company had no international
operations in those years.
11. COMMITMENTS AND CONTINGENCIES
A. LEASES
Iron Mountain leases most of its facilities under various operating leases.
A majority of these leases have renewal options of five to ten years and have
either fixed or Consumer Price Index escalation clauses. The Company also leases
equipment under operating leases, primarily computers which have an average
lease life of three years. Trucks and office equipment are also leased and have
remaining lease lives ranging from one to seven years. Rent expense was $21,114,
$29,332 and $47,049 for the years ended December 31, 1996, 1997 and 1998,
respectively.
Minimum future lease payments are as follows:
<TABLE>
<CAPTION>
YEAR OPERATING
- ------------------------------------------------------------ ---------
<S> <C>
1999........................................................ $ 41,700
2000........................................................ 39,999
2001........................................................ 36,928
2002........................................................ 33,545
2003........................................................ 29,442
Thereafter.................................................. 141,339
--------
Total minimum lease payments................................ $322,953
========
</TABLE>
Included in the lease commitments disclosed in the preceding paragraph are
certain five-year operating lease agreements signed in 1998 for specified
records storage warehouses. At the end of the lease term, the Company, at its
option, may: (i) negotiate a renewal of the lease; (ii) purchase the properties
at a price equal to the lessor's original cost (approximately $47.5 million); or
(iii) allow the
F-38
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
lease to expire and cause the properties to be sold. The Company's ability to
cause the properties to be sold depends upon its compliance with certain terms
of the lease. Under certain conditions, the Company would receive any excess of
the net sales proceeds over the properties' original cost. In the event that the
net sales proceeds are less than 85% of the properties' original cost, the
Company would make contingent rental payments to the lessor equal to that
difference.
B. FACILITY FIRE
In March 1997, the Company experienced three fires, all of which authorities
have determined were caused by arson. These fires resulted in damage to one and
destruction of the Company's other RIMS facility in South Brunswick Township,
New Jersey.
Some of Iron Mountain's customers or their insurance carriers have asserted
claims as a consequence of the destruction of or damage to their records as a
result of the fires, some of which allege negligence or other culpability on the
part of Iron Mountain. The Company has received notices of claims and lawsuits
filed by customers and abutters seeking damages against the Company and to
rescind their written contracts with Iron Mountain. Iron Mountain denies any
liability as a result of the destruction of or damage to customer records as a
result of the fires, which were beyond its control, and intends to vigorously
defend itself against these and any other lawsuits that may arise. The Company
is also pursuing coverage of these claims and lawsuits with its various
insurers. The claims process is lengthy and its outcome cannot be predicted with
certainty.
Based on its present assessment of the situation, management, after
consultation with legal counsel, does not believe that the fires will have a
material adverse effect on Iron Mountain's financial condition or results of
operations, although there can be no assurance in this regard.
In June 1998, the Company settled several insurance claims, including a
significant claim under its business interruption policy, related to the fires.
Other income, net, for the year ended December 31, 1998 includes a $1.7 million
gain related to the settlement.
C. OTHER LITIGATION
Iron Mountain is presently involved as a defendant in various litigation
which has occurred in the normal course of business. Management believes it has
meritorious defenses in all such actions, and in any event, the amount of
damages, if such matters were decided adversely, would not have a material
adverse effect on Iron Mountain's financial condition or results of operations.
12. RELATED PARTY TRANSACTIONS
Iron Mountain leases space to an affiliated company, Schooner Capital LLC
("Schooner") for its corporate headquarters located in Boston, Massachusetts.
For the years ended December 31, 1996, 1997 and 1998, Schooner paid Iron
Mountain rent totaling $68, $85 and $90, respectively. Iron Mountain leased one
facility from a landlord which was a related party. Total rental payments for
the years ended December 31, 1996, 1997 and 1998, for this facility totaled $94,
$99 and $99, respectively. In the opinion of management, both of these leases
were entered into at market prices and terms.
F-39
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. EMPLOYEE BENEFIT PLANS
A. PROFIT SHARING RETIREMENT PLAN
The Company has a defined contribution plan which covers all non-union
employees meeting certain service requirements. Eligible employees may elect to
defer from 1% to 15% of compensation per pay period up to the amount allowed by
the Internal Revenue Code. The Company makes matching contributions based on the
amount of the employee contribution and years of credited service, according to
a schedule as described in the plan documents. The Company has expensed $419,
$642 and $910 for the years ended December 31, 1996, 1997 and 1998,
respectively.
B. EMPLOYEE STOCK PURCHASE PLAN
During 1998, the Company introduced an employee stock purchase plan (the
"ESPP") which is available for participation by substantially all employees who
have met certain service requirements. Eligible employees may elect to
contribute from 1% to 15% of their gross compensation per pay period to the
ESPP. Such contributions are accumulated throughout the year until
September 30, the end of the fiscal year of the ESPP, and are then invested in
the Company's Common Stock. Such shares are purchased at 85% of the lower of the
fair value at the beginning or end of the fiscal year of the ESPP. Once
purchased, such shares are subject to a one year resale restriction. There were
no shares granted under the ESPP during 1998.
14. NONCASH TRANSACTIONS
The Company used the following as part of the consideration paid for certain
acquisitions:
<TABLE>
<CAPTION>
1996 1997 1998
--------- -------- --------
<S> <C> <C> <C>
Fair Value of Common Stock Issued........................... -- $85,863 $51,448
Fair Value of Options Issued................................ -- 3,071 15,655
Fair Value of Certain Net Assets of a Business Acquired in
1997....................................................... -- -- 3,000
</TABLE>
In December 1998, the Company entered into a foreign currency exchange
agreement and has recorded an asset and a liability based upon the exchange
rates as of December 31, 1998. A cash settlement of the agreement occurred in
January 1999.
During 1997, $3,086 of property and equipment, destroyed in a fire, was
transferred to receivable from insurance company.
See Note 5 for liabilities assumed in acquisitions.
15. SUBSEQUENT EVENTS
A. COMPLETED ACQUISITIONS
In January 1999, the Company completed the acquisition of a majority
interest in Britannia Data Management Limited ("BDM"), a provider of records
management services in the United Kingdom. Total consideration for the 50.1
percent interest in BDM consisted of $49.8 million, including $47.3 million in
cash and the balance in the capital stock of the Company's pre-existing United
Kingdom subsidiary. The acquisition will be accounted for as a purchase.
F-40
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. SUBSEQUENT EVENTS (CONTINUED)
On April 1, 1999, the Company acquired all of the outstanding capital stock
of First American Records Management, Inc. for total consideration of $41.5
million.
Effective April 1, 1999, the Company acquired all of the outstanding capital
stock of Data Base, Inc. and certain related real estate for approximately $116
million, including estimated transaction costs. The consideration was comprised
of 1,476,577 shares of the Company's Common Stock with a fair value of $46.0
million and the balance in cash and assumed debt. As part of the Data Base
acquisition, the Company agreed to, and subsequently did, repurchase all 1,477
shares of its Common Stock issued to the sellers with a portion of the net
proceeds from its May 1999 equity offering.
On June 2, 1999, BDM acquired MAP, S.A. and related companies for aggregate
consideration of approximately $17 million, based on an exchange rate of 6.2699
French Francs per $1 on June 2, 1999. Memogarde, headquartered and operating in
Paris, France, is a leading provider of data security services in France.
B. LINE OF CREDIT AGREEMENT
In January 1999, the Company entered into a $10 million credit facility with
a bank that matures on September 30, 1999. Interest on borrowings under this
facility will be paid monthly at the lender's index rate plus one-half of one
percent. Restrictive covenants under this agreement are similar to those on the
Company's $250 million revolving credit facility discussed in Note 4.
C. FINANCING ACTIVITIES
On April 26, 1999, the Company completed the sale, in a private placement to
qualified institutional buyers, of $150 million in aggregate principal amount of
its 8 1/4% Senior Subordinated Notes due 2011 (the "1999 Notes"). The 1999 Notes
were issued at a price to investors of 99.64% of par. The net proceeds from the
sale of the 1999 Notes were used to repay outstanding indebtedness under the
Company's revolving credit facility.
On May 17, 1999, the Company issued and sold an aggregate of 5.8 million
shares (including approximately 0.8 million shares to cover over-allotments) of
its Common Stock in an underwritten public offering at a price to the public of
$28.00 per share. Net proceeds to the Company after deducting underwriting
discounts and commissions were $153.8 million and were used: (i) to repurchase
all of the 1,476,577 shares of the Company's Common Stock issued in connection
with the acquisition of Data Base at a purchase price of $26.74 per share;
(ii) to repay outstanding indebtedness under the revolving credit facility; and
(iii) for general corporate purposes, including the funding of possible future
acquisitions.
D. DISCONTINUED OPERATIONS
In June 1999, the Company made a decision to sell its Information Technology
staffing business, Arcus Staffing Resources, Inc. ("Arcus Staffing" or "IT
Staffing"). Iron Mountain acquired Arcus Staffing in January 1998 as part of its
acquisition of Arcus Group, Inc. The Company intends to complete the sale in
1999. In 1998, Arcus Staffing reported revenues of $39.6 million and EBITDA of
$1.5 million.
F-41
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. SUBSEQUENT EVENTS (CONTINUED)
Iron Mountain has accounted for the sale of Arcus Staffing as discontinued
operations in accordance with APB No. 30. Accordingly, the fiscal 1998 results
of operations of Arcus Staffing have been segregated from continuing operations
and reported as a separate line item on the accompanying consolidated statement
of operations as discontinued operations. The Company expects to report a loss
on the sale of the Arcus Staffing business in its 1999 second quarter results,
although the amount is not determinable at this time. The loss will be reported
separately from results of continuing operations.
F-42
<PAGE>
PIERCE LEAHY CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 2,312 $ 2,028
Accounts receivable, net of allowance for doubtful
accounts
of $3,650 and $3,621.................................... 43,063 56,402
Inventories............................................... 1,056 1,051
Prepaid expenses and other................................ 1,129 2,905
Deferred income taxes..................................... 4,402 4,402
-------- --------
Total current assets................................ 51,962 66,788
-------- --------
PROPERTY AND EQUIPMENT...................................... 297,216 343,199
Less--Accumulated depreciation and amortization........... (67,522) (80,623)
-------- --------
Net property and equipment.......................... 229,694 262,576
-------- --------
OTHER ASSETS:
Intangible assets, net.................................... 381,515 419,119
Other..................................................... 3,287 2,575
-------- --------
Total other assets.................................. 384,802 421,694
-------- --------
$666,458 $751,058
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt......................... $ 3,583 $ 19,243
Accounts payable.......................................... 11,663 10,440
Accrued expenses.......................................... 40,931 41,278
Deferred revenues......................................... 11,932 15,146
-------- --------
Total current liabilities........................... 68,109 86,107
LONG-TERM DEBT.............................................. 514,362 564,105
DEFERRED RENT............................................... 5,856 6,822
DEFERRED INCOME TAXES....................................... 15,036 18,614
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK.................................. -- 4,927
SHAREHOLDERS' EQUITY........................................ 63,095 70,483
-------- --------
$666,458 $751,058
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-43
<PAGE>
PIERCE LEAHY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
(UNAUDITED)
<S> <C> <C>
REVENUES:
Storage................................................... $40,820 $48,761
Service and storage material sales........................ 33,777 39,275
------- -------
Total revenues...................................... 74,597 88,036
------- -------
OPERATING EXPENSES:
Cost of sales, excluding depreciation and amortization.... 41,961 49,573
Selling, general and administrative....................... 9,882 11,423
Depreciation and amortization............................. 9,385 10,888
Foreign currency exchange................................. 4,246 (540)
------- -------
Total operating expenses............................ 65,474 71,344
------- -------
Operating income.................................... 9,123 16,692
INTEREST EXPENSE............................................ 12,089 13,363
------- -------
Income (loss) before income taxes................... (2,966) 3,329
INCOME TAXES................................................ 1,648 1,544
------- -------
NET INCOME (LOSS)........................................... (4,614) 1,785
PREFERRED STOCK DIVIDEND.................................... -- 280
------- -------
NET INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS......... $(4,614) $ 1,505
======= =======
Basic net income (loss) per Common share.................... $ (0.27) $ 0.09
======= =======
Diluted net income (loss) per Common share.................. $ (0.27) $ 0.09
======= =======
Shares used in computing basic net income (loss) per Common
share..................................................... 17,026 17,070
======= =======
Shares used in computing diluted net income (loss) per
Common share.............................................. 17,026 17,582
======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-44
<PAGE>
PIERCE LEAHY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
(UNAUDITED)
<S> <C> <C>
REVENUES:
Storage................................................... $111,217 $139,856
Service and storage material sales........................ 83,816 113,903
-------- --------
Total revenues...................................... 195,033 253,759
-------- --------
OPERATING EXPENSES:
Cost of sales, excluding depreciation and amortization.... 111,155 143,429
Selling, general and administrative....................... 27,512 33,563
Depreciation and amortization............................. 25,181 32,084
Foreign currency exchange................................. 7,908 (5,505)
-------- --------
Total operating expenses............................ 171,756 203,571
-------- --------
Operating income.................................... 23,277 50,188
INTEREST EXPENSE............................................ 30,772 38,877
-------- --------
Income (loss) before income taxes................... (7,495) 11,311
INCOME TAXES................................................ 2,613 3,482
-------- --------
NET INCOME (LOSS)........................................... (10,108) 7,829
PREFERRED STOCK DIVIDEND.................................... -- 648
-------- --------
NET INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS......... $(10,108) $ 7,181
======== ========
Basic net income (loss) per Common share.................... $ (0.60) $ 0.42
======== ========
Diluted net income (loss) per Common share.................. $ (0.60) $ 0.41
======== ========
Shares used in computing basic net income (loss) per Common
share..................................................... 16,731 17,066
======== ========
Shares used in computing diluted net income (loss) per
Common share.............................................. 16,731 17,589
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-45
<PAGE>
PIERCE LEAHY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $(10,108) $ 7,829
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization......................... 25,181 31,965
(Gain) loss on sale of property and equipment......... 29 (94)
Deferred income tax provision......................... 2,577 3,482
Amortization of deferred financing costs.............. 1,017 1,157
Change in deferred rent............................... 1,045 771
Foreign currency adjustment........................... 10,422 (4,818)
Changes in assets and liabilities, excluding the
effects from the purchases of businesses:
(Increase) decrease in --
Accounts receivable, net........................ (10,129) (10,002)
Inventories..................................... (385) 62
Prepaid expenses and other...................... 564 (1,191)
Other assets.................................... 2,324 740
Increase (decrease) in --
Accounts payable................................ 1,367 (2,033)
Accrued expenses................................ 1,897 (2,871)
Deferred revenue................................ 1,108 1,290
-------- -------
Net cash provided by operating activities... 26,909 26,287
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for businesses acquired, net of cash acquired... (186,499) (23,633)
Capital expenditures...................................... (30,468) (39,840)
Client acquisition costs.................................. (7,334) (11,468)
Increase in intangible assets............................. (5,684) (2,039)
Proceeds from sale of property and equipment.............. -- 1,106
-------- -------
Net cash used in investing activities....... (229,985) (75,874)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving line of credit.................... 165,423 81,868
Payments on revolving line of credit...................... (76,247) (36,628)
Proceeds from issuance of long-term debt.................. 128,843 5,261
Issuance of redeemable preferred stock.................... -- 4,615
Payments on long-term debt................................ (9,856) (5,031)
Payment of deferred financing costs....................... (2,511) (669)
Proceeds from exercise of stock options................... -- 223
Payment of dividends on redeemable preferred stock........ -- (336)
-------- -------
Net cash provided by financing activities... 205,652 49,303
-------- -------
NET INCREASE (DECREASE) IN CASH............................. 2,576 (284)
CASH, BEGINNING OF PERIOD................................... 1,782 2,312
-------- -------
CASH, END OF PERIOD......................................... $ 4,358 $ 2,028
======== =======
SUPPLEMENTAL DISCLOSURE-CASH PAID FOR INTEREST.............. $ 30,188 $42,164
======== =======
SUPPLEMENTAL DISCLOSURE-CASH PAID FOR INCOME TAXES.......... $ -- $ 53
======== =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-46
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA)
1) GENERAL:
The interim consolidated financial statements presented herein have been
prepared by Pierce Leahy Corp. ("Pierce Leahy" or the "Company") without audit
and, in the opinion of management, reflect all adjustments of a normal recurring
nature necessary for a fair presentation. Interim results are not necessarily
indicative of results for a full year.
The consolidated balance sheet as of December 31, 1998 has been derived from
the Company's consolidated financial statements that have been audited by the
Company's independent public accountants. The unaudited consolidated financial
statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in the annual financial statements prepared in accordance with
generally accepted accounting principles have been omitted pursuant to those
rules and regulations. The consolidated financial statements and notes included
herein should be read in conjunction with the consolidated financial statements
and notes for the year ended December 31, 1998, included in the Company's Annual
Report on Form 10-K.
2) ACQUISITIONS:
During 1998, the Company completed 16 acquisitions. For the nine months
ended September 30, 1999, four records management businesses were purchased by
the Company. All 1998 and 1999 acquisitions were accounted for using the
purchase method of accounting and, accordingly, the results of operations for
such acquisitions have been included in the consolidated results of the Company
from their respective acquisition dates. The aggregate purchase price for the
companies acquired in 1999 exceeded the underlying estimated fair value of the
net assets acquired by $40,619, which has been assigned to goodwill and is being
amortized over the estimated benefit period of 30 years. For the nine months
ended September 30, 1999, the Company paid an aggregate purchase price of
approximately $42,929 for the acquisitions, consisting of $23,633 in net cash
and $19,296 in Seller notes. The most significant of these acquisitions was
Datavault, Limited, a U.K. based records management company with operations in
seven markets throughout England and Scotland. This acquisition was financed
with borrowings under the Company's credit facility and the issuance of Seller
notes. The Company has historically financed its acquisitions primarily with
borrowings under its credit facilities and with cash flows from existing
operating activities.
F-47
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA)
3) LONG-TERM DEBT:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
11 1/8% Senior Subordinated Notes due 2006.................. $130,000 $130,000
9 1/8% Senior Subordinated Notes due 2007................... 120,000 120,000
8 1/8% Senior Notes due 2008................................ 134,537 134,566
U.S. Revolver............................................... 118,000 152,000
Canadian Revolver........................................... -- 11,240
Mortgage Notes.............................................. 7,368 9,591
Seller Notes................................................ 3,475 18,314
Other....................................................... 4,565 7,637
-------- --------
517,945 583,348
Less-Current portion........................................ (3,583) (19,243)
-------- --------
$514,362 $564,105
======== ========
</TABLE>
In February 1999, the Company amended the U.S. portion of its revolving
credit facility to provide for borrowings of up to $175,000. All other material
terms and conditions remained the same.
4) REDEEMABLE PAY-IN-KIND PREFERRED STOCK:
In February 1999, the Company entered into an agreement to issue up to
$15,000 of redeemable pay-in-kind ("PIK") preferred stock. This stock is
redeemable at any time during the ten year term and has an initial annual
dividend rate of 11.36%, subject to increase under certain circumstances
including subsequent issuances of preferred stock (depending on certain interest
rates at such time) and if the preferred stock is not redeemed prior to six
months from its initial issuance. At its option, the Company may issue
additional shares of preferred stock in lieu of quarterly cash dividend
payments. The Company issued $5,000 of the redeemable PIK preferred stock in
March 1999. The Company incurred fees of approximately $385, providing for net
proceeds of approximately $4,615. For the nine months ended September 30, 1999,
amortization of fees was $312 and dividend payments of $336 were made to the
preferred stockholders. On November 1, 1999 the Company redeemed all of the
outstanding redeemable PIK preferred stock and paid all dividends.
F-48
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA)
5) EARNINGS PER SHARE:
The weighted average common and common equivalent shares outstanding for
purposes of calculating net income (loss) per common share are computed as
follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding used for basic
net income (loss) per common share........................ 17,026 17,070 16,731 17,066
Dilutive effect of common stock options outstanding......... -- 512 -- 523
------ ------ ------ ------
Weighted average common and common equivalent shares used
for diluted net income (loss) per common share............ 17,026 17,582 16,731 17,589
====== ====== ====== ======
</TABLE>
Options to purchase an aggregate of 1,336 shares of Common stock at prices
ranging from $5.09 to $25.50 per share were outstanding at September 30, 1999.
6) COMPREHENSIVE INCOME (LOSS):
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," requires presentation of the components of comprehensive
income (loss). The Company's comprehensive income (loss) includes net income
(loss) and unrealized gains and losses from foreign currency translation
adjustments. The Company's total comprehensive income (loss) is as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED, NINE MONTHS ENDED,
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Comprehensive Income (Loss):
Net Income (Loss) Applicable to Common Shareholders..... $(4,614) $1,505 $(10,108) $7,181
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustment............... (610) 1,053 (740) (30)
Income Tax Benefit Related to Items of Other
Comprehensive Income (Loss)......................... 244 (421) 296 12
------- ------ -------- ------
Other Comprehensive Income (Loss)....................... $(4,980) $2,137 $(10,522) $7,163
======= ====== ======== ======
</TABLE>
7) SEGMENT AND SUBSIDIARY INFORMATION (UNAUDITED):
The Company stores and services business records for clients throughout the
United States, Canada and the United Kingdom. The following information is a
summary of the operating results and
F-49
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA)
financial position for the Company's Canadian operations and the Company's U.S.
and other operations:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
United States and other.................................. $64,851 $76,273 $170,156 $219,632
Canada................................................... 9,746 11,763 24,877 34,127
------- ------- -------- --------
Total.................................................... $74,597 $88,036 $195,033 $253,759
======= ======= ======== ========
EBITDA:
United States and other.................................. $20,342 $24,046 $ 50,033 $ 68,509
Canada................................................... 2,412 2,994 6,333 8,258
------- ------- -------- --------
Total.................................................... $22,754 $27,040 $ 56,366 $ 76,767
======= ======= ======== ========
Operating income (loss):
United States and other.................................. $13,942 $14,994 $ 30,800 $ 41,102
Canada................................................... (4,819) 1,698 (7,523) 9,086
------- ------- -------- --------
Total $ 9,123 $16,692 $ 23,277 $ 50,188
======= ======= ======== ========
Net income (loss) applicable to Common shareholders:
United States and other.................................. $ 2,042 $ 2,382 $ 1,882 $ 5,524
Canada................................................... (6,656) (877) (11,990) 1,657
------- ------- -------- --------
Total.................................................... $(4,614) $ 1,505 $(10,108) $ 7,181
======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
AT AT
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Current assets:
United States and other................................... $ 42,896 $ 57,597
Canada.................................................... 9,066 9,191
-------- --------
Total..................................................... $ 51,962 $ 66,788
======== ========
Total assets:
United States and other................................... $542,378 $610,861
Canada.................................................... 124,080 140,197
-------- --------
Total..................................................... $666,458 $751,058
======== ========
Current liabilities:
United States and other................................... $ 59,885 $ 76,075
Canada.................................................... 8,224 10,032
-------- --------
Total..................................................... $ 68,109 $ 86,107
======== ========
Long-term liabilities
United States and other................................... $399,739 $442,768
Canada.................................................... 135,515 146,773
-------- --------
Total..................................................... $535,254 $589,541
======== ========
</TABLE>
F-50
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA)
The summarized financial information of the Canadian subsidiaries has been
prepared from the books and records maintained by each subsidiary. The
summarized financial information may not necessarily be indicative of the
results of operations or financial position had the Canadian subsidiaries
operated as independent entities. Certain intercompany sales and charges, and
intercompany loans among the Company and its Canadian subsidiaries are included
in the Canadian subsidiaries' records and are eliminated in consolidation.
The Company's domestic, wholly-owned subsidiaries are Monarch Box, Inc. and
Advanced Box, Inc. These subsidiaries were established in 1997 to hold
investments and certain intangible assets of the Company. They do not have any
other operations.
There are no restrictions on the ability of any of the subsidiaries to
transfer funds to the Company in the form of loans, advances or dividends,
except as provided by applicable law.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information." This
statement establishes additional standards for segment reporting in the
financial statements and is effective for fiscal years beginning after
December 15, 1997. Management has determined that all of their operations have
similar economic characteristics and may be aggregated into a single segment for
disclosure under SFAS 131. Information concerning the geographic operations of
the Company as prescribed by SFAS 131 is provided above.
8.) SUBSEQUENT EVENTS:
Subsequent to September 30, 1999, the Company announced the execution of a
definitive agreement to be acquired by Iron Mountain Incorporated in a
stock-for-stock merger valued at approximately $1.2 billion. The merger
consideration will result in the equivalent of a fixed exchange ratio of 1.1
shares of Iron Mountain common stock for each share of Pierce Leahy common
stock. As a result of the merger, existing Pierce Leahy shareholders will own
approximately 35% of the combined company. Iron Mountain's nine-member board of
directors will be expanded to include two additional board members designated by
Pierce Leahy. The proposed merger is subject to the approval by the shareholders
of both companies, completion of regulatory review, and other customary
conditions. The Company expects the merger to be completed in early 2000.
F-51
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Pierce Leahy Corp.:
We have audited the accompanying consolidated balance sheets of Pierce Leahy
Corp. (a Pennsylvania corporation) and Subsidiaries as of December 31, 1997 and
1998, and the related consolidated statements of operations, shareholders'
equity (deficit) and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pierce Leahy Corp. and
Subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
February 26, 1999
F-52
<PAGE>
PIERCE LEAHY CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1998
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 1,782 $ 2,312
Accounts receivable, net of allowance for doubtful
accounts of $2,399 and $3,650........................... 25,201 43,063
Inventories............................................... 813 1,056
Prepaid expenses and other................................ 1,772 1,129
Deferred income taxes..................................... 2,621 4,402
-------- --------
Total current assets.................................... 32,189 51,962
-------- --------
PROPERTY AND EQUIPMENT...................................... 214,981 297,216
Less--Accumulated depreciation and amortization........... (54,500) (67,522)
-------- --------
Net property and equipment.............................. 160,481 229,694
-------- --------
OTHER ASSETS:
Intangible assets, net.................................... 196,750 381,515
Other..................................................... 5,293 3,287
-------- --------
Total other assets...................................... 202,043 384,802
-------- --------
$394,713 $666,458
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt......................... $ 1,084 $ 3,583
Current portion of noncompete obligations................. 220 166
Accounts payable.......................................... 8,838 11,663
Accrued expenses.......................................... 24,754 40,765
Deferred revenues......................................... 10,199 11,932
-------- --------
Total current liabilities............................... 45,095 68,109
LONG-TERM DEBT.............................................. 277,767 514,362
NONCOMPETE OBLIGATIONS...................................... 126 --
DEFERRED RENT............................................... 3,993 5,856
DEFERRED INCOME TAXES....................................... 8,409 15,036
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS' EQUITY........................................ 59,323 63,095
-------- --------
$394,713 $666,458
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-53
<PAGE>
PIERCE LEAHY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Storage................................................... $ 75,900 $107,879 $153,533
Service and storage material sales........................ 53,848 75,638 116,767
-------- -------- --------
Total revenues........................................ 129,748 183,517 270,300
-------- -------- --------
OPERATING EXPENSES:
Cost of sales, excluding depreciation and amortization.... 73,870 101,940 154,435
Selling, general and administrative....................... 20,007 30,070 36,994
Depreciation and amortization............................. 12,869 21,528 35,772
Special compensation charge............................... -- 1,752 --
Foreign currency exchange................................. -- 702 7,907
Non-recurring charges..................................... 3,254 -- --
-------- -------- --------
Total operating expenses.............................. 110,000 155,992 235,108
-------- -------- --------
Operating income...................................... 19,748 27,525 35,192
INTEREST EXPENSE............................................ 17,225 29,262 42,864
-------- -------- --------
Income (loss) before income taxes and extraordinary
charge.............................................. 2,523 (1,737) (7,672)
INCOME TAXES................................................ -- 7,424 3,318
-------- -------- --------
Income (loss) before extraordinary charge............. 2,523 (9,161) (10,990)
EXTRAORDINARY CHARGE--loss on early extinguishment of debt
net of $4,014 tax benefit in 1997 and none in 1996........ 2,015 6,036 --
-------- -------- --------
NET INCOME (LOSS)........................................... 508 (15,197) (10,990)
ACCRETION OF REDEEMABLE WARRANTS............................ 1,561 -- --
-------- -------- --------
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS.................. $ (1,053) $(15,197) $(10,990)
======== ======== ========
BASIC AND DILUTED EARNINGS PER COMMON SHARE:
Income (loss) before extraordinary charge................. $ 0.09 $ (0.69) $ (0.65)
Extraordinary charge...................................... (0.19) (0.45) --
-------- -------- --------
Basic and diluted loss per Common share................... $ (0.10) $ (1.14) $ (0.65)
======== ======== ========
Shares used in computing basic loss per Common share........ 10,547 13,385 16,805
======== ======== ========
Shares used in computing diluted loss per Common share...... 10,631 13,385 16,805
======== ======== ========
PRO FORMA DATA (UNAUDITED) (NOTE 2):
Historical net loss before income taxes and extraordinary
charge.................................................... $ (1,737)
Pro forma provision for income taxes...................... 1,452
Extraordinary charge, net of tax.......................... 6,036
--------
Pro forma net loss applicable to Common shareholders........ $ (9,225)
========
Pro forma basic and diluted net loss per Common share
Loss before extraordinary charge.......................... $ (0.24)
Extraordinary charge...................................... (0.45)
--------
Pro forma basic and diluted net loss per Common share....... $ (0.69)
========
Shares used in computing pro forma basic and diluted net
loss per Common share..................................... 13,385
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-54
<PAGE>
PIERCE LEAHY CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN ACCUMULATED COMPREHENSIVE
STOCK CAPITAL DEFICIT INCOME TOTAL
-------- ---------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996............... $ -- $ 24 $(18,225) $ -- $(18,201)
Accretion of redeemable warrants..... -- -- (1,561) -- (1,561)
Repurchase of Common stock........... -- -- (1,450) -- (1,450)
Deemed distribution due to purchase
of real estate and other assets
from related parties............... -- -- (4,132) -- (4,132)
Net income........................... -- -- 508 -- 508
Distributions to shareholders........ -- -- (602) -- (602)
---- -------- -------- ----- --------
BALANCE, DECEMBER 31, 1996............. -- 24 (25,462) -- (25,438)
Comprehensive Income--
Net loss........................... -- -- (15,197) -- (15,197)
Foreign currency translation
adjustment....................... -- -- -- (309) (309)
--------
Total Comprehensive Income....... (15,506)
Transfer of accumulated deficit to
additional paid-in capital upon
conversion from S Corporation to C
Corporation........................ -- (32,234) 32,234 -- --
Stock split and recapitalization..... 105 (105) -- -- --
Net proceeds from initial public
offering of Common stock........... 57 93,551 -- -- 93,608
Accelerated vesting of stock
options............................ -- 1,752 -- -- 1,752
Issuance of Common stock for
acquisitions....................... 3 4,904 -- -- 4,907
---- -------- -------- ----- --------
BALANCE, DECEMBER 31, 1997............. 165 67,892 (8,425) (309) 59,323
Comprehensive Income--
Net loss........................... -- -- (10,990) -- (10,990)
Foreign currency translation
adjustment....................... -- -- -- 299 299
--------
Total Comprehensive Income....... (10,691)
Issuance of Common stock for
acquisitions....................... 5 14,404 -- -- 14,409
Stock Option exercise................ -- 54 -- -- 54
---- -------- -------- ----- --------
BALANCE, DECEMBER 31, 1998............. $170 $ 82,350 $(19,415) $ (10) $ 63,095
==== ======== ======== ===== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-55
<PAGE>
PIERCE LEAHY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
---------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 508 $ (15,197) $ (10,990)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary item...................................... 2,015 6,036 --
Special compensation charge............................. -- 1,752 --
Depreciation and amortization........................... 12,869 21,528 35,772
(Gain) loss on sale of property and equipment........... (32) (44) 16
Deferred income tax provision........................... (128) 7,241 3,322
Amortization of deferred financing costs................ 516 1,069 1,393
Change in deferred rent................................. 302 1,042 1,280
Foreign currency adjustment............................. 31 (435) 10,122
Changes in assets and liabilities, excluding the effects
from the purchases of businesses:
(Increase) decrease in--
Accounts receivable, net............................ (2,408) (3,870) (10,731)
Inventories......................................... 150 (154) (102)
Prepaid expenses and other.......................... 747 (1,137) 1,282
Other assets........................................ (486) 746 2,296
Increase (decrease) in--
Accounts payable.................................... 1,630 185 2,545
Accrued expenses.................................... 10,732 1,872 4,457
Deferred revenue.................................... (8) 330 25
--------- --------- ---------
Net cash provided by operating activities....... 26,438 20,964 40,687
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for businesses acquired, net of cash acquired... (61,176) (102,068) (186,486)
Capital expenditures...................................... (23,493) (35,397) (48,591)
Purchase of real estate and other assets from related
parties................................................... (11,018) -- --
Client acquisition costs.................................. (6,477) (10,629) (10,921)
Deposits on pending acquisitions.......................... (850) (2,398) (214)
Increase in intangible assets............................. (5,618) (5,625) (6,659)
Payments on noncompete agreements......................... (333) (496) (220)
Proceeds from sale of property and equipment.............. 123 64 60
--------- --------- ---------
Net cash used in investing activities........... (108,842) (156,549) (253,031)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving line of credit.................... 54,750 156,983 183,925
Payments on revolving line of credit...................... (49,513) (139,784) (86,771)
Proceeds from issuance of long-term debt.................. 210,229 120,000 128,951
Proceeds from issuance of Common Stock.................... -- 93,608 --
Payments on long-term debt................................ (118,570) (82,464) (10,627)
Payment of debt financing costs........................... (9,283) (5,230) (2,658)
Proceeds from exercise of stock options................... -- -- 54
Prepayment penalties and cancellation of warrants......... (2,625) (7,000) --
Repurchase of Common Stock................................ (1,450) -- --
Distributions to shareholders............................. (602) -- --
--------- --------- ---------
Net cash provided by financing activities....... 82,936 136,113 212,874
--------- --------- ---------
NET INCREASE IN CASH........................................ 532 528 530
CASH, BEGINNING OF YEAR..................................... 722 1,254 1,782
--------- --------- ---------
CASH, END OF YEAR........................................... $ 1,254 $ 1,782 $ 2,312
========= ========= =========
SUPPLEMENTAL DISCLOSURE--CASH PAID FOR INTEREST............. $ 7,443 $ 26,288 $ 39,013
========= ========= =========
SUPPLEMENTAL DISCLOSURE--CASH PAID FOR INCOME TAXES......... $ -- $ -- $ 75
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-56
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. BACKGROUND
Pierce Leahy Corp., (the "Company"), stores and services business records
for clients throughout the United States and Canada. The Company also sells
storage containers and provides records management consulting services, imaging
services, and marketing literature storage and fulfillment services.
On June 25, 1997, the Company effected a stock split, reclassified its
Class A and Class B Common stock to Common stock, authorized 10,000,000 shares
of undesignated Preferred stock and increased its authorized Common stock to
80,000,000 shares. All references in the accompanying financial statements to
the number of Common shares and per-share amounts have been retroactively
restated to reflect the stock split.
In July 1997, the Company completed an initial public offering of 5,664,017
shares of Common stock, raising net proceeds of $93,608. The proceeds of the
offering were used to redeem a portion of the Company's 11 1/8% Senior
Subordinated Notes and to repay outstanding borrowings under the Company's
credit facility (see Note 6).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Pierce Leahy
Corp., its 99%-owned subsidiary, Pierce Leahy Command Company, and its
wholly-owned subsidiaries, Archivex, Ltd., Monarch Box, Inc. and Advanced
Box, Inc. All intercompany accounts and transactions have been eliminated in
consolidation. The minority interest in Pierce Leahy Command Company is not
material to the consolidated financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORIES
Inventories, which consist primarily of storage containers, are stated at
the lower of cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using
straight-line and accelerated methods over the estimated useful lives of the
assets. In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Software
Developed or Obtained for Internal Use." This statement requires that certain
costs related to the development or purchase of internal-use software be
capitalized and amortized over
F-57
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the estimated useful life of the software, and also requires that costs related
to the preliminary project stage and post implementation/operations stage in an
internal-use computer software development project be charged to expense as
incurred. The Company's capitalization policy was in accordance with the
requirements of SOP 98-1 throughout 1996, 1997 and 1998.
GOODWILL
Goodwill reflects the cost in excess of fair value of the net assets of
companies acquired in purchase transactions. Goodwill is amortized using the
straight-line method from the date of acquisition over the expected period to be
benefited, estimated at 30 years. The Company assesses the recoverability of
goodwill, as well as other long-lived assets, based upon expectations of future
undiscounted cash flows in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." At December 31, 1998, no
adjustment of the carrying values of long-lived assets was necessary.
CLIENT ACQUISITION COSTS
The unreimbursed costs of moving the records of new clients into the
Company's facilities and sales commissions related to new client contracts have
been capitalized and are included in intangible assets in the accompanying
balance sheets (see Note 4). All such costs are being amortized on a
straight-line basis over six years, which represents the average initial
contract term. The Company assesses whether amortization using a six year
average initial contract term varies significantly from using a specific
contract basis. Such difference has not been material.
DEFERRED RENT
Certain of the Company's leases for warehouse space provide for scheduled
rent increases over the lease terms. The Company recognizes rent expense on a
straight-line basis over the lease terms, with the excess rent charged to
expense over the amount paid recorded as deferred rent in the accompanying
balance sheets.
HEALTH INSURANCE RESERVE
The Company self-insures for benefit claims under a health insurance plan
provided to employees. The self-insurance was limited to $100 in claims per
insured individual per year for both 1997 and 1998, and a liability for claims
incurred but not reported is reflected in the accompanying balance sheets.
Specific stop-loss insurance coverage is maintained to cover claims in excess of
the coverage per insured individual per year.
INCOME TAXES
Prior to July 1, 1997, the Company was an S Corporation for federal and
state income tax purposes and, accordingly, income and losses were passed
through to the shareholders and taxed at the
F-58
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
individual level. On July 1, 1997, in connection with the Company's initial
public offering, the Company terminated its S Corporation election and currently
provides for federal and state income taxes.
The Company applies SFAS No. 109, "Accounting for Income Taxes," which
requires the liability method of accounting for income taxes. Under the
liability method, deferred tax assets and liabilities are recognized for the
future tax consequences, measured by enacted tax rates, attributable to
temporary differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards, for years in which taxes are expected to be
paid or recovered.
REVENUE RECOGNITION
Storage and service revenues are recognized in the month the respective
service is provided. Storage material sales are recognized when shipped to the
customer. Deferred revenues represent amounts invoiced for storage services in
advance of the rendering of the services. The costs of storage and service
revenues are not separately distinguishable, as the revenue producing activities
are interdependent and costs are not directly attributable or allocable in a
meaningful way to those activities.
FOREIGN CURRENCY
The balance sheets of Pierce Leahy Command Company and Archivex, Limited,
the Company's Canadian subsidiaries, are translated into U.S. dollars using the
rate of exchange at period end. The statements of operations for the Canadian
subsidiaries are translated into U.S. dollars using the average exchange rate
for the period. Net unrecognized exchange gains or losses resulting from the
translation of the balance sheets are accumulated and included as comprehensive
income on the statement of shareholders' equity (deficit). Exchange gains and
losses are recognized during the period, including those related to the U.S.
dollar denominated 8 1/8% Senior Notes of Pierce Leahy Command Company due in
2008, and are included in the Company's consolidated statements of operations.
COMPREHENSIVE INCOME
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 requires the reporting and disclosure of comprehensive income and
its components which encompasses net income and foreign currency translation
adjustments. The Company reports comprehensive income in the consolidated
statement of shareholders' equity (deficit). The prior year financial statements
have been restated to conform to the reporting requirements of SFAS No. 130.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes standards for reporting and classification of derivatives on the
balance sheet as assets or liabilities, measured at fair value. Gains or losses
resulting from changes in the values of those derivatives would be accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting. SFAS No. 133 is effective for
F-59
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
fiscal years beginning after June 15, 1999. This pronouncement is not expected
to have any impact on the Company's financial position or results of operations
as the Company has not currently entered into any such instruments or hedging
activities.
FAIR VALUE OF FINANCIAL INSTRUMENTS
For certain of the Company's financial instruments, including accounts
receivable, accounts payable and accrued expenses, management believes that the
carrying amounts approximate fair value due to their short maturities. The
carrying amount and estimated fair value of the Company's 11 1/8% Senior
Subordinated Notes at December 31, 1998 was $130,000 and $143,650, respectively.
The carrying amount and estimated fair value of the Company's 9 1/8% Senior
Subordinated Notes at December 31, 1998 was $120,000 and $126,000, respectively.
The carrying amount and estimated fair value of the Company's 8 1/8% Senior
Notes at December 31, 1998 was $134,537 and $133,864, respectively. All of the
Notes are publicly traded, and accordingly, the fair value of the Notes was
estimated based on the quoted market price offered for such securities.
PRO FORMA BASIC AND DILUTED NET LOSS PER SHARE
Prior to July 1, 1997, the Company was an S Corporation for federal and
state income tax purposes. The pro forma income tax provision for 1997 reflects
taxes that would have been recorded on the historical loss before income taxes,
at an effective rate of 39%, had the Company not been an S Corporation during
such period. The basic and diluted pro forma net loss per share is computed by
dividing pro forma net loss by the weighted average number of shares outstanding
during the period.
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
LIFE 1997 1998
----------- -------- --------
<S> <C> <C> <C>
Land........................................................ -- $ 10,501 $ 16,785
Buildings and improvements.................................. 10-40 years 79,119 107,210
Warehouse equipment (primarily shelving).................... 12-20 years 95,005 131,090
Data processing equipment and software...................... 7 years 18,364 24,063
Furniture and fixtures...................................... 7 years 5,615 6,688
Transportation equipment.................................... 5 years 6,377 9,125
Construction in progress.................................... -- -- 2,255
-------- --------
214,981 297,216
Less-Accumulated depreciation and amortization.............. (54,500) (67,522)
-------- --------
Net property and equipment................................ $160,481 $229,694
======== ========
</TABLE>
Depreciation expense was $6,652, $9,599 and $15,127 for the years ended
December 31, 1996, 1997 and 1998, respectively.
F-60
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
4. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Goodwill.................................................... $160,119 $337,409
Client acquisition costs.................................... 26,233 37,033
Noncompete agreements....................................... 14,263 23,257
Deferred financing costs.................................... 11,174 13,825
Other intangible assets..................................... 18,525 25,405
-------- --------
230,314 436,929
Less-Accumulated amortization............................... (33,564) (55,414)
-------- --------
Net intangible assets................................... $196,750 $381,515
======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------
ACCUMULATED NET BOOK
LIFE COST AMORTIZATION VALUE
--------- -------- ------------ --------
<S> <C> <C> <C> <C>
Goodwill.......................................... 30 years $337,409 $(17,646) $319,763
Client acquisition costs.......................... 6 years 37,033 (13,396) 23,637
Noncompete agreements............................. 3-7 years 23,257 (11,857) 11,400
Deferred financing costs.......................... 10 years 13,825 (2,514) 11,311
Other intangible assets........................... 5-6 years 25,405 (10,001) 15,404
-------- -------- --------
$436,929 $(55,414) $381,515
======== ======== ========
</TABLE>
Amortization of all intangible assets, other than deferred financing costs
which are charged to interest expense, was $6,217, $11,929 and $20,645 for the
years ended December 31, 1996, 1997 and 1998, respectively. Amortization of
deferred financing costs was $516, $1,069 and $1,393 for the years ended
December 1996, 1997 and 1998, respectively. Capitalized client acquisition costs
were $6,477, $10,629 and $10,921 for the years ended December 31, 1996, 1997 and
1998, respectively.
5. ACCRUED EXPENSES
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Accrued salaries and commissions............................ $ 3,329 $ 4,863
Accrued vacation and other absences......................... 3,981 5,646
Accrued interest............................................ 12,004 14,312
Other....................................................... 5,440 15,944
------- -------
$24,754 $40,765
======= =======
</TABLE>
F-61
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1998
-------- --------
<S> <C> <C>
11 1/8% Senior Subordinated Notes due 2006.................. $130,000 $130,000
9 1/8% Senior Subordinated Notes due 2007................... 120,000 120,000
8 1/8% Senior Notes due 2008................................ -- 134,537
U.S. Revolver............................................... -- 118,000
Canadian Revolver........................................... 22,303 --
Mortgage Notes.............................................. 5,369 7,368
Seller Notes................................................ 1,051 3,475
Other....................................................... 128 4,565
-------- --------
278,851 517,945
Less-Current portion........................................ (1,084) (3,583)
-------- --------
$277,767 $514,362
======== ========
</TABLE>
11 1/8% SENIOR SUBORDINATED NOTES DUE 2006
In July 1996, the Company issued $200,000 of Senior Subordinated Notes in a
private offering that were later exchanged for registered notes with
substantially identical terms (the "1996 Notes"). The 1996 Notes are general
unsecured obligations of the Company, subordinated in right of payment to senior
indebtedness of the Company and senior in right of payment to any current or
future subordinated indebtedness. The 1996 Notes are guaranteed by the U.S.
subsidiaries of the Company and secured by a second lien on 65% of the stock of
the Company's Canadian subsidiaries. The 1996 Notes mature on July 15, 2006, and
bear interest at 11 1/8% per year, payable semiannually in arrears on
January 15 and July 15. The proceeds from the sale of the 1996 Notes were used
to retire certain existing indebtedness of the Company under its previous credit
facilities, to purchase certain properties from related party partnerships (see
Note 12), to redeem stock from a shareholder (see Note 8), to fund an
acquisition and for general corporate purposes. Upon completion of the Company's
initial public offering of its Common stock in July 1997 (see Note 1), the
Company exercised an option to redeem $70,000 principal amount of the 1996
Notes. The resulting $7,000 prepayment penalty along with the write-off of a
portion of the unamortized deferred financing costs of $3,050, net of an income
tax benefit of $4,014, was recorded as an extraordinary charge in the
accompanying consolidated statements of operations.
9 1/8% SENIOR SUBORDINATED NOTES DUE 2007
In July 1997, the Company issued $120,000 of Senior Subordinated Notes (the
"1997 Notes") in a public offering. The 1997 Notes are general unsecured
obligations of the Company, subordinated in right of payment to the senior
indebtedness of the Company and senior in right of payment to any current or
future subordinated indebtedness. The 1997 Notes are guaranteed by the U.S.
subsidiaries of the Company and secured by a third lien on 65% of the stock of
the Company's Canadian subsidiaries. The 1997 Notes are equal in right of
payment with the 1996 Notes. The 1997 Notes mature on July 7,
F-62
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
6. LONG-TERM DEBT (CONTINUED)
2007, and bear interest at 9 1/8% per year, payable semiannually in arrears on
January 15 and July 15. The proceeds from the sale of the 1997 Notes were used
to repay outstanding borrowings under a previous credit facility and for general
corporate purposes.
8 1/8% SENIOR NOTES DUE 2008
In April 1998, Pierce Leahy Command Company, the Company's principal
Canadian subsidiary, issued $135,000 of Senior Notes in a private offering that
were later exchanged for registered notes with substantially identical terms
(the "1998 Notes"). The 1998 Notes are general unsecured obligations of Pierce
Leahy Command Company ranking PARI PASSU in right of payment to all existing and
future senior unsecured indebtedness of Command. The 1998 Notes are effectively
subordinated to secured indebtedness of Command to the extent of the assets
securing such indebtedness. The 1998 Notes are guaranteed on a senior
subordinated basis by the Company, which guarantee is equal in right of payment
with the 1996 and 1997 Notes. The 1998 Notes mature on May 15, 2008, and bear
interest at 8 1/8% per year, payable semi-annually in arrears on May 15 and
November 15. The proceeds from the sale of the 1998 Notes were used primarily to
finance the acquisition of Archivex Inc., to repay outstanding borrowings under
the credit facility and for general corporate purposes.
REVOLVING CREDIT FACILITY
In February 1998, the Company amended its credit facility to provide for a
revolving line of credit of U.S. $150 million in borrowings and CDN $40 million
in borrowings for Pierce Leahy Command Company. The credit facility is senior to
all subordinated indebtedness of the Company and is secured by substantially all
of the assets of the Company, and a first lien on 65% of the stock of the
Company's Canadian subsidiaries. Borrowings under the facility bear interest at
prime plus an applicable margin, or at LIBOR plus an applicable margin, at the
option of the Company. In addition to interest and other customary fees, the
Company is obligated to remit a fee of 0.375% per year on unused commitments,
payable quarterly. The aggregate available commitment under the credit facility
will be reduced on a quarterly basis beginning September 30, 2001. The credit
facility matures on June 30, 2004, unless previously terminated. The Company's
available borrowing capacity under the credit facility is contingent upon the
Company meeting certain financial ratios and other criteria.
The weighted average interest rate on outstanding borrowings on the U.S.
portion of the revolver at December 31, 1998 was 7.6%. The highest amount
outstanding under the U.S. revolver during the year ended December 31, 1997 was
$117,763, the average amount outstanding during the year was $69,338, and the
weighted average interest rate was 7.85%. The highest amount outstanding during
the year ended December 31, 1998 was $125,500, the average amount outstanding
during the year was $79,150, and the weighted average interest rate was 7.95%.
There were no outstanding borrowings on the Canadian portion of the credit
facility at December 31, 1998. The highest amounts outstanding during the years
ended December 31, 1997 and 1998, were CDN $31,900 and $35,000, respectively.
The average amounts outstanding in 1997 and 1998, respectively, were CDN $17,100
and $8,750, while the weighted average interest rates were 6.12% and 8.51%,
respectively.
F-63
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
6. LONG-TERM DEBT (CONTINUED)
In February 1999, the Company amended the U.S. portion of the credit
facility to provide for borrowings of up to $175 million. All other material
terms and conditions remained the same.
MORTGAGE NOTES
In connection with the purchase of real estate from related parties in 1996
(see Note 12), the Company assumed a mortgage of $1,114. The mortgage bears
interest at 10.5% and requires monthly principal and interest payments of $20
through 2002. The Company also assumed mortgage notes in connection with certain
acquisitions during 1996, 1997 and 1998 of $2,630, $2,000 and $2,465,
respectively. The notes bear interest at rates of approximately 8% and require
monthly principal and interest payments ranging from $12 to $22 through 2009.
SELLER NOTES
In connection with certain acquisitions completed in 1997 and 1998, notes
for $1,652, and $3,175, respectively, were issued to the sellers. The notes bear
interest at rates ranging from 5% to 7% per year. The outstanding balances on
the notes as of December 31, 1998 mature through 1999.
Future scheduled principal payments on all of the Company's long-term debt
at December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999........................................................ $ 3,583
2000........................................................ 933
2001........................................................ 2,563
2002........................................................ 21,013
2003........................................................ 49,644
2004 and thereafter......................................... 440,209
--------
$517,945
========
</TABLE>
Upon entering into prior credit facilities in 1993 and 1994, the Company
issued warrants to certain lenders to purchase common stock. Warrants to
purchase 229,825 shares at $.01 per share were issued in 1993 and 55,073 shares
at $2.68 per share were issued in 1994. Management assigned an initial value of
$338 to the 1993 warrants and $87 to the 1994 warrants for financial reporting
purposes. The Company called the warrants in February 1996 at an amount which
was determined by a formula defined in the credit agreement. The change in value
of the redeemable warrants from the initial value has been accreted through a
charge to shareholder's equity (deficit) in the accompanying financial
statements. The warrants were redeemed for $2,625 in 1996. There were no
warrants outstanding during 1997 or 1998.
Debt refinancings occurred in 1996 and 1997, resulting in the write-off of
previously deferred financing costs of $2,015 and $3,050, respectively, and
prepayment and other charges of $7,000 in 1997. Such write-offs and charges have
been recorded as extraordinary charges, net of tax, in the accompanying
consolidated statements of operations. No debt refinancings occurred in 1998.
The Company is in compliance with all financial and operating covenants
required under all indentures and under the Credit Facility.
F-64
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
7. INCOME TAXES:
The components of income taxes for the years ended December 31, 1997 and
1998 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Current--
Federal................................................. $ -- $ 95
State................................................... -- 55
Foreign................................................. 150 --
------- -------
150 150
Deferred--
Federal................................................. 8,895 5,309
State................................................... 1,172 (144)
Foreign................................................. 1,221 (1,997)
------- -------
11,288 3,168
------- -------
$11,438 $ 3,318
======= =======
</TABLE>
The provision for income taxes for the years ended December 31, 1997 and
1998 consists of a current tax provision for alternative minimum taxes on
domestic operations and foreign taxes due on taxable income of the Company's
Canadian subsidiaries, and deferred federal, state and foreign income taxes. The
total deferred income tax provision in 1997 includes a one-time tax charge of
$6,600 recorded upon the termination of the Company's S corporation status.
The statement of operations for the year ended December 31, 1997 includes a
pro forma adjustment for the income taxes which would have been recorded if the
Company had been a C corporation for the entire period based on tax laws in
effect during the period. The reconciliation of the federal statutory income tax
rate and the pro forma effective income tax rate for the year ended
December 31, 1997, and the reconciliation of the federal statutory income tax
rate and the effective income tax rate for the year ended December 31, 1998, are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1997 1998
-------- --------
<S> <C> <C>
Federal statutory rate...................................... 34.0% 34.0%
State income taxes.......................................... (1.2) 2.7
Non-deductible expenses..................................... (7.9) (86.3)
Foreign..................................................... (3.2) 6.4
---- -----
21.7% (43.2)%
==== =====
</TABLE>
F-65
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
7. INCOME TAXES: (CONTINUED)
Deferred taxes are determined based on the estimated future tax effects of
differences between the financial statement and tax basis of assets and
liabilities given the provisions of enacted tax laws. Deferred taxes are
comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998
-------- --------
<S> <C> <C>
Current deferred income tax asset...................... $ 2,621 $ 4,402
------- --------
Gross non-current deferred tax assets.................. 10,269 12,190
Gross non-current deferred tax liabilities............. (18,678) (27,226)
------- --------
Total non-current deferred taxes................. (8,409) (15,036)
------- --------
Net deferred tax liability............................. $(5,788) $(10,634)
======= ========
</TABLE>
The tax effect of significant temporary differences representing deferred
tax assets and liabilities at December 31, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998
-------- --------
<S> <C> <C>
Basis difference of property and equipment............ $(10,312) $(16,493)
Basis difference in intangible assets................. (5,076) (8,170)
Net operating loss carryforward....................... 5,112 7,464
Deferred rent......................................... 1,526 2,295
Expenses not currently deductible for tax purposes.... 2,962 4,270
-------- --------
Net deferred tax liability...................... $ (5,788) $(10,634)
======== ========
</TABLE>
The Company has federal and state net operating loss carryforwards available
for income tax and financial reporting purposes of approximately $12,056 at
December 31, 1998. The net operating loss carryforwards begin to expire in 2012.
8. CAPITAL STOCK:
At December 31, 1997 and 1998, the Company's capital stock was comprised of
the following:
<TABLE>
<CAPTION>
PREFERRED COMMON
---------- ----------
<S> <C> <C>
Par value............................................ $ .01 $ .01
Shares authorized.................................... 10,000,000 80,000,000
Shares issued and outstanding December 31, 1997...... -- 16,477,728
Shares issued and outstanding December 31, 1998...... -- 17,036,581
</TABLE>
In 1996, the Company redeemed 105,910 shares of Common stock for $1,450 and
canceled these shares.
F-66
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
8. CAPITAL STOCK: (CONTINUED)
Certain shareholders of the Company entered into a voting trust agreement on
June 24, 1997. The shares held in trust represent 48.5% of the outstanding
Common stock at December 31, 1998. The trustees of the voting trust include the
President and Chief Executive Officer of the Company and the Chairman of the
Board of Directors. Each of the trustees has shared power to vote the shares
held in the voting trust. The beneficial owners of interests in the voting trust
have the right to dispose of the shares to which they have beneficial interests.
9. STOCK OPTIONS:
In September 1994, the Company established a non-qualified stock option plan
which provides for the granting of options to key employees to purchase an
aggregate of 1,208,433 shares of Common stock. The shares available for grant
were increased by 284,898 in December 1996. Option grants have an exercise price
equal to the fair market value of the Common stock on the date of grant. Before
the Company consummated its initial public offering of Common stock in
July 1997 (see Note 1), the fair market value of the options was determined
based upon a formula, as defined in the option plan. The options granted vest in
five equal annual installments beginning on the first anniversary of the date of
grant, except as discussed below.
Upon the consummation of the Company's initial public offering of Common
stock in July 1997, options granted during 1997 became fully vested and
exercisable as provided for under the plan. The Company recorded a
non-recurring, non-cash compensation charge of approximately $1,752 relating to
those options, representing the difference between the exercise price and the
deemed value for accounting purposes.
In April 1997, the Company adopted its 1997 Stock Option Plan (the "1997
Plan") which provides for the granting of stock options to purchase up to
1,500,000 shares of Common stock to employees, officers, directors, consultants
and advisors of the Company. The 1997 Plan is administered by the Compensation
Committee of the Board of Directors (the "Committee"). Grants may consist of
incentive stock options or nonqualified stock options. The option price of any
incentive stock option granted will not be less than the fair value of the
underlying shares of Common stock on the date of grant. The option price of a
non-qualified stock option will be determined by the Committee and may be
greater than, equal to or less than the fair market value of the underlying
shares of Common stock on the date of grant. The term of each option will be
determined by the Committee, provided that the exercise period may not exceed
10 years from the date of grant. The options granted may be subject to vesting
and other conditions. In the event of a change in control (as defined in the
1997 Plan), all outstanding options will become fully exercisable.
F-67
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
9. STOCK OPTIONS: (CONTINUED)
Information related to all of the Company's existing stock option plans is
as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE PRICE EXERCISE PRICE AGGREGATE
OPTIONS PER SHARE PER SHARE EXERCISE PRICE
--------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance as of December 31, 1995............. 600,512 $ 5.09 $5.09 $3,056,606
Granted................................... 360,092 5.86 5.86 2,110,139
--------- ----------- ----- ----------
Balance as of December 31, 1996............. 960,604 5.09-5.86 5.38 5,166,745
Granted................................... 153,570 5.09 5.09 781,671
--------- ----------- ----- ----------
Balance as of December 31, 1997............. 1,114,174 5.09-5.86 5.34 5,948,416
Granted................................... 156,250 20.50 20.50 3,203,125
Exercised................................. (10,591) 5.09 5.09 (53,908)
Terminated................................ (8,750) 20.50 20.50 (179,375)
--------- ----------- ----- ----------
Balance as of December 31, 1998............. 1,251,083 $5.09-20.50 $7.13 $8,918,258
========= =========== ===== ==========
</TABLE>
At December 31, 1998, 647,333 options to purchase shares of Common stock are
fully vested and exercisable. Subsequent to December 31, 1998, the Company
issued 151,000 options to employees at an exercise price of $25.50 per share.
The Company accounts for its option plans under APB Opinion No. 25,
"Accounting for Stock Issued to Employees," under which no compensation cost has
been recognized. In 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 establishes a
fair value based method of accounting for stock-based compensation plans. This
statement also applies to transactions in which an entity issues its equity
instruments to acquire goods or services from non-employees. SFAS No. 123
requires that an employer's financial statements include certain disclosures
about stock-based employee compensation arrangements regardless of the method
used to account for the plan.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions used for
the grants in 1996, 1997 and 1998:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Risk free interest rates.......................... 5.6% 6.4% 5.5%
Expected lives of options......................... 7 years 7 years 7 years
Expected dividend yields.......................... N/A N/A N/A
Expected volatility............................... 15% 20% 45%
</TABLE>
The approximate fair value of each option granted in 1996, 1997 and 1998 is
$2.06, $2.08 and $11.36, respectively, as determined under the provisions of
SFAS No. 123. The following pro forma
F-68
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
9. STOCK OPTIONS: (CONTINUED)
results would have been reported had compensation cost been recorded for the
fair value of the options granted:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Net loss applicable to Common shareholders, as reported..... $(1,053) $(15,197) $(10,990)
Net loss applicable to Common shareholders, pro forma for
compensation cost and income taxes in 1997 (Note 1)....... $(1,311) $ (9,681) $(11,468)
Net loss per share applicable to Common shareholders, pro
forma for compensation cost and income taxes in 1997 (Note
1)........................................................ -- $ (0.72) $ (0.68)
</TABLE>
The SFAS No. 123 method of accounting is applied only to options granted on
or after January 1, 1995. The resulting pro forma compensation cost may not be
representative of the amount to be expected in future years due to the vesting
schedule of the options.
10. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
At December 31, 1998, the Company was obligated under non-cancelable
operating leases, including the related-party leases discussed below, for
warehouse space, office equipment and transportation equipment. These leases
expire at various times through 2024 and require minimum rentals, subject to
escalation, as follows:
<TABLE>
<S> <C>
1999........................................................ $ 38,320
2000........................................................ 37,201
2001........................................................ 34,885
2002........................................................ 32,094
2003........................................................ 28,283
2004 and thereafter......................................... 97,495
--------
$268,278
========
</TABLE>
Rent expense for all leases was approximately $17,008, $21,657, and $31,077
for the years ended December 31, 1996, 1997 and 1998, respectively. Some of the
leases for warehouse space provide for purchase options on the facilities at
certain dates.
The Company leases office and warehouse space at prices which, in the
opinion of management, approximate market rates from entities which are owned by
certain shareholders, officers and employees of the Company. Rent expense on
these leases was approximately $9,019, $845, and $961 for the years ended
December 31, 1996, 1997 and 1998, respectively. A significant portion of the
related party rent expense was reduced through the purchase of certain real
estate and the buy-out of certain lease interests in July 1996 (see Note 12).
F-69
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
10. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
OTHER MATTERS
The Company is party to various claims arising in the ordinary course of
business. Although the ultimate outcome of these matters is presently not
determinable, management, after consultation with legal counsel, does not
believe that the resolution of these matters will have a material adverse effect
on the Company's consolidated financial position or results of operations.
In June 1997, the Company entered into a tax indemnification agreement with
its then current shareholders which provides for: (i) the distribution to such
shareholders of cash equal to the product of the Company's taxable income for
the period from January 1, 1997 until July 1, 1997 and the sum of the highest
effective federal and state income tax rate applicable to any current
shareholder, less any prior distributions to such shareholders to pay taxes for
such period, and (ii) an indemnification of such shareholders for any losses or
liabilities with respect to any additional taxes (including interest, penalties
and legal fees) resulting from the Company's operations during the period in
which it was a Subchapter S Corporation.
11. EARNINGS PER SHARE:
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share." SFAS No. 128 requires dual presentation of basic
and diluted earnings per share. According to SFAS No. 128, basic earnings per
share, which replaces primary earnings per share, is calculated by dividing net
income (loss) by the weighted average number of common shares outstanding for
the period. Diluted earnings per share, which replaces fully diluted earnings
per share, reflects the potential dilution from the exercise or conversion of
securities into Common stock, such as stock options and warrants. The Company
adopted SFAS No. 128 in 1997.
In 1996, the weighted average of shares outstanding was 10,546,871. The
dilutive effects of the weighted average number of stock options and warrants
outstanding was 84,059 shares. In 1997 and 1998 there were no dilutive effects
of stock options or warrants as the Company had a loss before extraordinary
item.
12. RELATED PARTY TRANSACTIONS:
In August 1996, the Company purchased certain real estate previously leased
and other assets from two partnerships, whose partners were shareholders of the
Company. The payment for the purchased real estate and other assets was $11,018
plus the assumption of a $1,114 mortgage. Since the transaction was with related
parties, the real estate was recorded at its depreciated cost. As a result, the
Company charged the elimination of the deferred rent liability on the leases and
the difference between the purchase price and the depreciated cost, which
together totaled $4,132, to shareholders' equity (deficit) as a deemed
distribution. In addition, the Company bought out certain lease commitments from
a related party partnership for $2,764. This lease buy-out was recorded as a
non-recurring charge in the 1996 consolidated statement of operations.
The Company had an agreement with a shareholder of the Company that required
payments of $60 per year for five years upon the death of the shareholder. The
present value of this benefit was
F-70
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
12. RELATED PARTY TRANSACTIONS: (CONTINUED)
recorded as a liability by the Company. In July 1996, the Company decided to
make monthly pension payments to the shareholder and terminated the previous
agreement. The pension payments are $8 per month until the later of the death of
the shareholder or his spouse. The $490 difference between the present value of
this benefit and the liability previously reported was recorded as a
non-recurring charge in the 1996 consolidated statement of operations.
The Company paid financial advisory fees to an investment banking firm of
which a director of the Company was a managing director. The fees were
approximately $800 in 1996 and $62 in 1997, respectively. In addition, the
investment banking firm received $1,800 from the underwriters on the 1997 Notes
and initial public offering and $310 from the placement agent on the 1998 Notes.
The Company paid real estate advisory fees to a firm of which a director of
the Company is the owner. The fees were approximately $88 in 1997 and $8 in
1998. There were no fees paid to the firm in 1996.
13. EMPLOYEE BENEFIT PLANS:
The Company maintains a discretionary profit sharing and a 401(k) plan for
substantially all full-time employees over the age of 20 1/2 and with more than
1,000 hours of service. Participants in the 401(k) plan may elect to defer a
specified percentage of their compensation on a pretax basis. The Company is
required to make matching contributions equal to 25% of the employee's
contribution up to a maximum of 2% of the employee's annual compensation.
Participants become vested in the Company's matching contribution over three to
seven years. The expense relating to these plans was $1,122, $892 and $1,209 for
the years ended December 31, 1996, 1997 and 1998, respectively.
14. ACQUISITIONS:
In 1996, the Company completed 12 acquisitions for an aggregate cash
purchase price of $62,165 (of which $14,000 was for one transaction in May 1996
and $13,500 was for another transaction in October 1996; all others were
individually less than $8,000).
In 1997, the Company completed 17 acquisitions, of which 15 were recorded
under the purchase method of accounting while the other two acquisitions were
accounted for as pooling of interests. The 15 acquisitions accounted for under
the purchase method had an aggregate purchase price of $109,098, consisting
primarily of $102,068 in net cash, 163,266 shares of Common stock with a deemed
value of $4,500 and $1,652 in Seller notes. For purposes of computing the
purchase price for accounting purposes, the value of the shares issued is
determined using a discount of 10% from the market value at the day of issuance
due to certain restrictions on the sale and transferability of shares issued.
The most significant of these acquisitions was one acquisition for $9,084 in
January 1997 and another for $62,000 in April 1997; all others were individually
less than $8,000.
During 1997, the Company also completed two mergers with records management
businesses by exchanging an aggregate of 165,355 shares of Common stock for the
stock of these entities. These mergers constituted tax free reorganizations and
have been accounted for as pooling of interests under Accounting Principles
Board Opinion No. 16. Prior periods have not been restated for the acquisitions
F-71
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
14. ACQUISITIONS: (CONTINUED)
due to the immateriality of the transactions, and the book value of net assets
acquired of $407 has been recorded as additional paid-in capital. The results of
operations for each acquisition have been included in the consolidated results
of the Company from their respective acquisition dates.
In 1998, the Company completed 16 acquisitions for an aggregate purchase
price of $204,070, consisting primarily of $186,486 in net cash, 548,262 shares
of Common Stock with a deemed value of $14,409 and $3,175 in Seller notes. The
most significant of these acquisitions was one transaction for $59,000 in
April 1998, another for $30,000 in May 1998 and a third for $52,000 in
July 1998, all others were individually less than $15,000. All of the
acquisitions in 1998 were recorded under the purchase method of accounting.
In addition to these payments, the acquisitions in 1996, 1997, and 1998
provided for non-compete obligations of $400, $60, and $40, respectively,
payable over one year. The non-compete obligations at December 31, 1996, 1997
and 1998 was $783, $347 and $166, respectively. The results of operations for
each of these acquisitions have been included in the consolidated results of the
Company from their respective acquisition dates. The excess of the fair value of
the assets and liabilities acquired has been allocated to goodwill ($43,062 in
1996, $91,047, in 1997 and $178,049 in 1998) and is being amortized over the
estimated benefit period of 30 years.
Subsequent to December 31, 1998, the Company completed three acquisitions of
records management businesses for an aggregate purchase price of approximately
$42,146, consisting of $23,402 in net cash and $18,744 in Seller notes. Certain
purchase agreements contain purchase price adjustments that could affect the net
cash paid for such acquisitions. The acquisitions were accounted for under the
purchase method of accounting. The $36,264 excess of the purchase price over the
underlying fair value of the assets and liabilities acquired has been allocated
to goodwill. The most significant of these acquisitions was Datavault, Limited,
a U.K. based records management company with operations in seven markets
throughout England and Scotland. This acquisition was primarily financed by
borrowings under the Company's recently amended credit facility (see Note 6).
A summary of the net cash paid for the purchase price of the completed
acquisitions is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998
---------- ----------
<S> <C> <C>
Fair value of assets acquired........................... $119,053 $230,343
Liabilities assumed..................................... (9,953) (27,967)
Seller notes issued..................................... (1,652) (3,175)
Fair value of Common stock issued....................... (4,907) (14,409)
Cash acquired........................................... (473) 1,694
-------- --------
Net cash paid....................................... $102,068 $186,486
======== ========
</TABLE>
F-72
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
14. ACQUISITIONS: (CONTINUED)
The following unaudited pro forma information shows the results of the
Company's operations for the years ended December 31, 1997 and 1998 as though
each of the completed acquisitions had occurred as of January 1, 1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998
---------- ----------
<S> <C> <C>
Total revenues.......................................... $286,108 $306,051
Net loss................................................ $(25,487) $(15,057)
Basic and diluted net loss per Common share............. $ (1.50) $ (0.88)
</TABLE>
The pro forma results have been prepared for comparative purposes only and
are not necessarily indicative of the actual results of operations had the
acquisitions taken place as of January 1, 1997, or the results that may occur in
the future. Furthermore, the pro forma results do not give effect to all cost
savings or incremental costs which may occur as a result of the integration and
consolidation of the acquired companies.
F-73
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
15. SEGMENT AND SUBSIDIARY INFORMATION (UNAUDITED):
The Company stores and services business records for clients throughout the
United States and Canada. The following information is a summary of the
operating results and financial position for the Company's U.S. and Canadian
operations:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
United States............................................. $114,049 $166,337 $235,649
Canada.................................................... $ 15,699 $ 17,180 $ 34,651
-------- -------- --------
Total..................................................... $129,748 $183,517 $270,300
EBITDA:
United States............................................. $ 28,454 $ 43,451 $ 70,194
Canada.................................................... $ 7,417 $ 8,056 $ 8,677
-------- -------- --------
Total..................................................... $ 35,871 $ 51,507 $ 78,871
Operating income (loss):
United States............................................. $ 16,986 $ 25,238 $ 41,917
Canada.................................................... $ 2,762 $ 2,287 $ (6,725)
-------- -------- --------
Total $ 19,748 $ 27,525 $ 35,192
Net income (loss):
United States............................................. $ (568) $(15,443) $ 2,928
Canada.................................................... $ 1,076 $ 246 $(13,918)
-------- -------- --------
Total..................................................... $ 508 $(15,197) $(10,990)
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Current assets:
United States............................................. $ 17,155 $ 28,602 $ 42,896
Canada.................................................... $ 3,226 $ 3,587 $ 9,066
-------- -------- --------
Total..................................................... $ 20,381 $ 32,189 $ 51,962
Total assets:
United States............................................. $203,941 $361,657 $542,378
Canada.................................................... $ 30,879 $ 33,056 $124,080
-------- -------- --------
Total..................................................... $234,820 $394,713 $666,458
Current liabilities:
United States............................................. $ 42,607 $ 43,077 $ 59,885
Canada.................................................... $ 1,707 $ 2,018 $ 8,224
-------- -------- --------
Total $ 44,314 $ 45,095 $ 68,109
Long-term liabilities:
United States............................................. $207,590 $264,643 $399,739
Canada.................................................... $ 8,354 $ 25,652 $135,515
-------- -------- --------
Total..................................................... $215,944 $290,295 $535,254
</TABLE>
F-74
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
15. SEGMENT AND SUBSIDIARY INFORMATION (UNAUDITED): (CONTINUED)
The summarized financial information of the Canadian subsidiaries has been
prepared from the books and records maintained by each subsidiary. The
summarized financial information may not necessarily be indicative of the
results of operations or financial position had the Canadian subsidiaries
operated as independent entities. Certain intercompany sales and charges, and
intercompany loans among the Company and its Canadian subsidiaries are included
in the subsidiaries' records and are eliminated in consolidation.
The Company's domestic, wholly-owned subsidiaries are Monarch Box, Inc. and
Advanced Box, Inc. These subsidiaries were established in 1997 to hold
investments and certain intangible assets of the Company. They do not have any
other operations.
There are no restrictions on the ability of any of the subsidiaries to
transfer funds to the Company in the form of loans, advances or dividends,
except as provided by applicable law.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information." This
statement establishes additional standards for segment reporting in the
financial statements and is effective for fiscal years beginning after
December 15, 1997. Management has determined that all of their operations have
similar economic characteristics and may be aggregated into a single segment for
disclosure under SFAS 131. Information concerning the geographic operations of
the Company as prescribed by SFAS 131 is provided above.
F-75
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
16. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data for 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
1997 QUARTER
-----------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Total Revenues...................................... $ 40,232 $ 46,208 $ 47,249 $ 49,828
Cost of sales, excluding depreciation and
amortization...................................... $ 22,298 $ 25,611 $ 25,943 $ 28,088
Operating income.................................... $ 6,776 $ 8,040 $ 6,780 $ 5,929
Income (loss) before extraordinary charge........... $ 64 $ (103) $ (7,870) $ (1,252)
Net income (loss)................................... $ 64 $ (103) $(13,906) $ (1,252)
Basic and diluted loss per Common share:
Income (loss) before extraordinary charge......... $ 0.01 $ (0.01) $ (0.49) $ (0.08)
Extraordinary charge.............................. $ -- $ -- $ (0.37) $ --
Net income (loss)................................. $ 0.01 $ (0.01) $ (0.86) $ (0.08)
</TABLE>
<TABLE>
<CAPTION>
1998 QUARTER
-----------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Total Revenues...................................... $ 56,290 $ 64,146 $ 74,597 $ 75,267
Cost of sales, excluding depreciation and
amortization...................................... $ 32,915 $ 36,279 $ 41,961 $ 43,280
Operating income.................................... $ 7,444 $ 6,710 $ 9,123 $ 11,915
Net loss............................................ $ (1,037) $ (4,457) $ (4,614) $ (882)
Basic and diluted loss per Common share............. $ (0.06) $ (0.27) $ (0.27) $ (0.05)
</TABLE>
In the third quarter of 1997, the Company incurred a non-recurring non-cash
compensation charge of $1,752 relating to the accelerated vesting of options as
a result of its initial public offering of Common stock (see Note 9).
F-76
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
IRON MOUNTAIN INCORPORATED
AND
PIERCE LEAHY CORP.
DATED AS OF
OCTOBER 20, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
ARTICLE THE MERGER.............................................................. A-1
1.
Section 1.1. The Merger............................................... A-1
Section 1.2. Action by Iron Mountain Stockholders and Pierce Leahy
Shareholders............................................. A-1
Section 1.3. Closing.................................................. A-2
Section 1.4. Effective Time........................................... A-2
Section 1.5. Effect of the Merger..................................... A-2
Section 1.6. Articles of Incorporation................................ A-2
Section 1.7. Bylaws................................................... A-2
Section 1.8. Directors and Officers................................... A-2
ARTICLE CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES...................... A-3
2.
Section 2.1. Conversion of Securities................................. A-3
Section 2.2. Exchange of Certificates................................. A-3
Section 2.3. Stock Transfer Books..................................... A-4
Section 2.4. Option Securities of Pierce Leahy........................ A-4
Section 2.5. Option Securities of Iron Mountain....................... A-4
ARTICLE REPRESENTATIONS AND WARRANTIES OF PIERCE LEAHY.......................... A-4
3.
Section 3.1. Organization and Business; Power and Authority; Effect of
Transaction.............................................. A-4
Section 3.2. SEC Filings; Financial Statements........................ A-6
Section 3.3. Changes in Condition..................................... A-7
Section 3.4. Liabilities.............................................. A-7
Section 3.5. Title to Properties; Leases.............................. A-8
Section 3.6. Compliance with Governmental Authorizations and
Applicable Law........................................... A-8
Section 3.7. Year 2000................................................ A-8
Section 3.8. Related Transactions..................................... A-9
Section 3.9. Tax Matters.............................................. A-9
Section 3.10. ERISA.................................................... A-10
Section 3.11. Authorized and Outstanding Capital Stock................. A-11
Section 3.12. Employment Arrangements.................................. A-12
Section 3.13. Material Agreements...................................... A-13
Section 3.14. Ordinary Course of Business.............................. A-13
Section 3.15. Broker or Finder......................................... A-14
Section 3.16. Environmental Matters.................................... A-14
Section 3.17. Board Action; Fairness Opinion........................... A-14
Section 3.18. Materiality.............................................. A-15
ARTICLE REPRESENTATIONS AND WARRANTIES OF IRON MOUNTAIN......................... A-15
4.
Section 4.1. Organization and Business; Power and Authority; Effect of
Transaction.............................................. A-15
Section 4.2. SEC Filings; Financial Statements........................ A-17
Section 4.3. Changes in Condition..................................... A-17
Section 4.4. Liabilities.............................................. A-18
Section 4.5. Title to Properties; Leases.............................. A-18
Section 4.6. Compliance with Governmental Authorizations and
Applicable Law........................................... A-18
Section 4.7. Year 2000................................................ A-19
</TABLE>
A-i
<PAGE>
<TABLE>
<S> <C> <C> <C>
Section 4.8. Related Transactions..................................... A-19
Section 4.9. Tax Matters.............................................. A-19
Section 4.10. ERISA.................................................... A-20
Section 4.11. Authorized and Outstanding Capital Stock................. A-21
Section 4.12. Employment Arrangements.................................. A-22
Section 4.13. Material Agreements...................................... A-23
Section 4.14. Ordinary Course of Business.............................. A-23
Section 4.15. Broker or Finder......................................... A-24
Section 4.16. Environmental Matters.................................... A-24
Section 4.17. Board Action; Fairness Opinion........................... A-25
Section 4.18. Materiality.............................................. A-25
ARTICLE ADDITIONAL COVENANTS.................................................... A-25
5.
Section 5.1. Access to Information; Confidentiality................... A-25
Section 5.2. Conduct of the Business of Pierce Leahy Pending the
Merger................................................... A-26
Section 5.3. Conduct of the Business of Iron Mountain Pending the
Merger................................................... A-27
Section 5.4. Control of Operations.................................... A-28
Section 5.5. Agreement to Cooperate................................... A-28
Section 5.6. Affiliate Agreements; Registration Rights Agreement...... A-30
Section 5.7. No Solicitation.......................................... A-30
Section 5.8. Directors' and Officers' Indemnification and Insurance... A-32
Section 5.9. Notification of Certain Matters.......................... A-33
Section 5.10. Public Announcements..................................... A-33
Section 5.11. Certain Actions Concerning Business Combinations......... A-33
Section 5.12. Option Securities........................................ A-34
Section 5.13. Tax Treatment............................................ A-34
Section 5.14. Registration Statement and Joint Proxy
Statement/Prospectus..................................... A-34
Section 5.15. Exchange Listing......................................... A-35
Section 5.16. Disclosure Schedules..................................... A-35
Section 5.17. Pierce Leahy Indebtedness................................ A-36
Section 5.18. Pierce Leahy Command Company............................. A-36
Section 5.19. Stock Dividend........................................... A-36
Section 5.20. Pierce Leahy Shareholders' Agreement..................... A-36
Section 5.21. Termination of Plans..................................... A-36
ARTICLE CLOSING CONDITIONS...................................................... A-37
6.
Section 6.1. Conditions to Obligations of Each Party to Effect the
Merger................................................... A-37
Section 6.2. Conditions to Obligations of Iron Mountain............... A-37
Section 6.3. Conditions to Obligations of Pierce Leahy................ A-38
ARTICLE TERMINATION, AMENDMENT AND WAIVER....................................... A-39
7.
Section 7.1. Termination.............................................. A-39
Section 7.2. Effect of Termination.................................... A-41
Section 7.3. Amendment................................................ A-41
Section 7.4. Waiver................................................... A-41
Section 7.5. Fees, Expenses and Other Payments........................ A-41
Section 7.6. Effect of Investigation.................................. A-42
ARTICLE GENERAL PROVISIONS...................................................... A-42
8.
Section 8.1. Nonsurvival of Representations and Warranties............ A-42
Section 8.2. Notices.................................................. A-42
Section 8.3. Headings................................................. A-43
Section 8.4. Severability............................................. A-43
</TABLE>
A-ii
<PAGE>
<TABLE>
<S> <C> <C> <C>
Section 8.5. Entire Agreement......................................... A-43
Section 8.6. Assignment............................................... A-43
Section 8.7. Parties in Interest...................................... A-43
Section 8.8. Governing Law............................................ A-43
Section 8.9. Enforcement of the Agreement............................. A-44
Section 8.10. Counterparts............................................. A-44
Section 8.11. Mutual Drafting.......................................... A-44
ARTICLE DEFINITIONS............................................................. A-44
9.
EXHIBITS
1.6 Form of Amended and Restated Articles of Incorporation
1.7 Form of Amended and Restated Bylaws
Form of Affiliate Agreement
5.6(a)
Form of Registration Rights Agreement Joinder
5.6(b)
Form of Employment Agreement
6.2(e)
SCHEDULES
Pierce Leahy Disclosure Schedule
Iron Mountain Disclosure Schedule
</TABLE>
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 20, 1999, by and between
Iron Mountain Incorporated, a Delaware corporation ("Iron Mountain"), and Pierce
Leahy Corp., a Pennsylvania corporation ("Pierce Leahy").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this Agreement
(this and other capitalized terms used herein are either defined in Article 9
below or in another Article of this Agreement and, in such case, Article 9
includes a reference to such Section), in accordance with the General
Corporation Law of the State of Delaware (the "DGCL") and the Pennsylvania
Business Corporation Law of 1988, as amended (the "PBCL"), Pierce Leahy and Iron
Mountain will carry out a business combination transaction pursuant to which
Iron Mountain will merge with and into Pierce Leahy (the "Merger");
WHEREAS, the Board of Directors of Pierce Leahy has unanimously determined
that the Merger and and the Transactions are in the best interests of Pierce
Leahy and the shareholders of Pierce Leahy (the "Pierce Leahy Shareholders") and
has approved and adopted this Agreement as a tax-free plan of reorganization
within the provisions of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), has approved this Agreement, the Merger and the
Transactions and has recommended approval and adoption of this Agreement, the
Merger and the Transactions by the Pierce Leahy Shareholders; and
WHEREAS, the Board of Directors of Iron Mountain has unanimously determined
that the Merger and the Transactions are advisable to and in the best interests
of, Iron Mountain and the stockholders of Iron Mountain (the "Iron Mountain
Stockholders") and has approved and adopted this Agreement as a tax-free plan of
reorganization within the provisions of Section 368(a) of the Code, has approved
this Agreement, the Merger and the Transactions and has recommended approval and
adoption of this Agreement, the Merger and the Transactions by the Iron Mountain
Stockholders.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto, intending to be legally bound, agree as follows:
ARTICLE 1.
THE MERGER
Section 1.1. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL and the PBCL, at the
Effective Time Iron Mountain shall be merged with and into Pierce Leahy. As a
result of the Merger, the separate existence of Iron Mountain shall cease and
Pierce Leahy shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
Section 1.2. ACTION BY IRON MOUNTAIN STOCKHOLDERS AND PIERCE LEAHY
SHAREHOLDERS.
(a) Pierce Leahy, acting through its Board of Directors, shall, in
accordance with and subject to Applicable Law, its Organic Documents and the
rules of the NYSE: as soon as practicable, duly call, give notice of,
convene and hold a special meeting of the Pierce Leahy Shareholders for the
purpose of adopting and approving this Agreement, the Merger and the
Transactions (including any adjournment thereof, the "Pierce Leahy Special
Meeting"); include in the Joint Proxy Statement/Prospectus the conclusion
and recommendation of the Board of Directors to the effect that the Board of
Directors, having determined that this Agreement, the Merger and the
Transactions are in the best interests of Pierce Leahy and the Pierce Leahy
Shareholders, has
A-1
<PAGE>
approved this Agreement, the Merger and the Transactions and recommends that
the Pierce Leahy Shareholders vote in favor of the approval and adoption of
this Agreement, the Merger and the Transactions; and use its reasonable best
efforts to obtain the necessary approval and adoption of this Agreement, the
Merger and the Transactions by the Pierce Leahy Shareholders.
(b) Iron Mountain, acting through its Board of Directors, shall, in
accordance with and subject to Applicable Law, its Organic Documents and the
rules of the NYSE: as soon as practicable, duly call, give notice of,
convene and hold a special meeting of the Iron Mountain Stockholders for the
purpose of adopting and approving this Agreement, the Merger and the
Transactions (including any adjournment thereof, the "Iron Mountain Special
Meeting" and, together with the Pierce Leahy Special Meeting, the "Special
Meetings"); include in the Joint Proxy Statement/Prospectus the conclusion
and recommendation of the Board of Directors to the effect that the Board of
Directors, having determined that this Agreement, the Merger and the
Transactions are advisable to and in the best interests of Iron Mountain and
the Iron Mountain Stockholders, has approved this Agreement, the Merger and
the Transactions and recommends that the Iron Mountain Stockholders vote in
favor of the approval and adoption of this Agreement, the Merger and the
Transactions; and use its reasonable best efforts to obtain the necessary
approval and adoption of this Agreement, the Merger and the Transactions by
the Iron Mountain Stockholders.
Section 1.3. CLOSING. Unless this Agreement shall have been terminated
pursuant to Section 7.1 hereof, the closing of the Merger (the "Closing") will
take place at 10:00 A.M., local time, on the fifth business day (the "Closing
Date") after the date on which the last of the conditions set forth in
Article 6 is satisfied or waived (other than conditions requiring deliveries at
the Closing), at the offices of Sullivan & Worcester LLP, One Post Office
Square, Boston, Massachusetts, unless another date, time or place is agreed to
in writing by Pierce Leahy and Iron Mountain; provided, however, that, without
the consent of Pierce Leahy and Iron Mountain, the Closing Date shall not be
earlier than January 15, 2000.
Section 1.4. EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in
Article 6 (but subject to Section 1.3 hereof), the Parties shall cause the
Merger to be consummated by filing a certificate of merger with the Secretary of
State of the State of Delaware and articles of merger with the Secretary of
State of the Commonwealth of Pennsylvania, and by making any related filings
required under the DGCL and the PBCL. The Merger shall become effective at such
time (but not prior to the Closing Date) as the later to occur of the due filing
of such certificate with the Secretary of State of the State of Delaware and the
due filing of such articles with the Secretary of State of the Commonwealth of
Pennsylvania, or at such later time on the Closing Date as is specified in such
certificate and articles (the "Effective Time").
Section 1.5. EFFECT OF THE MERGER. From and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties of
Pierce Leahy and Iron Mountain, and the Merger shall otherwise have the effect,
as provided under the DGCL and the PBCL.
Section 1.6. ARTICLES OF INCORPORATION. At the Effective Time, the
Articles of Incorporation of the Surviving Corporation shall be amended and
restated in their entirety to read as set forth in EXHIBIT 1.6 hereto and the
name of the Surviving Corporation shall be Iron Mountain Incorporated.
Section 1.7. BYLAWS. At the Effective Time, the Bylaws of the Surviving
Corporation shall be amended and restated in their entirety to read as set forth
in EXHIBIT 1.7 hereto.
Section 1.8. DIRECTORS AND OFFICERS. From and after the Effective Time,
until successors are duly elected or appointed and qualified (or their earlier
resignation or removal) in accordance with Applicable Law, the officers of Iron
Mountain shall be the officers of the Surviving Corporation
A-2
<PAGE>
(except that J. Peter Pierce shall be the President of the Surviving Corporation
and David S. Wendell shall be the Senior Vice President of the Surviving
Corporation). Pierce Leahy's Board of Directors shall take all necessary
corporate actions to increase the number of directors of the Surviving
Corporation to eleven (11) and shall nominate the directors of Iron Mountain
together with J. Peter Pierce and Howard D. Ross, subject to the approval of the
Pierce Leahy Shareholders at the Pierce Leahy Special Meeting, to serve at the
Effective Time as the members of the Board of Directors of the Surviving
Corporation. At the Effective Time, subject to the approval of the Pierce Leahy
Shareholders, Iron Mountain's Class A, B and C directors shall be Class II, III
and I directors, respectively, of the Surviving Corporation and J. Peter Pierce
shall be an additional Class III Director of the Surviving Corporation and
Howard D. Ross shall be an additional Class II Director of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation. At the Effective Time,
Leo W. Pierce, Sr. shall be appointed as the Chairman Emeritus of the Surviving
Corporation.
ARTICLE 2.
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.1. CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of Iron Mountain, Pierce Leahy or
the holders of any of the following securities:
(a) Each share of Common Stock, par value $.01 per share, of Pierce
Leahy (the "Pierce Leahy Common Stock") outstanding immediately prior to the
Effective Time shall remain outstanding.
(b) Each share of Series A Redeemable Senior Pay-in-Kind Preferred
Stock, par value $.01 per share, of Pierce Leahy (the "Pierce Leahy
Preferred Stock") outstanding immediately prior to the Effective Time shall
remain outstanding.
(c) Each share of Common Stock, par value $.01 per share, of Iron
Mountain (the "Iron Mountain Common Stock") outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into one fully paid and
nonassessable share of Pierce Leahy Common Stock. At the Effective Time, all
shares of Iron Mountain Common Stock shall no longer be outstanding and
shall automatically be cancelled and retired. Certificates previously
representing shares of Iron Mountain Common Stock outstanding immediately
prior to the Effective Time shall be deemed for all purposes to represent an
equivalent number of shares of Pierce Leahy Common Stock following the
Effective Time and shall be so accepted for such purposes by the Surviving
Corporation.
(d) Notwithstanding any provision to the contrary in this Section 2.1,
each share of Iron Mountain Common Stock held in the treasury of Iron
Mountain, each share of Iron Mountain Common Stock owned by Pierce Leahy or
any Subsidiary of Pierce Leahy, and each share of Pierce Leahy Common Stock
held by Iron Mountain or any Subsidiary of Iron Mountain immediately prior
to the Effective Time shall automatically be cancelled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto.
Section 2.2. EXCHANGE OF CERTIFICATES.
(a) To the extent the Parties or the Surviving Corporation deem it
necessary or appropriate to permit or facilitate transfers of the Common
Stock of the Surviving Corporation following the Effective Time, the Parties
shall use their reasonable best efforts to agree on customary exchange
procedures for certificates representing shares of Pierce Leahy Common Stock
or Iron Mountain Common Stock, as the need may be, to be exchanged for
certificates representing shares of common stock of the Surviving
Corporation. The Parties shall agree no later than twenty (20) days
A-3
<PAGE>
before the Closing Date on such exchange procedures and appoint an exchange
agent (the "Exchange Agent") to exchange certificates representing shares of
Pierce Leahy Common Stock or Iron Mountain Common Stock, as the need may be,
outstanding immediately prior to the Effective Time for new certificates
representing shares of common stock of the Surviving Corporation as soon as
practicable after the Effective Time.
(b) To the extent necessary, if an Exchange Agent has been so appointed,
as soon as reasonably practicable after the Effective Time, the Surviving
Corporation will instruct the Exchange Agent to issue (by mail to the most
recent address of such holder as shown on the Surviving Corporation's books
and records) to the holders of certificates to be exchanged (other than
shares to be canceled pursuant to Section 2.1(d)), a letter of transmittal
and instructions to effect the surrender of such certificates in exchange
for replacement certificates.
(c) None of Iron Mountain, Pierce Leahy, the Surviving Corporation or
the Exchange Agent shall be liable to any holder of shares of Pierce Leahy
Common Stock or Iron Mountain Common Stock for any shares of common stock of
the Surviving Corporation delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
Section 2.3. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of Iron Mountain shall be closed, and there shall be no further
registration of transfers of shares of Iron Mountain Common Stock thereafter on
the records of Iron Mountain. Shares of Iron Mountain Common Stock that have
been converted into shares of Pierce Leahy Common Stock pursuant to
Section 2.1(c) shall be deemed outstanding shares of Pierce Leahy Common Stock
on and after the Effective Time.
Section 2.4. OPTION SECURITIES OF PIERCE LEAHY. Each unexpired option to
purchase Pierce Leahy Common Stock ("Pierce Leahy Options") that is outstanding
at the Effective Time shall remain outstanding.
Section 2.5. OPTION SECURITIES OF IRON MOUNTAIN. Effective as of the
Effective Time, each then outstanding option to purchase Iron Mountain Common
Stock (the "Iron Mountain Options") granted pursuant to the Iron Mountain Option
Plans shall be converted automatically into an option to purchase such number of
shares of Pierce Leahy Common Stock equal to the number of shares of Iron
Mountain Common Stock subject to such Iron Mountain Option immediately prior to
the Effective Time and on other terms and conditions (including, without
limitation, exercise price) as were applicable under the applicable Iron
Mountain Option Plan and the underlying stock option agreement. At the Effective
Time, the Surviving Corporation shall assume each of the Iron Mountain Option
Plans and each underlying stock option agreement that relates to outstanding
Iron Mountain Options. The Surviving Corporation shall (i) reserve for issuance
the number of additional shares of Pierce Leahy Common Stock that will become
issuable upon the exercise of the Iron Mountain Options, as so converted, and
(ii) as soon as practicable after the Effective Time, have filed a Registration
Statement on Form S-8 to register the shares of Pierce Leahy Common Stock
subject to such Iron Mountain Options, as so converted.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF PIERCE LEAHY
Pierce Leahy hereby represents and warrants to Iron Mountain as follows:
Section 3.1. ORGANIZATION AND BUSINESS; POWER AND AUTHORITY; EFFECT OF
TRANSACTION.
(a) Pierce Leahy:
(i) is a corporation duly organized and subsisting under the laws of
the Commonwealth of Pennsylvania,
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(ii) has all requisite corporate power and corporate authority to own
or hold under lease its properties and to conduct its business, and has
in full force and effect all Governmental Authorizations and Private
Authorizations and has made all Governmental Filings, to the extent
required for such ownership and lease of its property and conduct of its
business, except to the extent the failure to be in full force and effect
or to have made such Governmental Filings would not, individually or in
the aggregate, reasonably be expected to have an Adverse Effect, and
(iii) is duly qualified and authorized to do business and is in good
standing as a foreign corporation in each jurisdiction in which the
character of its property or the nature of its business or operations
requires such qualification or authorization, except to the extent the
failure to so qualify or to maintain such authorizations would not
reasonably be expected to have an Adverse Effect.
(b) Pierce Leahy has all requisite corporate power and corporate
authority to execute and deliver, and to perform its obligations under, this
Agreement and each Collateral Document executed or required to be executed
by it pursuant hereto or thereto and to consummate the Merger and the
Transactions, and the execution, delivery and performance of this Agreement
and each Collateral Document executed or required to be executed by it
pursuant hereto or thereto have been duly authorized by all requisite
corporate action (other than that of the Pierce Leahy Shareholders). This
Agreement has been duly executed and delivered by Pierce Leahy and
constitutes, and each Collateral Document executed or required to be
executed by it pursuant hereto or thereto or to consummate the Merger and
the Transactions, when executed and delivered by Pierce Leahy or a Pierce
Leahy Shareholder will constitute, legal, valid and binding obligations of
Pierce Leahy or such Pierce Leahy Shareholder, enforceable in accordance
with their respective terms, except as such enforceability may be subject to
bankruptcy, moratorium, insolvency, reorganization, arrangement, voidable
preference, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and except as the same may be subject to
the effect of general principles of equity (the "Enforceability
Exceptions"). The affirmative vote of the holders of a majority of the
outstanding shares of Pierce Leahy Common Stock present or voting by proxy
at the Pierce Leahy Special Meeting at which a quorum is present is the only
vote of the holders of any class or series of the capital stock of Pierce
Leahy necessary to approve this Agreement, the Merger and the Transactions
under Applicable Law and Pierce Leahy's Organic Documents. The provisions of
Section 2538 and Sections 2551-2556 of the PBCL will not apply to this
Agreement, the Merger or the Transactions.
(c) Except as set forth in Section 3.1(c) of the Pierce Leahy Disclosure
Schedule (which in accordance with Section 5.16 hereof (other than those
sections relating to Applicable Law, Organic Documents and Material
Agreements, which sections shall be delivered herewith), will be delivered
within thirty (30) days after the date of this Agreement), neither the
execution and delivery of this Agreement or any Collateral Document executed
or required to be executed pursuant hereto or thereto, nor the consummation
of the Transactions, nor compliance with the terms, conditions and
provisions hereof or thereof by Pierce Leahy:
(i) will conflict with, or result in a breach or violation of, or
constitute a default under, any Applicable Law on the part of Pierce
Leahy or any Pierce Leahy Subsidiary or will conflict with, or result in
a breach or violation of, or constitute a default under, or permit the
acceleration of any obligation or liability in, or but for any
requirement of giving of notice or passage of time or both would
constitute such a conflict with, breach or violation of, or default
under, or permit any such acceleration in, any Organic Document or any
Contractual Obligation of Pierce Leahy or any Pierce Leahy Subsidiary,
other than any such conflict, breach, violation or default as would not,
individually or in the aggregate, reasonably be expected to have an
Adverse Effect;
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(ii) will result in or permit the creation or imposition of any Lien
upon any property now owned or leased by Pierce Leahy or any Pierce Leahy
Subsidiary, except for such Liens that, individually or in the aggregate,
would not reasonably be expected to have an Adverse Effect; or
(iii) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for the certificate and articles
of merger and related filings under the DGCL and the PBCL in connection
with the Merger and the Transactions and except pursuant to the HSR Act,
the Exchange Act, the Securities Act or any applicable state securities
laws, or as otherwise would not reasonably be expected to have an Adverse
Effect.
(d) Pierce Leahy does not have any Subsidiaries other than those set
forth on Section 3.1(d) of the Pierce Leahy Disclosure Schedule, each of
which is directly or indirectly wholly owned (except as set forth in
Section 3.1(d) of the Pierce Leahy Disclosure Schedule), is an Entity which
is duly organized, validly existing and in good standing under the laws of
the respective jurisdiction of organization set forth opposite its name on
Section 3.1(d) of the Pierce Leahy Disclosure Schedule, and is duly
qualified and in good standing in each other jurisdiction in which the
character of its property or the nature of its business or operations
requires such qualification or authorization (except to the extent the
failure to be duly organized, validly existing or in good standing or to so
qualify would not, individually or in the aggregate, reasonably be expected
to have an Adverse Effect), with full corporate or similar power and
corporate or similar authority to carry on the business in which it is
engaged. Except as set forth in Section 3.1(d) to the Pierce Leahy
Disclosure Schedule, each Pierce Leahy Subsidiary has in full force and
effect all Governmental Authorizations and Private Authorizations, and has
made all Governmental Filings to the extent required for such ownership and
lease of its property and conduct of its business, except to the extent the
failure to so have such Authorizations or made such Governmental Filings
would not, individually or in the aggregate, reasonably be expected to have
an Adverse Effect. Except to the extent set forth on Section 3.1(d) of the
Pierce Leahy Disclosure Schedule, Pierce Leahy owns, directly or indirectly
through other Pierce Leahy Subsidiaries, all of the outstanding capital
stock or other equity interests (as shown on Section 3.1(d) of the Pierce
Leahy Disclosure Schedule) of each Pierce Leahy Subsidiary, free and clear
of all Liens, and all such stock or other equity interests have been duly
authorized and validly issued and are fully paid and nonassessable and were
issued and sold in compliance with the Securities Act, the Exchange Act and
applicable state securities laws. Except as set forth in Section 3.1(d) of
the Pierce Leahy Disclosure Schedule, (i) there is neither outstanding nor
has any Pierce Leahy Subsidiary agreed to grant or issue any shares of its
capital stock or other equity interests or any Option Security or
Convertible Security, and (ii) no Pierce Leahy Subsidiary is a party to or
is bound by any agreement, put or commitment pursuant to which it is
obligated to purchase, redeem or otherwise acquire any shares of capital
stock or other equity interests or any Option Security or Convertible
Security.
(e) Pierce Leahy does not own any capital stock or equity or other
interest in any other Entity or enterprise, however organized and however
such interest may be denominated or evidenced, except as set forth in
Section 3.1(d) or 3.1(e) of the Pierce Leahy Disclosure Schedule.
Section 3.2. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Pierce Leahy has filed all forms, reports and documents required to
be filed by it with the SEC, and has heretofore made available to Iron
Mountain, in the form filed with the SEC (including any exhibits thereto),
(i) its Annual Report on Form 10-K for the fiscal year ended December 31,
1998, (ii) its Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1999 and June 30, 1999, (iii) its proxy statement relating to its
1999 meeting of shareholders, (iv) all of its registration statements that
are effective as of the date of this Agreement under which shares of Pierce
Leahy Common Stock are still available for issuance (a complete list of
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which is set forth in Section 3.2(a) of the Pierce Leahy Disclosure
Schedule), and (v) all other forms, reports and registration statements
filed by it with the SEC since January 1, 1999 (the forms, reports and other
documents referred to in clauses (i), through (v) above, together with all
other forms, reports and documents filed by Pierce Leahy with the SEC, being
referred to herein collectively as the "Pierce Leahy SEC Reports"). The
Pierce Leahy SEC Reports and any forms, reports and other documents filed by
Pierce Leahy with the SEC after the date of this Agreement, (x) complied
with or will comply in all material respects with the requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations thereunder and (y) did not at the time they were filed, or will
not at the time they are filed, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading; provided that no
representation or warranty is made with respect to any information provided
by Iron Mountain that is or will be included in any Pierce Leahy SEC Report.
None of Pierce Leahy's Subsidiaries is required to file any forms, reports
or other documents with the SEC pursuant to Section 12 or 15 of the Exchange
Act.
(b) Pierce Leahy's financial statements, including in each case the
notes thereto, contained in its Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 and its Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1999 and June 30, 1999 (the "Pierce Leahy Financial
Statements") (i) have been prepared from, and are in accordance with, the
books and records of Pierce Leahy and its consolidated Subsidiaries,
(ii) comply in all material respects with applicable accounting requirements
and with published rules and regulations of the SEC with respect thereto,
(iii) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, except as otherwise noted
therein, are true, correct and complete, and (iv) fairly present the
financial condition and results of operations and cash flows of Pierce Leahy
and its Subsidiaries, on the bases therein stated, as of the respective
dates thereof, and for the respective periods covered thereby subject, in
the case of unaudited financial statements to normal nonmaterial year-end
audit adjustments and accruals and to the absence of complete footnotes.
Section 3.3. CHANGES IN CONDITION. Since the date of the most recent
financial statements forming part of the Pierce Leahy Financial Statements,
except to the extent specifically described in Section 3.3 of the Pierce Leahy
Disclosure Schedule, there has been no Adverse Change in Pierce Leahy. To Pierce
Leahy's knowledge, there is no Event known to Pierce Leahy which Adversely
Affects, or would reasonably be expected to Adversely Affect, Pierce Leahy and
its Subsidiaries, taken as a whole, or the ability of Pierce Leahy to perform
any of the obligations set forth in this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or thereto.
Section 3.4. LIABILITIES. (i) At the date of the most recent balance sheet
forming part of the Pierce Leahy Financial Statements, neither Pierce Leahy nor
any Pierce Leahy Subsidiary had any obligations or liabilities, accrued or
unaccrued, fixed, absolute, contingent or other (including, without limitation,
any contingent payments or "earnouts" owing under any acquisition agreement),
except as disclosed in such balance sheet, or the notes thereto, and (ii) since
such date, neither Pierce Leahy nor any Pierce Leahy Subsidiary has incurred any
such obligations or liabilities, other than those incurred in the ordinary
course of business consistent with past practice of Pierce Leahy and Pierce
Leahy Subsidiaries, and other than obligations and liabilities which in the case
of clauses (i) and (ii) do not and, to Pierce Leahy's knowledge, would not,
individually or in the aggregate, reasonably be expected to Adversely Affect
Pierce Leahy, except to the extent set forth in Section 3.4 of the Pierce Leahy
Disclosure Schedule. Neither Pierce Leahy nor any Pierce Leahy Subsidiary has
guaranteed or is otherwise primarily or secondarily liable in respect of any
obligation or liability of any other Person (other than Pierce Leahy or a Pierce
Leahy Subsidiary), except for endorsements of negotiable instruments for deposit
in the ordinary course of business, consistent with prior practice, or as
disclosed in the most recent balance sheet, or the notes thereto, forming part
of the Pierce Leahy Financial Statements or in Section 3.4 of the Pierce Leahy
Disclosure Schedule.
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Section 3.5. TITLE TO PROPERTIES; LEASES. Except as would not reasonably
be expected to have an Adverse Effect on Pierce Leahy, each of Pierce Leahy and
its Subsidiaries has good legal, marketable and insurable title, with respect to
all real property owned (in fee simple), good title with respect to all real
property leased (in leasehold) reflected as an asset on the most recent balance
sheet forming part of the Pierce Leahy Financial Statements, or held by Pierce
Leahy or any such Subsidiary for use in its business, if not so reflected, and
good indefeasible and merchantable title to all other assets, tangible and
intangible, reflected on the most recent balance sheet forming part of the
Pierce Leahy Financial Statements, or (excluding leased real estate) held by
Pierce Leahy or any Pierce Leahy Subsidiary for use in its business if not so
reflected, or purported to have been acquired by Pierce Leahy or any Pierce
Leahy Subsidiary since such date, except inventory sold or depleted, or
property, plant and other equipment used up or retired, since such date, in each
case in the ordinary course of business consistent with the past practice of
Pierce Leahy and its Subsidiaries, free and clear of all Liens, except
(i) Liens reflected in the Pierce Leahy Financial Statements, (ii) Liens set
forth on Section 3.5(a) of the Pierce Leahy Disclosure Schedule,
(iii) Permitted Liens, and (iv) such Liens that do not or would not,
individually or in the aggregate, reasonably be expected to have an Adverse
Effect on Pierce Leahy. Each Lease or other occupancy or other agreement under
which Pierce Leahy or any Pierce Leahy Subsidiary holds real or personal
property has been duly authorized, executed and delivered by Pierce Leahy or a
Pierce Leahy Subsidiary, and, to Pierce Leahy's knowledge, by each of the other
parties thereto; each such Lease is a legal, valid and binding obligation of
Pierce Leahy or a Pierce Leahy Subsidiary, and, to Pierce Leahy's knowledge, of
each other party thereto, enforceable in accordance with its terms (subject to
the Enforceability Exceptions), except where the lack of such authorization,
execution or delivery or the lack of the legal, valid and binding nature of such
obligation would not reasonably be expected to have an Adverse Effect on Pierce
Leahy.
Section 3.6. COMPLIANCE WITH GOVERNMENTAL AUTHORIZATIONS AND APPLICABLE
LAW.
(a) Section 3.6(a) of the Pierce Leahy Disclosure Schedule contains a
description of all Legal Actions which are pending in which Pierce Leahy or any
Pierce Leahy Subsidiary is a party, or to which the businesses, operations or
properties of Pierce Leahy or any Pierce Leahy Subsidiary are subject or, to
Pierce Leahy's knowledge, which are threatened in writing against, Pierce Leahy
or any Pierce Leahy Subsidiary or any of their respective businesses, operations
or properties, which, individually or in the aggregate, if determined against
Pierce Leahy or any Pierce Leahy Subsidiary would reasonably be expected to have
an Adverse Effect on Pierce Leahy.
(b) Pierce Leahy and its Subsidiaries have obtained all Governmental
Authorizations which are necessary for the ownership or use of their respective
properties and the conduct of their respective businesses as now conducted by
Pierce Leahy or any Pierce Leahy Subsidiary and such Governmental Authorizations
are in full force and effect, except for such Governmental Authorizations which,
if not obtained and maintained in full force and effect, would singly or in the
aggregate, reasonably be expected to have an Adverse Effect on Pierce Leahy.
Neither Pierce Leahy nor any Pierce Leahy Subsidiary is in material breach or
violation of, or in default in the performance, observance or fulfillment of,
any Governmental Authorization or any Applicable Law, and no Event exists or has
occurred, which constitutes, or but for any requirement of giving of notice or
passage of time or both would constitute, such a breach, violation or default,
under any Governmental Authorization or any Applicable Law, except for such
breaches, violations or defaults as do not and, to Pierce Leahy's knowledge,
would not, individually or in the aggregate, reasonably be expected to have an
Adverse Effect on Pierce Leahy.
Section 3.7. YEAR 2000. Any inability of Pierce Leahy's and its
Subsidiaries' systems (including, without limitation, any Year 2000 Systems) to
properly recognize and process date sensitive information relating to the year
2000 will not have an Adverse Effect on Pierce Leahy.
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Section 3.8. RELATED TRANSACTIONS. Set forth in the Pierce Leahy SEC
Reports or on Section 3.8 of the Pierce Leahy Disclosure Schedule is a true,
correct and complete (in all material respects) description of any Contractual
Obligation or transaction, whether now existing or existing during the period
covered by the most recent audited Pierce Leahy Financial Statements, between
Pierce Leahy or any Pierce Leahy Subsidiary and any Affiliate thereof or any
party to the Pierce Leahy Shareholders' Agreement that is required to be
disclosed pursuant to Item 404 of Regulation S-K, promulgated by the SEC.
Section 3.9. TAX MATTERS.
(a) Each of Pierce Leahy and each Pierce Leahy Subsidiary has in accordance
with all Applicable Laws duly and timely filed all Tax Returns which are
required to be filed, and has paid, or made adequate provision for the payment
of, all Taxes shown on such Tax Returns which have or may become due and payable
pursuant to said Returns and all other governmental charges and assessments
received to date, other than any failure to file Tax Returns or pay Taxes that
would not, individually or in the aggregate, reasonably be expected to have an
Adverse Effect on Pierce Leahy. Except as would not, individually or in the
aggregate, be reasonably expected to have an Adverse Effect on Pierce Leahy,
(i) the Tax Returns of Pierce Leahy and each Pierce Leahy Subsidiary have been
prepared in accordance with all Applicable Laws and generally accepted
principles applicable to taxation consistently applied; (ii) all Taxes which
Pierce Leahy and each Pierce Leahy Subsidiary are required by law to withhold
and collect have been duly withheld and collected, and have been paid over, in a
timely manner, to the proper Authorities to the extent due and payable; and
(iii) neither Pierce Leahy nor any Pierce Leahy Subsidiary has executed any
waiver to extend, or otherwise taken or failed to take any action that would
have the effect of extending, the applicable statute of limitations in respect
of any Tax liabilities of Pierce Leahy or any Pierce Leahy Subsidiary for the
fiscal years prior to and including the most recent fiscal year. Neither Pierce
Leahy nor any Pierce Leahy Subsidiary is a "consenting corporation" within the
meaning of Section 341(f) of the Code. Each of Pierce Leahy and each Pierce
Leahy Subsidiary has at all times been taxable as a Subchapter C corporation
under the Code, except as otherwise set forth in Section 3.9(a) of the Pierce
Leahy Disclosure Schedule. Neither Pierce Leahy nor any Pierce Leahy Subsidiary
has ever been a member of any consolidated group (other than exclusively with
Pierce Leahy and its Subsidiaries) for Tax purposes, except as set forth in
Section 3.9(a) of the Pierce Leahy Disclosure Schedule.
(b) From the end of its most recent fiscal year to the date of this
Agreement, neither Pierce Leahy nor any Pierce Leahy Subsidiary has made any
payment on account of any Taxes except regular payments required in the ordinary
course of business, consistent with prior practice, with respect to current
operations or property presently owned.
(c) The information shown on the Federal and foreign income Tax Returns of
Pierce Leahy and its Subsidiaries is true, correct and complete in all material
respects and fairly and accurately reflects the information purported to be
shown. Federal and state income Tax Returns of Pierce Leahy and its non-foreign
Subsidiaries have been examined by the Internal Revenue Service or applicable
state Authority through the taxable periods set forth in Section 3.9(c) of the
Pierce Leahy Disclosure Schedule, and neither Pierce Leahy nor any Pierce Leahy
Subsidiary has been notified in writing regarding any pending examination,
except as shown in Section 3.9(c) of the Pierce Leahy Disclosure Schedule.
(d) Neither Pierce Leahy nor any Pierce Leahy Subsidiary is a party to any
tax sharing agreement or arrangement.
(e) Neither Pierce Leahy nor any Pierce Leahy Subsidiary is, and since the
date of its incorporation has not been, a "United States real property holding
corporation" as defined in Section 897 of the Code.
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Section 3.10. ERISA.
(a) Neither Pierce Leahy nor any Pierce Leahy Subsidiary (which for
purposes of this Section 3.10 shall include any ERISA Affiliate with respect to
any Plan subject to Title IV of ERISA) contributes to any Plan or sponsors any
Plan or Benefit Arrangement or, within the past five years, has contributed to
or sponsored any Plan intended to comply with Section 401 of the Code, except as
set forth in Section 3.10(a) of the Pierce Leahy Disclosure Schedule. As to all
Plans and Benefit Arrangements listed in Section 3.10(a) of the Pierce Leahy
Disclosure Schedule, and except as disclosed in such Section 3.10(a) of the
Pierce Leahy Disclosure Schedule:
(i) all such Plans and Benefit Arrangements substantially comply and
have been administered in all material respects in form and in operation
with all Applicable Laws, all required returns (including without limitation
information returns) have been prepared in all material respects in
accordance with all Applicable Laws and have been timely filed with any
Authority with respect to any such Plan or Benefit Arrangement, and neither
Pierce Leahy nor any Pierce Leahy Subsidiary has received any outstanding
written notice from any Authority questioning or challenging such
compliance;
(ii) all such Plans maintained or previously maintained by Pierce Leahy
or any Pierce Leahy Subsidiary that are or were intended to comply with
Section 401 of the Code comply and complied in all material respects in form
and in operation with all applicable requirements of such Section, a
favorable determination letter has been received from the Internal Revenue
Service with respect to each such Plan or the sponsor of the Plan is
entitled to rely on a favorable opinion letter issued to the prototype
sponsor by the Internal Revenue Service with respect to each such Plan or an
application for a favorable determination letter is pending with the
Internal Revenue Service, and no event has occurred which will or would
reasonably be expected to give rise to disqualification of any such Plan
under such Section or to a tax under Section 511 of the Code;
(iii) none of the assets of any such Plan are invested in employer
securities or employer real property;
(iv) neither Pierce Leahy nor any of its Subsidiaries has engaged in any
non-exempt prohibited transactions (as described in Section 406 of ERISA or
Section 4975 of the Code) with respect to any such Plan;
(v) there have been no acts or omissions by Pierce Leahy or any Pierce
Leahy Subsidiary which have given rise to or would reasonably be expected to
give rise to material fines, penalties, taxes or related charges under
Sections 502(c), 502(i) or 4071 of ERISA or Chapter 43 of the Code for which
Pierce Leahy or any Pierce Leahy Subsidiary may be liable;
(vi) there are no material Claims (other than routine claims for
benefits) pending or, to Pierce Leahy's knowledge, threatened in writing
involving such Plans or the assets of such Plans, except as set forth on
Section 3.10(a)(vi) of the Pierce Leahy Disclosure Schedule;
(vii) no such Plan is subject to Title IV of ERISA, or if subject,
there have been no "reportable events" (as described in Section 4043 of
ERISA) as to which there is any material risk of termination of such Plan,
and no steps have been taken to terminate any such Plan;
(viii) neither Pierce Leahy nor, to Pierce Leahy's knowledge, any Pierce
Leahy Subsidiary nor any of their respective directors, officers, employees
or any other fiduciary has committed any material breach of fiduciary
responsibility imposed by ERISA that would subject Pierce Leahy or any
Pierce Leahy Subsidiary or any of their respective directors, officers or
employees to liability under ERISA;
(ix) no such Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA or Section 412 of the Code had an accumulated funding deficiency (as
defined in Section 302 of ERISA and
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Section 412 of the Code), whether or not waived, as of the last day of the
most recently completed fiscal year of such Plan;
(x) no material liability to the PBGC has been or is expected by Pierce
Leahy or any Pierce Leahy Subsidiary to be incurred by Pierce Leahy or any
Pierce Leahy Subsidiary with respect to any such Plan, and there has been no
event or condition which presents a material risk of termination of any such
Plan by the PBGC; and
(xi) except as set forth in Section 3.10(a)(xi) of the Pierce Leahy
Disclosure Schedule (which entry, if applicable, shall indicate the present
value of accumulated plan liabilities calculated in a manner consistent with
FAS 106 and actual annual expense for such benefits for each of the last two
(2) years) or pursuant to the provisions of COBRA, which provisions have
been complied with in all material respects, neither Pierce Leahy nor any
Pierce Leahy Subsidiary maintains any Plan that provides benefits described
in Section 3(1) of ERISA to any former employees or retirees of Pierce Leahy
or any of its Subsidiaries.
(b) Except as disclosed in Section 3.10(b) of the Pierce Leahy Disclosure
Schedule, neither Pierce Leahy nor any Pierce Leahy Subsidiary is or ever has
been a party to any Multiemployer Plan or made contributions to any such plan.
Section 3.11. AUTHORIZED AND OUTSTANDING CAPITAL STOCK.
(a) As of September 30, 1999, the authorized and outstanding capital stock
of Pierce Leahy was as set forth in Section 3.11(a) of the Pierce Leahy
Disclosure Schedule. All of such outstanding capital stock has been duly
authorized and validly issued, is fully paid and nonassessable and is not
subject to any preemptive or similar rights. From September 30, 1999 through the
date of this Agreement, Pierce Leahy has not issued any shares of capital stock
other than issuances of Pierce Leahy Common Stock in accordance with the
exercise of Pierce Leahy Options or under Pierce Leahy's 401(k) Plan in
accordance with past practice. Shares of Pierce Leahy Common Stock issued and
outstanding on the record date for the Pierce Leahy Special Meeting will be the
only class of capital stock eligible to vote on this Agreement, the Merger and
the Transactions. Except as set forth in Section 3.11(a) or 3.1(d) of the Pierce
Leahy Disclosure Schedule, (i) there is neither outstanding nor has Pierce Leahy
or any Pierce Leahy Subsidiary agreed to grant or issue any shares of its
capital stock, other equity interests, any Option Security, Convertible Security
or Voting Debt, and (ii) neither Pierce Leahy nor any Pierce Leahy Subsidiary is
a party to and neither Pierce Leahy nor any Pierce Leahy Subsidiary is bound by
any Contractual Obligation, put or commitment pursuant to which it is obligated
to purchase, redeem or otherwise acquire any shares of capital stock, other
equity interests, any Option Security, Convertible Security or Voting Debt.
Neither Pierce Leahy nor any Pierce Leahy Subsidiary has any bonds, debentures,
notes or other Indebtedness having general voting rights or convertible into
instruments having general voting rights ("Voting Debt") outstanding. Between
the date of this Agreement and the Closing, except as set forth in
Section 3.11(a) of the Pierce Leahy Disclosure Schedule, neither Pierce Leahy
nor any of its Subsidiaries will issue, sell or purchase or agree to issue, sell
or purchase any capital stock, other equity interests, any Option Security,
Convertible Security or Voting Debt of Pierce Leahy or any of its Subsidiaries,
except to the extent required or permitted pursuant to the terms hereof. All of
the issued and outstanding shares of Pierce Leahy's capital stock and each
Option Security or Convertible Security of Pierce Leahy were issued and sold or
granted in compliance with the Securities Act and applicable state securities
laws.
(b) As of September 30, 1999, (i) Option Securities to acquire 288,500
shares of Pierce Leahy Common Stock were outstanding under Pierce Leahy's 1997
Stock Option Plan (the "Pierce Leahy 1997 Option Plan"), including in such
number Option Securities which were then exercisable to acquire 29,003 shares of
Pierce Leahy Common Stock; (ii) Option Securities to acquire 1,047,746 shares of
Pierce Leahy Common Stock were outstanding under Pierce Leahy's Nonqualified
Stock Option Plan
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(the "Pierce Leahy Nonqualified Option Plan" and, together with the 1997 Option
Plan, the "Pierce Leahy Option Plans"), including in such number Option
Securities which were then exercisable to acquire 802,400 shares of Pierce Leahy
Common Stock; and (iii) 1,211,000 shares of Pierce Leahy Common Stock were
reserved for future issuance pursuant to Option Securities which may be granted
under the Pierce Leahy Option Plans. From September 30, 1999 through the date of
this Agreement, neither Pierce Leahy nor any of its Subsidiaries has issued any
Option Securities. The Pierce Leahy Option Plans constitute the only plans or
arrangements pursuant to which Option Securities or Convertible Securities to
acquire shares of capital stock of Pierce Leahy or any of its Subsidiaries are
currently outstanding. Other than as set forth in Section 3.11(b) of the Pierce
Leahy Disclosure Schedule, neither the execution and delivery of this Agreement
nor the consummation of the Merger or the Transactions are events which will
cause an acceleration of the exercise or vesting schedule of any such Option
Security or Convertible Security. All shares of Pierce Leahy capital stock
subject to issuance under an Option Security or Convertible Security of Pierce
Leahy or any of its Subsidiaries will be, upon issuance on the terms and
conditions specified in such Option Security or Convertible Security, validly
issued, fully paid and nonassessable.
(c) There are no voting trusts or other arrangements to which Pierce Leahy
or any Pierce Leahy Subsidiary is a party with respect to the voting of capital
stock of Pierce Leahy or any Pierce Leahy Subsidiary, except as set forth in
Section 3.11(c) of the Pierce Leahy Disclosure Schedule.
(d) At the Effective Time and at the time of issuance, the shares of Pierce
Leahy Common Stock issued pursuant to the Merger will be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive (or
similar) rights. All shares of Pierce Leahy Common Stock subject to issuance
pursuant to converted Iron Mountain Options will be, upon issuance on the terms
and conditions specified in the applicable Iron Mountain Option, validly issued,
fully paid and nonassessable. As a result of an election duly and validly
authorized, Pierce Leahy is not subject to Subchapter E (Sections 2541-2548),
Subchapter G (Sections 2561-2568) and Subchapter H (Sections 2571-2578) of the
PBCL.
Section 3.12. EMPLOYMENT ARRANGEMENTS.
(a) Neither Pierce Leahy nor any Pierce Leahy Subsidiary is now or during
the past three (3) years (at the time it was a Subsidiary of Pierce Leahy) has
been subject to or involved in or, to Pierce Leahy's knowledge, threatened in
writing with any union elections, petitions therefor or other organizational or
recruiting activities, except as described in Section 3.12(a) of the Pierce
Leahy Disclosure Schedule. Except as set forth in Section 3.12(a) of the Pierce
Leahy Disclosure Schedule, none of the employees of Pierce Leahy and its
Subsidiaries are now, or during the past three (3) years (at the time it was a
Subsidiary of Pierce Leahy) have been, represented by any labor union or other
employee collective bargaining organization or are parties to any labor or other
collective bargaining agreement, and there are no pending grievances, disputes
or controversies with any union or any other employee collective bargaining
organization of such employees, or, to Pierce Leahy's knowledge, threats in
writing of strikes, work stoppages or slowdowns or any pending demands for
collective bargaining by any union or other such organization or by any other
employees, except as would not, individually or in the aggregate, reasonably be
expected to have an Adverse Effect on Pierce Leahy.
(b) Except as set forth in Section 3.12(b) of the Pierce Leahy Disclosure
Schedule, no employee of Pierce Leahy or any Pierce Leahy Subsidiary will accrue
or receive or is entitled to accrue or receive additional benefits, service or
accelerated rights to payments of benefits, including the right to receive any
parachute payment, as defined in Section 280G of the Code, or become entitled to
severance, termination allowance or similar payments as a result of this
Agreement, the Merger or the Transactions.
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Section 3.13. MATERIAL AGREEMENTS. To Pierce Leahy's knowledge, listed on
Section 3.13 of the Pierce Leahy Disclosure Schedule are all Material Agreements
to which Pierce Leahy or any Pierce Leahy Subsidiary is a party or to which it
or any of its property is subject or bound. True, complete and correct copies of
each of the Material Agreements have been furnished by Pierce Leahy to Iron
Mountain. All of the Material Agreements are valid, binding and legally
enforceable obligations of Pierce Leahy and, to Pierce Leahy's knowledge, the
other parties thereto (subject to the Enforceability Exceptions), except where
the lack of enforceability would not, individually or in the aggregate,
reasonably be expected to have an Adverse Effect on Pierce Leahy. Except as set
forth in Section 3.13 of the Pierce Leahy Disclosure Schedule, Pierce Leahy and
each Pierce Leahy Subsidiary have duly complied in all material respects with
all of the terms and conditions of each Material Agreement and have not done or
performed, or failed to do or perform (and there is no pending or, to the
knowledge of Pierce Leahy, threatened (in writing) Claim that Pierce Leahy or
any Pierce Leahy Subsidiary has not so complied, done and performed or failed to
do and perform) any act the effect of which would be to invalidate or provide
grounds for the other party thereto to terminate (with or without notice,
passage of time or both) such Material Agreement or impair the rights or
benefits, or increase the costs, of Pierce Leahy or any Pierce Leahy Subsidiary,
under any of the Material Agreements, except as would not reasonably be expected
to have, individually or in the aggregate, an Adverse Effect on Pierce Leahy.
Except as set forth in Section 3.13 of the Pierce Leahy Disclosure Schedule,
neither the execution and delivery of this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or thereto, nor the
consummation of the Transactions, nor compliance with the terms, conditions and
provisions hereof or thereof by Pierce Leahy will conflict with, or result in a
breach or violation of, or constitute a default under, or permit the
acceleration of any obligation or liability in, or but for any requirement of
giving of notice or passage of time or both would constitute such a conflict
with, breach or violation of, or default under, or permit any such acceleration
in, any Material Agreement.
Section 3.14. ORDINARY COURSE OF BUSINESS. Except as set forth in
Section 3.14 of the Pierce Leahy Disclosure Schedule or disclosed in the Pierce
Leahy SEC Reports, since the date of the most recent audited Pierce Leahy
Financial Statements included in the Pierce Leahy SEC Reports through the date
of this Agreement, Pierce Leahy and its Subsidiaries have operated their
respective businesses only in the ordinary and usual course and in substantially
the same manner as previously conducted and there has not been:
(i) any damage, destruction or loss with respect to the properties or
assets of Pierce Leahy or its Subsidiaries whether covered by insurance or
not, which has had or would reasonably be expected to have, individually or
in the aggregate, an Adverse Effect with respect to Pierce Leahy;
(ii) any other change, occurrence or circumstance that had or would
reasonably be expected to have an Adverse Effect with respect to Pierce
Leahy;
(iii) any change to any accounting methods used by Pierce Leahy, unless
required in accordance with GAAP;
(iv) any declaration or payment of any Distributions in respect of the
outstanding shares of capital stock of Pierce Leahy or any of its
Subsidiaries (other than dividends declared or paid by wholly-owned
Subsidiaries or Distributions on the Pierce Leahy Preferred Stock in
accordance with its terms);
(v) any split, combination or reclassification of Pierce Leahy's capital
stock or any issuance of shares of capital stock of Pierce Leahy or any
Pierce Leahy Subsidiary or any other change in the authorized capitalization
of Pierce Leahy or any Pierce Leahy Subsidiary, except as contemplated or
permitted by this Agreement or pursuant to employee benefit plans, programs
or arrangements in existence on the date of this Agreement;
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(vi) any repurchase or redemption by Pierce Leahy of shares of its
capital stock or any issuance by Pierce Leahy of any other securities in
exchange or in substitution for shares of its capital stock except pursuant
to employee benefit plans, programs or arrangements in existence on the date
of this Agreement, in the ordinary course of business consistent with past
practice;
(vii) any grant or award of any Option Securities or Convertible
Securities or other rights to acquire any shares of capital stock or other
equity interests of Pierce Leahy or any Subsidiary, except as contemplated
or permitted by this Agreement or except pursuant to employee benefit plans,
programs or arrangements in existence on the date of this Agreement, in the
ordinary course of business consistent with past practice; or
(viii) any sale or other disposal of, or any contract to sell or
otherwise dispose of, any of its properties or assets, other than in the
ordinary course of business.
Section 3.15. BROKER OR FINDER. Except as set forth on Section 3.15 of the
Pierce Leahy Disclosure Schedule, no Person assisted in or brought about the
negotiation of this Agreement, the Merger or the subject matter of the
Transactions in the capacity of broker, agent or finder or in any similar
capacity on behalf of Pierce Leahy or is entitled to any brokerage, finder's or
other fee or commission from Pierce Leahy in connection with the Transactions.
Pierce Leahy has heretofore furnished to Iron Mountain a complete and correct
copy of all agreements between Pierce Leahy and the Persons set forth on
Section 3.15 of the Pierce Leahy Disclosure Schedule pursuant to which such
Person would be entitled to payment relating to the Transactions.
Section 3.16. ENVIRONMENTAL MATTERS.
(a) Except as set forth in Section 3.16(a) of the Pierce Leahy Disclosure
Schedule, Pierce Leahy and its Subsidiaries have complied with all applicable
Environmental Laws except where the failure to comply would not be reasonably
expected to have an Adverse Effect on Pierce Leahy. There is no pending or, to
Pierce Leahy's knowledge, threatened (in writing), civil or criminal Legal
Actions, written notice of violation, formal administrative proceeding or
investigation, inquiry or information request by any Authority relating to any
Environmental Law involving Pierce Leahy or any of its Subsidiaries or any of
their properties, which would, individually or in the aggregate, not reasonably
be expected to have an Adverse Effect on Pierce Leahy.
(b) Except as set forth in Section 3.16(b) of the Pierce Leahy Disclosure
Schedule, there have been no releases of any Hazardous Materials into the
environment by Pierce Leahy or any of its Subsidiaries, or, to Pierce Leahy's
knowledge, by any other party at any parcel of real property or any facility
formerly or currently owned, operated or controlled by Pierce Leahy or any of
its Subsidiaries which would reasonably be expected to have an Adverse Effect on
Pierce Leahy.
(c) Section 3.16(c) of the Pierce Leahy Disclosure Schedule (which in
accordance with Section 5.16 hereof, will be delivered within thirty (30) days
after the date of this Agreement) sets forth all site assessments, audits or
other investigations that have been conducted by or on behalf of Pierce Leahy or
any Pierce Leahy Subsidiary within the last three (3) years as to environmental
matters at any property owned, leased, operated or occupied by Pierce Leahy or
any Pierce Leahy Subsidiary.
Section 3.17. BOARD ACTION; FAIRNESS OPINION.
(a) The Board of Directors of Pierce Leahy at a meeting duly called and
held, has by unanimous vote of those directors present (who constituted 100% of
the directors then in office) (i) determined that this Agreement and the
Transactions, including the Merger, are in the best interests of the Pierce
Leahy Shareholders and has approved the same, (ii) resolved to recommend that
the holders of the shares of Pierce Leahy Common Stock adopt this Agreement and
the Transactions, including the Merger and (iii) nominated and recommended for
election to the Pierce Leahy Stockholders the individuals who will serve as
members of the Board of Directors of the Surviving Corporation at the Effective
Time.
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(b) Pierce Leahy has received the opinion of First Union Securities, Inc.,
dated as of October 20, 1999, to the effect that, as of the date thereof, the
consideration to be received in the Merger by the shareholders of Pierce Leahy
is fair, from a financial point of view, to such shareholders. A signed, true
and complete copy of such opinion has been delivered to Iron Mountain or will be
promptly delivered to Iron Mountain by Pierce Leahy.
Section 3.18. MATERIALITY. The matters and items excluded from the
representations and warranties set forth in this Article by operation of the
materiality exceptions and materiality qualifications contained in such
representations and warranties, in the aggregate for all such excluded matters
and items, are not and would not reasonably be expected to be Adverse to Pierce
Leahy.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF IRON MOUNTAIN
Iron Mountain hereby represents and warrants to Pierce Leahy as follows:
Section 4.1. ORGANIZATION AND BUSINESS; POWER AND AUTHORITY; EFFECT OF
TRANSACTION.
(a) Iron Mountain:
(1) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware,
(ii) has all requisite corporate power and corporate authority to own or
hold under lease its properties and to conduct its business, and has in full
force and effect all Governmental Authorizations and Private Authorizations
and has made all Governmental Filings, to the extent required for such
ownership and lease of its property and conduct of its business, except to
the extent the failure to be in full force and effect or to have made such
Governmental Filings would not, individually or in the aggregate, reasonably
be expected to have an Adverse Effect, and
(iii) is duly qualified and authorized to do business and is in good
standing as a foreign corporation in each jurisdiction in which the
character of its property or the nature of its business or operations
requires such qualification or authorization, except to the extent the
failure to so qualify or to maintain such authorizations would not
reasonably be expected to have an Adverse Effect.
(b) Iron Mountain has all requisite corporate power and corporate authority
to execute and deliver, and to perform its obligations under, this Agreement and
each Collateral Document executed or required to be executed by it pursuant
hereto or thereto and to consummate the Merger and the Transactions, and the
execution, delivery and performance of this Agreement and each Collateral
Document executed or required to be executed by it pursuant hereto or thereto
have been duly authorized by all requisite corporate action (other than that of
the Iron Mountain Stockholders). This Agreement has been duly executed and
delivered by Iron Mountain and constitutes, and each Collateral Document
executed or required to be executed by it pursuant hereto or thereto or to
consummate the Merger and the Transactions, when executed and delivered by Iron
Mountain or an Iron Mountain Stockholder will constitute, legal, valid and
binding obligations of Iron Mountain or such Iron Mountain Stockholder,
enforceable in accordance with their respective terms, except as such
enforceability may be subject to the Enforceability Exceptions. The affirmative
vote of the holders of a majority of the outstanding shares of Iron Mountain
Common Stock is the only vote of the holders of any class or series of the
capital stock of Iron Mountain necessary to approve this Agreement, the Merger
and the Transactions under Applicable Law and Iron Mountain's Organic Documents.
The provisions of Section 203 of the DGCL will not apply to this Agreement, the
Merger or the Transactions.
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(c) Except as set forth in Section 4.1(c) of the Iron Mountain Disclosure
Schedule (which in accordance with Section 5.16 hereof (other than those
sections relating to Applicable Law, Organic Documents and Material Agreements,
which sections shall be delivered herewith), will be delivered within thirty
(30) days after the date of this Agreement), neither the execution and delivery
of this Agreement or any Collateral Document executed or required to be executed
pursuant hereto or thereto, nor the consummation of the Transactions, nor
compliance with the terms, conditions and provisions hereof or thereof by Iron
Mountain:
(i) will conflict with, or result in a breach or violation of, or
constitute a default under, any Applicable Law on the part of Iron Mountain
or any Iron Mountain Subsidiary or will conflict with, or result in a breach
or violation of, or constitute a default under, or permit the acceleration
of any obligation or liability in, or but for any requirement of giving of
notice or passage of time or both would constitute such a conflict with,
breach or violation of, or default under, or permit any such acceleration
in, any Organic Document or any Contractual Obligation of Iron Mountain or
any Iron Mountain Subsidiary, other than any such conflict, breach,
violation or default as would not, individually or in the aggregate,
reasonably be expected to have an Adverse Effect,
(ii) will result in or permit the creation or imposition of any Lien
upon any property now owned or leased by Iron Mountain or any Iron Mountain
Subsidiary, except for such Liens that, individually or in the aggregate,
would not reasonably be expected to have an Adverse Effect,
(iii) will require any Governmental Authorization or Governmental Filing
or Private Authorization, except for the certificate and articles of merger
and related filings under the DGCL and the PBCL in connection with the
Merger and the Transactions and except pursuant to the HSR Act, the Exchange
Act, the Securities Act or any applicable state securities laws, or as
otherwise would not reasonably be expected to have an Adverse Effect.
(d) Iron Mountain does not have any Subsidiaries other than those set forth
on Section 4.1(d) of the Iron Mountain Disclosure Schedule, each of which is
directly or indirectly wholly owned (except as set forth in Section 4.1(d) of
the Iron Mountain Disclosure Schedule), is an Entity which is duly organized,
validly existing and in good standing under the laws of the respective
jurisdiction of organization set forth opposite its name on Section 4.1(d) of
the Iron Mountain Disclosure Schedule, and is duly qualified and in good
standing in each other jurisdiction in which the character of its property or
the nature of its business or operations requires such qualification or
authorization (except to the extent the failure to be duly organized, validly
existing or in good standing or to so qualify would not, individually or in the
aggregate, reasonably be expected to have an Adverse Effect), with full
corporate or similar power and corporate or similar authority to carry on the
business in which it is engaged. Except as set forth in Section 4.1(d) to the
Iron Mountain Disclosure Schedule, each Iron Mountain Subsidiary has in full
force and effect all Governmental Authorizations and Private Authorizations, and
has made all Governmental Filings to the extent required for such ownership and
lease of its property and conduct of its business, except to the extent the
failure to so have such Authorizations or made such Governmental Filings would
not, individually or in the aggregate, reasonably be expected to have an Adverse
Effect. Except to the extent set forth on Section 4.1(d) of the Iron Mountain
Disclosure Schedule, Iron Mountain owns, directly or indirectly through other
Iron Mountain Subsidiaries, all of the outstanding capital stock or other equity
interests (as shown on Section 4.1(d) of the Iron Mountain Disclosure Schedule)
of each Iron Mountain Subsidiary, free and clear of all Liens, and all such
stock or other equity interests have been duly authorized and validly issued and
are fully paid and nonassessable and were issued and sold in compliance with the
Securities Act, the Exchange Act and applicable state securities laws. Except as
set forth in Section 4.1(d) of the Iron Mountain Disclosure Schedule, (i) there
is neither outstanding nor has any Iron Mountain Subsidiary agreed to grant or
issue any shares of its capital stock or other equity interests or any Option
Security or Convertible Security, and (ii) no Iron Mountain Subsidiary is a
party to or is bound by any agreement, put or commitment pursuant to which it is
obligated to purchase, redeem or
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otherwise acquire any shares of capital stock or other equity interests or any
Option Security or Convertible Security.
(e) Iron Mountain does not own any capital stock or equity or other interest
in any other Entity or enterprise, however organized and however such interest
may be denominated or evidenced, except as set forth in Section 4.1(d) or 4.1(e)
of the Iron Mountain Disclosure Schedule.
Section 4.2. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Iron Mountain has filed all forms, reports and documents required to be
filed by it with the SEC, and has heretofore made available to Pierce Leahy, in
the form filed with the SEC (including any exhibits thereto), (i) its Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, (ii) its
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999 and
June 30, 1999, (iii) its proxy statement relating to its 1999 meeting of
stockholders, (iv) all of its registration statements that are effective as of
the date of this Agreement under which shares of Iron Mountain Common Stock are
still available for issuance (a complete list of which is set forth in
Section 4.2(a) of the Iron Mountain Disclosure Schedule), and (v) all other
forms, reports and registration statements filed by it with the SEC since
January 1, 1999 (the forms, reports and other documents referred to in clauses
(i), through (v) above, together with all other forms, reports and documents
filed by Iron Mountain with the SEC, being referred to herein collectively as
the "Iron Mountain SEC Reports"). The Iron Mountain SEC Reports and any forms,
reports and other documents filed by Iron Mountain with the SEC after the date
of this Agreement, (x) complied with or will comply in all material respects
with the requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations thereunder and (y) did not at the time
they were filed, or will not at the time they are filed, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading; provided
that no representation or warranty is made with respect to any information
provided by Pierce Leahy that is or will be included in any Iron Mountain SEC
Report. None of Iron Mountain's Subsidiaries is required to file any forms,
reports or other documents with the SEC pursuant to Section 12 or 15 of the
Exchange Act.
(b) Iron Mountain's financial statements, including in each case the notes
thereto, contained in its Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and its Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1999 and June 30, 1999 (the "Iron Mountain Financial Statements")
(i) have been prepared from, and are in accordance with, the books and records
of Iron Mountain and its consolidated Subsidiaries, (ii) comply in all material
respects with applicable accounting requirements and with published rules and
regulations of the SEC with respect thereto, (iii) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, except as otherwise noted therein, are true, correct and
complete, and (iv) fairly present the financial condition and results of
operations and cash flows of Iron Mountain and its Subsidiaries, on the bases
therein stated, as of the respective dates thereof, and for the respective
periods covered thereby subject, in the case of unaudited financial statements
to normal nonmaterial year-end audit adjustments and accruals and to the absence
of complete footnotes.
Section 4.3. CHANGES IN CONDITION. Since the date of the most recent
financial statements forming part of the Iron Mountain Financial Statements,
except to the extent specifically described in Section 4.3 of the Iron Mountain
Disclosure Schedule, there has been no Adverse Change in Iron Mountain. To Iron
Mountain's knowledge, there is no Event known to Iron Mountain which Adversely
Affects, or would reasonably be expected to Adversely Affect, Iron Mountain and
its Subsidiaries, taken as a whole, or the ability of Iron Mountain to perform
any of the obligations set forth in this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or thereto.
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Section 4.4. LIABILITIES. (i) At the date of the most recent balance sheet
forming part of the Iron Mountain Financial Statements, neither Iron Mountain
nor any Iron Mountain Subsidiary had any obligations or liabilities, accrued or
unaccrued, fixed, absolute, contingent or other (including, without limitation,
any contingent payments or "earnouts" owing under any acquisition agreement),
except as disclosed in such balance sheet, or the notes thereto, and (ii) since
such date, neither Iron Mountain nor any Iron Mountain Subsidiary has incurred
any such obligations or liabilities, other than those incurred in the ordinary
course of business consistent with past practice of Iron Mountain and Iron
Mountain Subsidiaries, and other than obligations and liabilities which in the
case of clauses (i) and (ii) do not and, to Iron Mountain's knowledge, would
not, individually or in the aggregate, reasonably be expected to Adversely
Affect Iron Mountain, except to the extent set forth in Section 4.4 of the Iron
Mountain Disclosure Schedule. Neither Iron Mountain nor any Iron Mountain
Subsidiary has guaranteed or is otherwise primarily or secondarily liable in
respect of any obligation or liability of any other Person (other than Iron
Mountain or an Iron Mountain Subsidiary), except for endorsements of negotiable
instruments for deposit in the ordinary course of business, consistent with
prior practice, or as disclosed in the most recent balance sheet, or the notes
thereto, forming part of the Iron Mountain Financial Statements or in
Section 4.4 of the Iron Mountain Disclosure Schedule.
Section 4.5. TITLE TO PROPERTIES; LEASES. Except as would not reasonably
be expected to have an Adverse Effect on Iron Mountain, each of Iron Mountain
and its Subsidiaries has good legal, marketable and insurable title, with
respect to all real property owned (in fee simple), good title with respect to
all real property leased (in leasehold) reflected as an asset on the most recent
balance sheet forming part of the Iron Mountain Financial Statements, or held by
Iron Mountain or any such Subsidiary for use in its business, if not so
reflected, and good indefeasible and merchantable title to all other assets,
tangible and intangible, reflected on the most recent balance sheet forming part
of the Iron Mountain Financial Statements, or (excluding leased real estate)
held by Iron Mountain or any Iron Mountain Subsidiary for use in its business if
not so reflected, or purported to have been acquired by Iron Mountain or any
Iron Mountain Subsidiary since such date, except inventory sold or depleted, or
property, plant and other equipment used up or retired, since such date, in each
case in the ordinary course of business consistent with the past practice of
Iron Mountain and its Subsidiaries, free and clear of all Liens, except
(i) Liens reflected in the Iron Mountain Financial Statements, (ii) Liens set
forth on Section 4.5(a) of the Iron Mountain Disclosure Schedule,
(iii) Permitted Liens, and (iv) such Liens that do not or would not,
individually or in the aggregate, reasonably be expected to have an Adverse
Effect on Iron Mountain. Each Lease or other occupancy or other agreement under
which Iron Mountain or any Iron Mountain Subsidiary holds real or personal
property has been duly authorized, executed and delivered by Iron Mountain or an
Iron Mountain Subsidiary, and, to Iron Mountain's knowledge, by each of the
other parties thereto; each such Lease is a legal, valid and binding obligation
of Iron Mountain or an Iron Mountain Subsidiary, and, to Iron Mountain's
knowledge, of each other party thereto, enforceable in accordance with its terms
(subject to the Enforceability Exceptions), except where the lack of such
authorization, execution or delivery or the lack of the legal, valid and binding
nature of such obligation would not reasonably be expected to have an Adverse
Effect on Iron Mountain.
Section 4.6. COMPLIANCE WITH GOVERNMENTAL AUTHORIZATIONS AND APPLICABLE
LAW.
(a) Section 4.6(a) of the Iron Mountain Disclosure Schedule contains a
description of all Legal Actions which are pending in which Iron Mountain or any
Iron Mountain Subsidiary is a party, or to which the businesses, operations or
properties of Iron Mountain or any Iron Mountain Subsidiary are subject or, to
Iron Mountain's knowledge, which are threatened in writing against, Iron
Mountain or any Iron Mountain Subsidiary or any of their respective businesses,
operations or properties, which, individually or in the aggregate, if determined
against Iron Mountain or any Iron Mountain Subsidiary would reasonably be
expected to have an Adverse Effect on Iron Mountain.
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(b) Iron Mountain and its Subsidiaries have obtained all Governmental
Authorizations which are necessary for the ownership or use of their respective
properties and the conduct of their respective businesses as now conducted by
Iron Mountain or any Iron Mountain Subsidiary and such Governmental
Authorizations are in full force and effect, except for such Governmental
Authorizations which, if not obtained and maintained in full force and effect,
would singly or in the aggregate, reasonably be expected to have an Adverse
Effect on Iron Mountain. Neither Iron Mountain nor any Iron Mountain Subsidiary
is in material breach or violation of, or in default in the performance,
observance or fulfillment of, any Governmental Authorization or any Applicable
Law, and no Event exists or has occurred, which constitutes, or but for any
requirement of giving of notice or passage of time or both would constitute,
such a breach, violation or default, under any Governmental Authorization or any
Applicable Law, except for such breaches, violations or defaults as do not and,
to Iron Mountain's knowledge, would not, individually or in the aggregate,
reasonably be expected to have an Adverse Effect on Iron Mountain.
Section 4.7. YEAR 2000. Any inability of Iron Mountain's and its
Subsidiaries' systems (including, without limitation, any Year 2000 Systems) to
properly recognize and process date sensitive information relating to the year
2000 will not have an Adverse Effect on Iron Mountain.
Section 4.8. RELATED TRANSACTIONS. Set forth in the Iron Mountain SEC
Reports or on Section 4.8 of the Iron Mountain Disclosure Schedule is a true,
correct and complete (in all material respects) description of any Contractual
Obligation or transaction, whether now existing or existing during the period
covered by the most recent audited Iron Mountain Financial Statements, between
Iron Mountain or any Iron Mountain Subsidiary and any Affiliate thereof that is
required to be disclosed pursuant to Item 404 of Regulation S-K, promulgated by
the SEC.
Section 4.9. TAX MATTERS.
(a) Each of Iron Mountain and each Iron Mountain Subsidiary has in
accordance with all Applicable Laws duly and timely filed all Tax Returns which
are required to be filed, and has paid, or made adequate provision for the
payment of, all Taxes shown on such Tax Returns which have or may become due and
payable pursuant to said Returns and all other governmental charges and
assessments received to date, other than any failure to file Tax Returns or pay
Taxes that would not, individually or in the aggregate, reasonably be expected
to have an Adverse Effect on Iron Mountain. Except as would not, individually or
in the aggregate, be reasonably expected to have an Adverse Effect on Iron
Mountain, (i) the Tax Returns of Iron Mountain and each Iron Mountain Subsidiary
have been prepared in accordance with all Applicable Laws and generally accepted
principles applicable to taxation consistently applied; (ii) all Taxes which
Iron Mountain and each Iron Mountain Subsidiary are required by law to withhold
and collect have been duly withheld and collected, and have been paid over, in a
timely manner, to the proper Authorities to the extent due and payable; and
(iii) neither Iron Mountain nor any Iron Mountain Subsidiary has executed any
waiver to extend, or otherwise taken or failed to take any action that would
have the effect of extending, the applicable statute of limitations in respect
of any Tax liabilities of Iron Mountain or any Iron Mountain Subsidiary for the
fiscal years prior to and including the most recent fiscal year. Neither Iron
Mountain nor any Iron Mountain Subsidiary is a "consenting corporation" within
the meaning of Section 341(f) of the Code. Each of Iron Mountain and each Iron
Mountain Subsidiary has at all times been taxable as a Subchapter C corporation
under the Code, except as otherwise set forth in Section 4.9(a) of the Iron
Mountain Disclosure Schedule. Neither Iron Mountain nor any Iron Mountain
Subsidiary has ever been a member of any consolidated group (other than
exclusively with Iron Mountain and its Subsidiaries) for Tax purposes, except as
set forth in Section 4.9(a) of the Iron Mountain Disclosure Schedule.
(b) From the end of its most recent fiscal year to the date of this
Agreement, neither Iron Mountain nor any Iron Mountain Subsidiary has made any
payment on account of any Taxes except
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regular payments required in the ordinary course of business, consistent with
prior practice, with respect to current operations or property presently owned.
(c) The information shown on the Federal and foreign income Tax Returns of
Iron Mountain and its Subsidiaries is true, correct and complete in all material
respects and fairly and accurately reflects the information purported to be
shown. Federal and state income Tax Returns of Iron Mountain and its non-foreign
Subsidiaries have been examined by the Internal Revenue Service or applicable
state Authority through the taxable periods set forth in Section 4.9(c) of the
Iron Mountain Disclosure Schedule, and neither Iron Mountain nor any Iron
Mountain Subsidiary has been notified in writing regarding any pending
examination, except as shown in Section 4.9(c) of the Iron Mountain Disclosure
Schedule.
(d) Neither Iron Mountain nor any Iron Mountain Subsidiary is a party to any
tax sharing agreement or arrangement.
(e) Neither Iron Mountain nor any Iron Mountain Subsidiary is, and since the
date of its incorporation has not been, a "United States real property holding
corporation" as defined in Section 897 of the Code.
Section 4.10. ERISA.
(a) Neither Iron Mountain nor any Iron Mountain Subsidiary (which for
purposes of this Section 4.10 shall include any ERISA Affiliate with respect to
any Plan subject to Title IV of ERISA) contributes to any Plan or sponsors any
Plan or Benefit Arrangement or, within the past five years, has contributed to
or sponsored any Plan intended to comply with Section 401 of the Code, except as
set forth in Section 4.10(a) of the Iron Mountain Disclosure Schedule. As to all
Plans and Benefit Arrangements listed in Section 4.10(a) of the Iron Mountain
Disclosure Schedule, and except as disclosed in such Section 4.10(a) of the Iron
Mountain Disclosure Schedule:
(i) all such Plans and Benefit Arrangements substantially comply and
have been administered in all material respects in form and in operation
with all Applicable Laws, all required returns (including without limitation
information returns) have been prepared in all material respects in
accordance with all Applicable Laws and have been timely filed with any
Authority with respect to any such Plan or Benefit Arrangement, and neither
Iron Mountain nor any Iron Mountain Subsidiary has received any outstanding
written notice from any Authority questioning or challenging such
compliance;
(ii) except as described in Section 4.10(a)(ii) of the Iron Mountain
Disclosure Schedule, all such Plans maintained or previously maintained by
Iron Mountain or any Iron Mountain Subsidiary that are or were intended to
comply with Section 401 of the Code comply and complied in all material
respects in form and in operation with all applicable requirements of such
Section, a favorable determination letter has been received from the
Internal Revenue Service with respect to each such Plan or the sponsor of
the Plan is entitled to rely on a favorable opinion letter issued to the
prototype sponsor by the Internal Revenue Service with respect to each such
Plan or an application for a favorable determination letter is pending with
the Internal Revenue Service, and no event has occurred which will or would
reasonably be expected to give rise to disqualification of any such Plan
under such Section or to a tax under Section 511 of the Code;
(iii) none of the assets of any such Plan are invested in employer
securities or employer real property;
(iv) neither Iron Mountain nor any of its Subsidiaries has engaged in
any non-exempt prohibited transactions (as described in Section 406 of ERISA
or Section 4975 of the Code) with respect to any such Plan;
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(v) there have been no acts or omissions by Iron Mountain or any Iron
Mountain Subsidiary which have given rise to or would reasonably be expected
to give rise to material fines, penalties, taxes or related charges under
Sections 502(c), 502(i) or 4071 of ERISA or Chapter 43 of the Code for which
Iron Mountain or any Iron Mountain Subsidiary may be liable;
(vi) there are no material Claims (other than routine claims for
benefits) pending or, to Iron Mountain's knowledge, threatened in writing
involving such Plans or the assets of such Plans, except as set forth on
Section 4.10(a)(vi) of the Iron Mountain Disclosure Schedule;
(vii) except as described in Section 4.10(a)(vii) of the Iron Mountain
Disclosure Schedule, no such Plan is subject to Title IV of ERISA, or if
subject, there have been no "reportable events" (as described in
Section 4043 of ERISA) as to which there is any material risk of termination
of such Plan, and no steps have been taken to terminate any such Plan;
(viii) neither Iron Mountain nor, to Iron Mountain's knowledge, any Iron
Mountain Subsidiary nor any of their respective directors, officers,
employees or any other fiduciary has committed any material breach of
fiduciary responsibility imposed by ERISA that would subject Iron Mountain
or any Iron Mountain Subsidiary or any of their respective directors,
officers or employees to liability under ERISA;
(ix) no such Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA or Section 412 of the Code had an accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recently completed fiscal year of
such Plan;
(x) no material liability to the PBGC has been or is expected by Iron
Mountain or any Iron Mountain Subsidiary to be incurred by Iron Mountain or
any Iron Mountain Subsidiary with respect to any such Plan, and there has
been no event or condition which presents a material risk of termination of
any such Plan by the PBGC; and
(xi) except as set forth in Section 4.10(a)(xi) of the Iron Mountain
Disclosure Schedule (which entry, if applicable, shall indicate the present
value of accumulated plan liabilities calculated in a manner consistent with
FAS 106 and actual annual expense for such benefits for each of the last two
(2) years) or pursuant to the provisions of COBRA, which provisions have
been complied with in all material respects, neither Iron Mountain nor any
Iron Mountain Subsidiary maintains any Plan that provides benefits described
in Section 3(1) of ERISA to any former employees or retirees of Iron
Mountain or any of its Subsidiaries.
(b) Except as disclosed in Section 4.10(b) of the Iron Mountain Disclosure
Schedule, neither Iron Mountain nor any Iron Mountain Subsidiary is or ever has
been a party to any Multiemployer Plan or made contributions to any such plan.
Section 4.11. AUTHORIZED AND OUTSTANDING CAPITAL STOCK.
(a) As of September 30, 1999, the authorized and outstanding capital stock
of Iron Mountain was as set forth in Section 4.11(a) of the Iron Mountain
Disclosure Schedule. All of such outstanding capital stock has been duly
authorized and validly issued, is fully paid and nonassessable and is not
subject to any preemptive or similar rights. From September 30, 1999 through the
date of this Agreement, Iron Mountain has not issued any shares of capital stock
other than issuances of Iron Mountain Common Stock in accordance with the
exercise of Iron Mountain Options or under the Iron Mountain ESPP Plan in
accordance with past practice. Shares of Iron Mountain Common Stock issued and
outstanding on the record date for the Iron Mountain Special Meeting will be the
only class of capital stock eligible to vote on this Agreement, the Merger and
the Transactions. Except as set forth in Section 4.11(a) or 4.1(d) of the Iron
Mountain Disclosure Schedule, (i) there is neither outstanding nor has Iron
Mountain or any Iron Mountain Subsidiary agreed to grant or issue any shares of
its capital
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stock, other equity interests, any Option Security, Convertible Security or
Voting Debt, and (ii) neither Iron Mountain nor any Iron Mountain Subsidiary is
a party to and neither Iron Mountain nor any Iron Mountain Subsidiary is bound
by any Contractual Obligation, put or commitment pursuant to which it is
obligated to purchase, redeem or otherwise acquire any shares of capital stock,
other equity interests, any Option Security, Convertible Security or Voting
Debt. Neither Iron Mountain nor any Iron Mountain Subsidiary has any Voting Debt
outstanding. Between the date of this Agreement and the Closing, except as set
forth in Section 4.11(a) of the Iron Mountain Disclosure Schedule, neither Iron
Mountain nor any of its Subsidiaries will issue, sell or purchase or agree to
issue, sell or purchase any capital stock, other equity interests, any Option
Security, Convertible Security or Voting Debt of Iron Mountain or any of its
Subsidiaries, except to the extent required or permitted pursuant to the terms
hereof. All of the issued and outstanding shares of Iron Mountain's capital
stock and each Option Security or Convertible Security of Iron Mountain were
issued and sold or granted in compliance with the Securities Act and applicable
state securities laws.
(b) As of September 30, 1999, (i) Option Securities to acquire 2,120,795
shares of Iron Mountain Common Stock were outstanding under Iron Mountain's 1995
Stock Incentive Plan (the "Iron Mountain 1995 Option Plan"), including in such
number Option Securities which were then exercisable to acquire 929,631 shares
of Iron Mountain Common Stock; (ii) Option Securities to acquire 264,227 shares
of Iron Mountain Common Stock were outstanding under the Iron Mountain/ATSI 1995
Stock Option Plan (the "Iron Mountain/ATSI Option Plan"), including in such
number Option Securities which were then exercisable to acquire 222,297 shares
of Iron Mountain Common Stock; (iii) no Option Securities to acquire shares of
Iron Mountain Common Stock were outstanding under Iron Mountain's 1998 Employee
Stock Purchase Plan (the "Iron Mountain ESPP Plan" and, together with the Iron
Mountain 1995 Option Plan, the "Iron Mountain Option Plans"); and (iv) 531,350
shares of Iron Mountain Common Stock were reserved for future issuance pursuant
to Option Securities which may be granted under the Iron Mountain 1995 Option
Plan and 375,000 shares of Iron Mountain Common Stock were reserved for future
issuance pursuant to Option Securities which may be granted under the Iron
Mountain ESPP Plan. From September 30, 1999 through the date of this Agreement,
neither Iron Mountain nor any of its Subsidiaries has issued any Option
Securities, other than Option Securities under the Iron Mountain ESPP Plan in
accordance with past practice. The Iron Mountain Option Plans constitute the
only plans or arrangements pursuant to which Option Securities or Convertible
Securities to acquire shares of capital stock of Iron Mountain or any of its
Subsidiaries are currently outstanding. Other than as set forth in
Section 4.11(b) of the Iron Mountain Disclosure Schedule, neither the execution
and delivery of this Agreement nor the consummation of the Merger or the
Transactions are events which will cause an acceleration of the exercise or
vesting schedule of any such Option Security or Convertible Security. All shares
of Iron Mountain capital stock subject to issuance under an Option Security or
Convertible Security of Iron Mountain or any of its Subsidiaries will be, upon
issuance on the terms and conditions specified in such Option Security or
Convertible Security, validly issued, fully paid and nonassessable.
(c) There are no voting trusts or other arrangements to which Iron Mountain
or any Iron Mountain Subsidiary is a party with respect to the voting of capital
stock of Iron Mountain or any Iron Mountain Subsidiary.
Section 4.12. EMPLOYMENT ARRANGEMENTS.
(a) Neither Iron Mountain nor any Iron Mountain Subsidiary is now or during
the past three (3) years (at the time it was a Subsidiary of Iron Mountain) has
been subject to or involved in or, to Iron Mountain's knowledge, threatened in
writing with any union elections, petitions therefor or other organizational or
recruiting activities, except as described in Section 4.12(a) of the Iron
Mountain Disclosure Schedule. Except as set forth in Section 4.12(a) of the Iron
Mountain Disclosure Schedule, none of the employees of Iron Mountain and its
Subsidiaries are now, or during the past three (3) years (at the time it was a
Subsidiary of Iron Mountain) have been, represented by any labor union
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or other employee collective bargaining organization or are parties to any labor
or other collective bargaining agreement, and there are no pending grievances,
disputes or controversies with any union or any other employee collective
bargaining organization of such employees, or, to Iron Mountain's knowledge,
threats in writing of strikes, work stoppages or slowdowns or any pending
demands for collective bargaining by any union or other such organization or by
any other employees, except as would not, individually or in the aggregate,
reasonably be expected to have an Adverse Effect on Iron Mountain.
(b) Except as set forth in Section 4.12(b) of the Iron Mountain Disclosure
Schedule, no employee of Iron Mountain or any Iron Mountain Subsidiary will
accrue or receive or is entitled to accrue or receive additional benefits,
service or accelerated rights to payments of benefits, including the right to
receive any parachute payment, as defined in Section 280G of the Code, or become
entitled to severance, termination allowance or similar payments as a result of
this Agreement, the Merger or the Transactions.
Section 4.13. MATERIAL AGREEMENTS. To Iron Mountain's knowledge, listed on
Section 4.13 of the Iron Mountain Disclosure Schedule are all Material
Agreements to which Iron Mountain or any Iron Mountain Subsidiary is a party or
to which it or any of its property is subject or bound. True, complete and
correct copies of each of the Material Agreements have been furnished by Iron
Mountain to Pierce Leahy. All of the Material Agreements are valid, binding and
legally enforceable obligations of Iron Mountain and, to Iron Mountain's
knowledge, the other parties thereto (subject to the Enforceability Exceptions),
except where the lack of enforceability would not, individually or in the
aggregate, reasonably be expected to have an Adverse Effect on Iron Mountain.
Except as set forth in Section 4.13 of the Iron Mountain Disclosure Schedule,
Iron Mountain and each Iron Mountain Subsidiary have duly complied in all
material respects with all of the terms and conditions of each Material
Agreement and have not done or performed, or failed to do or perform (and there
is no pending or, to the knowledge of Iron Mountain, threatened (in writing)
Claim that Iron Mountain or any Iron Mountain Subsidiary has not so complied,
done and performed or failed to do and perform) any act the effect of which
would be to invalidate or provide grounds for the other party thereto to
terminate (with or without notice, passage of time or both) such Material
Agreement or impair the rights or benefits, or increase the costs, of Iron
Mountain or any Iron Mountain Subsidiary, under any of the Material Agreements,
except as would not reasonably be expected to have, individually or in the
aggregate, an Adverse Effect on Iron Mountain. Except as set forth in
Section 4.13 of the Iron Mountain Disclosure Schedule, neither the execution and
delivery of this Agreement or any Collateral Document executed or required to be
executed pursuant hereto or thereto, nor the consummation of the Transactions,
nor compliance with the terms, conditions and provisions hereof or thereof by
Iron Mountain will conflict with, or result in a breach or violation of, or
constitute a default under, or permit the acceleration of any obligation or
liability in, or but for any requirement of giving of notice or passage of time
or both would constitute such a conflict with, breach or violation of, or
default under, or permit any such acceleration in, any Material Agreement.
Section 4.14. ORDINARY COURSE OF BUSINESS. Except as set forth in
Section 4.14 of the Iron Mountain Disclosure Schedule or disclosed in the Iron
Mountain SEC Reports, since the date of the most recent audited Iron Mountain
Financial Statements included in the Iron Mountain SEC Reports through the date
of this Agreement, Iron Mountain and its Subsidiaries have operated their
respective businesses only in the ordinary and usual course and in substantially
the same manner as previously conducted and there has not been:
(i) any damage, destruction or loss with respect to the properties or
assets of Iron Mountain or its Subsidiaries whether covered by insurance or
not, which has had or would reasonably be expected to have, individually or
in the aggregate, an Adverse Effect with respect to Iron Mountain;
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(ii) any other change, occurrence or circumstance that had or would
reasonably be expected to have an Adverse Effect with respect to Iron
Mountain;
(iii) any change to any accounting methods used by Iron Mountain, unless
required in accordance with GAAP;
(iv) any declaration or payment of any Distributions in respect of the
outstanding shares of capital stock of Iron Mountain or any of its
Subsidiaries (other than dividends declared or paid by wholly-owned
Subsidiaries);
(v) any split, combination or reclassification of Iron Mountain's
capital stock or any issuance of shares of capital stock of Iron Mountain or
any Iron Mountain Subsidiary or any other change in the authorized
capitalization of Iron Mountain or any Iron Mountain Subsidiary, except as
contemplated or permitted by this Agreement or pursuant to employee benefit
plans, programs or arrangements in existence on the date of this Agreement;
(vi) any repurchase or redemption by Iron Mountain of shares of its
capital stock or any issuance by Iron Mountain of any other securities in
exchange or in substitution for shares of its capital stock except pursuant
to employee benefit plans, programs or arrangements in existence on the date
of this Agreement, in the ordinary course of business consistent with past
practice;
(vii) any grant or award of any Option Securities or Convertible
Securities or other rights to acquire any shares of capital stock or other
equity interests of Iron Mountain or any Subsidiary, except as contemplated
or permitted by this Agreement or except pursuant to employee benefit plans,
programs or arrangements in existence on the date of this Agreement, in the
ordinary course of business consistent with past practice; or
(viii) any sale or other disposal of, or any contract to sell or
otherwise dispose of, any of its properties or assets, other than in the
ordinary course of business.
Section 4.15. BROKER OR FINDER. Other than Bear, Stearns & Co. Inc., no
Person assisted in or brought about the negotiation of this Agreement, the
Merger or the subject matter of the Transactions in the capacity of broker,
agent or finder or in any similar capacity on behalf of Iron Mountain or is
entitled to any brokerage, finder's or other fee or commission from Iron
Mountain in connection with the Transactions. Iron Mountain has heretofore
furnished to Pierce Leahy a complete and correct copy of all agreements between
Iron Mountain and Bear, Stearns & Co. Inc. pursuant to which such Person would
be entitled to payment relating to the Transactions.
Section 4.16. ENVIRONMENTAL MATTERS.
(a) Except as set forth in Section 4.16(a) of the Iron Mountain Disclosure
Schedule, Iron Mountain and its Subsidiaries have complied with all applicable
Environmental Laws except where the failure to comply would not be reasonably
expected to have an Adverse Effect on Iron Mountain. There is no pending or, to
Iron Mountain's knowledge, threatened (in writing), civil or criminal Legal
Actions, written notice of violation, formal administrative proceeding or
investigation, inquiry or information request by any Authority relating to any
Environmental Law involving Iron Mountain or any of its Subsidiaries or any of
their properties, which would, individually or in the aggregate, not reasonably
be expected to have an Adverse Effect on Iron Mountain.
(b) Except as set forth in Section 4.16(b) of the Iron Mountain Disclosure
Schedule, there have been no releases of any Hazardous Materials into the
environment by Iron Mountain or any of its Subsidiaries, or, to Iron Mountain's
knowledge, by any other party at any parcel of real property or any facility
formerly or currently owned, operated or controlled by Iron Mountain or any of
its Subsidiaries which would reasonably be expected to have an Adverse Effect on
Iron Mountain.
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(c) Section 4.16(c) of the Iron Mountain Disclosure Schedule (which in
accordance with Section 5.16 hereof, will be delivered within thirty (30) days
after the date of this Agreement) sets forth all site assessments, audits or
other investigations that have been conducted by or on behalf of Iron Mountain
or any Iron Mountain Subsidiary within the last three (3) years as to
environmental matters at any property owned, leased, operated or occupied by
Iron Mountain or any Iron Mountain Subsidiary.
Section 4.17. BOARD ACTION; FAIRNESS OPINION.
(a) The Board of Directors of Iron Mountain at a meeting duly called and
held, has by unanimous vote of those directors present (who constituted 100% of
the directors then in office) (i) determined that this Agreement and the
Transactions, including the Merger, are advisable to and in the best interests
of the Iron Mountain Stockholders and has approved the same, and (ii) resolved
to recommend that the holders of the shares of Iron Mountain Common Stock adopt
this Agreement and the Transactions, including the Merger.
(b) Iron Mountain has received the opinion of Bear, Stearns & Co. Inc.,
dated as of October 20, 1999, to the effect that, as of the date thereof, the
"Exchange Ratio" (as defined in such opinion) equivalent to 1.10 shares of Iron
Mountain Common Stock per share of Pierce Leahy Common Stock to be paid in
connection with the Merger is fair, from a financial point of view, to the
stockholders of Iron Mountain. A signed, true and complete copy of such opinion
has been delivered to Pierce Leahy or will be promptly delivered to Pierce Leahy
by Iron Mountain.
Section 4.18. MATERIALITY. The matters and items excluded from the
representations and warranties set forth in this Article by operation of the
materiality exceptions and materiality qualifications contained in such
representations and warranties, in the aggregate for all such excluded matters
and items, are not and would not reasonably be expected to be Adverse to Iron
Mountain.
ARTICLE 5.
ADDITIONAL COVENANTS
Section 5.1. ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Upon reasonable notice, each Party shall afford to the other Party and
their respective Representatives full access during normal business hours
throughout the period prior to the Effective Time to all of its properties,
books, contracts (other than customer contracts), commitments and records
(including without limitation Tax Returns) and, during such period, shall
furnish promptly to one another (i) a copy of each report, schedule and other
document filed or received by either of them pursuant to the requirements of any
Applicable Law (including without limitation federal or state securities laws)
or filed by it or any of its Subsidiaries with any Authority in connection with
the Transactions or which would reasonably be expected to have an Adverse Effect
on such Party and (ii) such other information concerning their respective
businesses, properties and personnel as Pierce Leahy or Iron Mountain, as the
case may be, shall reasonably request (other than customer contracts or the
pricing thereof). Pierce Leahy and Iron Mountain acknowledge that they have
heretofore executed a confidentiality agreement, dated October 4, 1999 (the
"Confidentiality Agreement"), which separately and as incorporated herein shall
remain in full force and effect after and notwithstanding the execution and
delivery of this Agreement, and that information obtained from Pierce Leahy by
Iron Mountain or its Representatives or by Pierce Leahy or its Representatives
from Iron Mountain, pursuant to this Section 5.1(a), the Confidentiality
Agreement or otherwise, shall be subject to the provisions of the
Confidentiality Agreement.
(b) Subject to the terms and conditions of the Confidentiality Agreement,
Iron Mountain and Pierce Leahy may disclose such information as may be necessary
in connection with seeking all
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Governmental and Private Authorizations or that is required by Applicable Law or
the rules of the NYSE to be disclosed. In the event that this Agreement is
terminated, Iron Mountain and Pierce Leahy shall each promptly redeliver all
non-public written material provided pursuant to this Section or any other
provision of this Agreement or otherwise in connection with the Merger and the
Transactions and shall not retain any copies, extracts or other reproductions in
whole or in part of such written material other than one copy thereof which
shall be delivered to independent counsel for such party.
(c) No investigation pursuant to this Section 5.1 shall affect any
representation or warranty in this Agreement of any Party hereto or any
condition to the obligations of the Parties hereto.
Section 5.2. CONDUCT OF THE BUSINESS OF PIERCE LEAHY PENDING THE
MERGER. Between the date of this Agreement and the Closing Date, Pierce Leahy
will, and will ensure that each of its Subsidiaries will (except (i) as may be
described on Section 5.2 of the Pierce Leahy Disclosure Schedule, (ii) as may be
required or expressly contemplated or permitted by the terms of this Agreement,
or (iii) as may be consented to by Iron Mountain, which consent shall not be
unreasonably withheld or delayed):
(i) operate its business in the normal, usual and customary manner in
the ordinary course of business, consistent with prior practice, and use all
reasonable efforts, consistent with past practice, to maintain and preserve
its business organization, assets, employees and advantageous business
relationships;
(ii) not sell or otherwise dispose of or contract to sell or otherwise
dispose of any material amount of properties or assets, other than in the
ordinary course of business consistent with past practice;
(iii) not create or permit to be created any Lien on any of its
properties, except such Liens which, individually or in the aggregate, would
not reasonably be expected to have an Adverse Effect on Pierce Leahy;
(iv) except in the ordinary course of business, consistent with prior
practice, not increase the compensation or fringe benefits payable or to
become payable to any of its directors, officers, employees, advisers,
consultants, salesmen or agents or otherwise alter, modify or change the
terms of their employment or engagement, or grant any severance or
termination pay not currently required to be paid under existing severance
plans to, or enter into any employment, consulting or severance agreement
with, any present or former director, officer or other employee of Pierce
Leahy or any of its Subsidiaries, or establish, adopt, enter into or amend
or terminate any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of directors, officers or
employees;
(v) not settle any pending or threatened material Legal Action or any
other Legal Action which relates to the Merger or the Transactions;
(vi) not (A) enter into, amend or terminate (1) any Material Agreement,
except in the ordinary course of business, consistent with prior practice,
in accordance with the terms thereof and which individually or in the
aggregate would not reasonably be expected to have an Adverse Effect on
Pierce Leahy, or (2) any Contractual Obligation or transaction with an
Affiliate that would be required to be disclosed pursuant to Item 404 of
Regulation S-K promulgated by the SEC, or (B) enter into or amend any
Contractual Obligation which restrains, limits or impedes Pierce Leahy or
any of its Subsidiaries (or, after the Merger, the Surviving Corporation or
any of its Subsidiaries) from freely engaging in any business or competing
anywhere in the world (including, without limitation, in connection with any
joint venture or similar Entity that provides for such joint venture or
Entity to be the exclusive provider of records management services in a
particular geographic area);
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(vii) not, directly or indirectly, (A) sell or transfer or agree to sell
or transfer any shares of Pierce Leahy Common Stock, Pierce Leahy Preferred
Stock or capital stock or other equity interests of it or any of its
Subsidiaries directly or indirectly beneficially owned by Pierce Leahy or
any of its Subsidiaries; or (B) split, combine or reclassify the Pierce
Leahy Common Stock, Pierce Leahy Preferred Stock or any other outstanding
capital stock or other equity interests of it or any of Pierce Leahy's
Subsidiaries;
(viii) not, directly or indirectly, (A) amend its Organic Documents;
(B) issue, grant or sell any Option Securities, Convertible Securities,
shares of capital stock or other equity interests of Pierce Leahy or its
Subsidiaries or any other ownership interests (including, without
limitation, stock appreciation rights or phantom stock), other than
(1) shares of Pierce Leahy Common Stock reserved for issuance on the date of
this Agreement pursuant to the exercise of Pierce Leahy Options outstanding
on the date of this Agreement, (2) dividends paid in kind in accordance with
the terms of the Pierce Leahy Preferred Stock, or (3) shares of preferred
stock of Pierce Leahy that satisfy the definition of Permitted Indebtedness
("Redeemable Preferred Stock"); (C) incur any Indebtedness other than
borrowings under existing agreements as in effect on the date of this
Agreement and under agreements representing Permitted Indebtedness so long
as the proceeds of such borrowings are used in a manner consistent with this
Section 5.2; or (D) redeem, purchase or otherwise acquire directly or
indirectly any of its capital stock (other than the Pierce Leahy Preferred
Stock or Redeemable Preferred Stock);
(ix) not declare, set aside or pay any Distribution with respect to its
capital stock (other than (A) the Stock Dividend, (B) in accordance with the
terms of the Pierce Leahy Preferred Stock or (C) in accordance with the
terms of any Redeemable Preferred Stock issued in accordance with
Section 5.2(viii));
(x) not change any accounting methods used by it unless required in
accordance with GAAP;
(xi) not acquire or agree to acquire by merging or consolidating with,
or by purchasing any of the assets of or equity in, or by any other manner,
any business of any Person (A) having a fair market value (which amount
shall include the maximum amount of any earnout or other contingent payment)
in excess of $25 million individually or $100 million in the aggregate or
(B) that is primarily engaged in a line of business different than those of
Pierce Leahy and its Subsidiaries, regardless of fair market value; and
(xii) not authorize or enter into an agreement to do any of the
foregoing.
Section 5.3. CONDUCT OF THE BUSINESS OF IRON MOUNTAIN PENDING THE
MERGER. Between the date of this Agreement and the Closing Date, Iron Mountain
will, and will ensure that each of its Subsidiaries will (except (i) as may be
described on Section 5.3 of the Iron Mountain Disclosure Schedule, (ii) as may
be required or expressly contemplated or permitted by the terms of this
Agreement, or (iii) as may be consented to by Pierce Leahy, which consent shall
not be unreasonably withheld or delayed):
(i) operate its business in the normal, usual and customary manner in
the ordinary course of business, consistent with prior practice, and use all
reasonable efforts, consistent with past practice, to maintain and preserve
its business organization, assets, employees and advantageous business
relationships;
(ii) except as disclosed in Section 5.3(ii) of the Iron Mountain
Disclosure Schedule, not sell or otherwise dispose of or contract to sell or
otherwise dispose of any material amount of properties or assets, other than
in the ordinary course of business consistent with past practice; provided,
however, that Iron Mountain may sell or otherwise dispose of or contract to
sell or otherwise dispose of any properties or assets which generated not
more than $50 million in revenues for the fiscal year ended December 31,
1998, excluding, for purposes of such calculation, those properties and
assets described in Section 5.3(ii) of the Iron Mountain Disclosure
Schedule;
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(iii) not create or permit to be created any Lien on any of its
properties, except such Liens which, individually or in the aggregate, would
not reasonably be expected to have an Adverse Effect on Iron Mountain;
(iv) not settle any pending or threatened Legal Action which relates to
the Merger or the Transactions;
(v) not enter into, amend or terminate any Contractual Obligation or
transaction with an Affiliate that would be required to be disclosed
pursuant to Item 404 of Regulation S-K promulgated by the SEC;
(vi) not, directly or indirectly, (A) sell or transfer or agree to sell
or transfer any shares of Iron Mountain Common Stock, preferred stock or
capital stock or other equity interests of it or any of its Subsidiaries
directly or indirectly beneficially owned by Iron Mountain or any of its
Subsidiaries; provided, however, that Iron Mountain or one of its
Subsidiaries may transfer its shares of capital stock of, or other equity
interests in, any Subsidiary so long as such transaction would be permitted
under Section 5.3(ii); or (B) split, combine or reclassify the Iron Mountain
Common Stock or any other outstanding capital stock or other equity
interests of it or any of Iron Mountain's Subsidiaries;
(vii) not, directly or indirectly, (A) amend its Organic Documents or
(B) issue, grant or sell any Option Securities (other than under the Iron
Mountain Option Plans), Convertible Securities, shares of capital stock or
other equity interests of Iron Mountain or its Subsidiaries, other than
(1) issuances by Iron Mountain of additional shares of Iron Mountain Common
Stock in an aggregate amount not to exceed an additional ten percent (10%)
of the number of outstanding shares of Iron Mountain Common Stock as of the
date of this Agreement in connection with acquisitions by Iron Mountain or
any of its Subsidiaries, (2) shares of Iron Mountain Common Stock pursuant
to the exercise of Iron Mountain Options under the Iron Mountain Option
Plans and (3) shares of preferred stock of Iron Mountain that do not
represent Option Securities, Convertible Securities or Voting Debt);
(viii) not declare, set aside or pay any Distribution with respect to
its capital stock (other than in accordance with the terms of any preferred
stock issued in accordance with Section 5.3(vii) hereof);
(ix) not change any accounting methods used by it unless required in
accordance with GAAP;
(x) not acquire or agree to acquire by merging or consolidating with, or
by purchasing any of the assets of or equity in, or by any other manner,
businesses or Persons (A) having a fair market value (which amount shall
include the maximum amount of any earnout or other contingent payment) in
excess of $200 million in the aggregate or (B) that are primarily engaged in
a line of business different than those of Iron Mountain and its
Subsidiaries, regardless of fair market value; and
(xi) not authorize or enter into an agreement to do any of the
foregoing.
Section 5.4. CONTROL OF OPERATIONS. Nothing contained in this Agreement
shall give to Pierce Leahy or Iron Mountain, directly or indirectly, rights to
control or direct the operations of Iron Mountain or Pierce Leahy, as the case
may be, prior to the Effective Time. Prior to the Effective Time, each of Pierce
Leahy and Iron Mountain shall exercise, consistent with the terms and conditions
of this Agreement, complete control and supervision of its operations.
Section 5.5. AGREEMENT TO COOPERATE.
(a) Each of the Parties shall use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under Applicable Law to
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consummate the Merger and make effective the Transactions, including using its
reasonable best efforts (i) to prepare and file with the applicable Authorities
as promptly as practicable after the execution of this Agreement all requisite
applications and amendments thereto, together with related information, data and
exhibits, necessary to request issuance of orders approving the Merger and the
Transactions by all such applicable Authorities, each of which must be obtained
or become final in order to satisfy the condition applicable to it set forth in
Section 6.1(c); (ii) to obtain all necessary or appropriate waivers, consents
and approvals; (iii) to effect all necessary registrations, filings and
submissions (including without limitation filings under federal or state
securities laws or the HSR Act and any other submissions requested by the SEC,
the FTC or the DOJ); and (iv) to lift any injunction or other legal bar to the
Merger and the Transactions. Each of the Parties recognizes that the
consummation of the Merger and the Transactions is subject to the preacquisition
notification requirements of the HSR Act. Each agrees that it will file with the
Antitrust Division of the DOJ and the FTC within fifteen (15) days of the date
of this Agreement a Notification and Report Form in a manner so as to constitute
substantial compliance with the notification requirements of the HSR Act. Each
Party covenants and agrees to use its reasonable best efforts to achieve the
prompt termination or expiration of any waiting period or any extension thereof
under the HSR Act and to obtain any clearance required under the HSR Act for the
consummation of the Merger, which efforts, for purposes of this Agreement, shall
not require either Party, the Surviving Corporation or any of their respective
Subsidiaries in order to obtain any consent or clearance from the DOJ, FTC or
any other Authority to hold separate, sell or otherwise dispose of any assets,
the effect of any of which, in the reasonable judgment of such Party, would be
to materially impair the value of the Merger to such Party.
(b) Pierce Leahy will use its reasonable best efforts on or prior to the
Closing Date to obtain the satisfaction of the conditions specified in Sections
6.1 and 6.2. Iron Mountain will use its reasonable best efforts on or prior to
the Closing Date to obtain the satisfaction of the conditions applicable to it
specified in Sections 6.1 and 6.3.
(c) The parties shall cooperate with one another in the preparation,
execution and filing of all Returns, questionnaires, applications, or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp Taxes or any Plan, Benefit Arrangement or
employment arrangement, any transfer, recording, registration and other fees,
and any similar Taxes which become payable in connection with the Transactions
that are required or permitted to be filed on or before the Effective Time.
(d) Iron Mountain shall cause its independent accountants, and shall use its
reasonable best efforts to cause any other independent accountants that have
audited any financial statements of businesses acquired by Iron Mountain that
are required to be included or incorporated by reference in the Registration
Statement, to cooperate with Pierce Leahy and to consent to the use of their
audit reports on audited financial statements for Iron Mountain or such other
businesses for inclusion in the Registration Statement. Without limiting the
generality of the foregoing, Iron Mountain agrees that it will (i) consent to
the use of such audited financial statements in any registration statement or
other document filed by Pierce Leahy under the Securities Act or the Exchange
Act, and (ii) execute and deliver, and cause its officers to execute and
deliver, such "representation" letters as are customarily delivered in
connection with audits and as Pierce Leahy's independent accountants may
reasonably request under the circumstances.
(e) Pierce Leahy and Iron Mountain (i) shall supply consolidated financial
statements for it and, to the extent required under Regulation S-X under the
Securities Act, any acquired businesses, (and any and all documents and consents
related thereto) which comply with Regulation S-X under the Securities Act and
the applicable published rules and regulations thereunder for inclusion in any
registration statement or other public filing of the other Party under the
Securities Act and the Exchange Act, and any other offering circular or document
used by Pierce Leahy or Iron Mountain, as the case may be, in any other
offering, whether public or private, and (ii) shall use its reasonable best
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efforts to cause their respective independent accountants to cooperate with the
other Party in connection with the foregoing (including, without limitation,
using reasonable best efforts to cause such independent accountants to deliver
so-called "comfort letters" and written consents relating to the foregoing);
provided, however, that Pierce Leahy or Iron Mountain, as the case may be, shall
reimburse the other for its reasonable out-of-pocket expenses incurred in
connection with its compliance with this Section 5.5(e) (other than with respect
to any services that would ordinarily be provided by such accountants). Without
limiting the generality of the foregoing, Pierce Leahy and Iron Mountain each
agrees that it will (i) consent to the use of such audited financial statements
in any such registration statement, document or circular and (ii) execute and
deliver, and cause its officers to execute and deliver, such "representation"
letters as are customarily delivered in connection with audits and as Pierce
Leahy's and Iron Mountain's independent accountants may reasonably request under
the circumstances.
Section 5.6. AFFILIATE AGREEMENTS; REGISTRATION RIGHTS AGREEMENT.
(a) Prior to the Closing Date, Iron Mountain shall deliver to Pierce Leahy a
letter identifying all Persons who are, at the time this Agreement is submitted
to the Stockholders, "affiliates" of Iron Mountain for purposes of Rule 145
under the Securities Act. Iron Mountain shall use its reasonable best efforts to
cause each such "affiliate", to deliver to Pierce Leahy on or prior to the
Closing Date a written agreement (an "Affiliate Agreement") substantially in the
form attached hereto as Exhibit 5.6(a).
(b) Pierce Leahy agrees that it will expressly assume the rights and
obligations of Iron Mountain under that certain Amended and Restated
Registration Rights Agreement dated as of June 12, 1997 among Iron Mountain,
certain principal stockholders of Iron Mountain and such other stockholders of
Iron Mountain as are party thereto (the "Registration Rights Agreement") with
respect to shares of Pierce Leahy Common Stock to be issued in the Merger and
that for purposes of the Registration Rights Agreement, Pierce Leahy Common
Stock shall be considered "Registrable Securities". Pierce Leahy and Iron
Mountain agree that the Registration Rights Agreement will be amended as of the
Effective Time to join (the "Registration Rights Agreement Joinder") those
Pierce Leahy Principal Shareholders who become party to the Pierce Leahy
Shareholders' Agreement on or before November 3, 1999 (together with their
Permitted Assignees (as defined in the Pierce Leahy Shareholders' Agreement)),
with respect to Subject Shares (as defined in the Pierce Leahy Shareholders'
Agreement), for the benefit of such Pierce Leahy Principal Shareholders, which
amendment to the Registration Rights Agreement shall be substantially in the
form attached hereto as Exhibit 5.6(b).
Section 5.7. NO SOLICITATION.
(a) Pierce Leahy shall not, nor shall it permit any of its Representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) to, initiate, solicit or facilitate, directly or indirectly, any
inquiries or the making of any proposal with respect to an Other Transaction,
engage in any discussions or negotiations concerning, or provide to any other
Person any information or data relating to, Pierce Leahy or any of its
Subsidiaries for the purposes of, or otherwise cooperate in any way with or
assist or participate in, facilitating any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, a proposal
to seek or effect an Other Transaction, or agree to or endorse any Other
Transaction; provided, however, that, notwithstanding anything to the contrary
in this Agreement, prior to the approval of this Agreement and the Transactions
by the Pierce Leahy Shareholders, Pierce Leahy may engage in discussions or
negotiations with, and may furnish information concerning Pierce Leahy and its
Subsidiaries and their business, properties and assets to, a third party who,
without any solicitation, initiation, encouragement, discussion or negotiation,
directly or indirectly, by or with Pierce Leahy, any of its Subsidiaries or any
of their respective Representatives, or in furtherance thereof makes a written,
bona fide proposal
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regarding an Other Transaction that is not subject to any material contingencies
relating to financing and that is reasonably capable of being financed and is
financially superior to the consideration to be received by the Pierce Leahy
Shareholders pursuant to the Merger (as determined in good faith by Pierce
Leahy's Board of Directors after consultation with Pierce Leahy's financial
advisors) if (1) Pierce Leahy's Board of Directors determines in good faith,
after consultation with Pierce Leahy's outside legal counsel, that such action
is required for Pierce Leahy's Board of Directors to act in a manner consistent
with its fiduciary duties under Applicable Law and (2) prior to furnishing
information with respect to Pierce Leahy and its Subsidiaries to such third
party, Pierce Leahy shall have received from such third party an executed
confidentiality agreement in reasonably customary form on terms not more
favorable to such Entity than the terms contained in the Confidentiality
Agreement. Notwithstanding the foregoing, the Board of Directors of Pierce Leahy
may take and disclose to the Pierce Leahy Shareholders a position with regard to
a tender offer or exchange offer to the extent required by Rule 14e-2(a) under
the Exchange Act. In the event of a purported termination of this Agreement by
Pierce Leahy pursuant to Section 7.1(c)(ii), any violation prior to such
termination of the restrictions set forth in the preceding sentence (after
giving effect to the proviso contained therein) by any investment banker or
financial advisor retained by Pierce Leahy, whether or not such Person is
purporting to act on behalf of Pierce Leahy or any of its Subsidiaries or
otherwise, shall be deemed to constitute a breach of this Section 5.7(a) by
Pierce Leahy. Pierce Leahy shall promptly advise Iron Mountain of, and (unless
the Board of Directors of Pierce Leahy concludes that such disclosure is
inconsistent with its fiduciary duties under Applicable Law) communicate the
material terms of, any proposal it may receive, or any inquiries it receives
which may reasonably be expected to lead to such a proposal relating to an Other
Transaction, and the identity of the Person making it. Pierce Leahy shall
further advise Iron Mountain of the status and changes in the material terms
(unless the Board of Directors of Pierce Leahy concludes that such disclosure is
inconsistent with its fiduciary duties under Applicable Law) of any such
proposal or inquiry (or any amendment to any of them). During the term of this
Agreement, except as contemplated or permitted by this Section 5.7(a), Pierce
Leahy shall not enter into any agreement (other than a confidentiality
agreement), whether oral or written and whether or not legally binding, with any
Person that provides for, or in any way facilitates, an Other Transaction.
(b) Iron Mountain shall not, nor shall it permit any of its Representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) to, initiate, solicit or facilitate, directly or indirectly, any
inquiries or the making of any proposal with respect to an Iron Mountain
Transaction, engage in any discussions or negotiations concerning, or provide to
any other Person any information or data relating to, Iron Mountain or any of
its Subsidiaries for the purposes of, or otherwise cooperate in any way with or
assist or participate in, facilitating any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, a proposal
to seek or effect an Iron Mountain Transaction, or agree to or endorse any Iron
Mountain Transaction; provided, however, that, notwithstanding anything to the
contrary in this Agreement, prior to the approval of this Agreement and the
Transactions by the Iron Mountain Stockholders, Iron Mountain may engage in
discussions or negotiations with, and may furnish information concerning Iron
Mountain and its Subsidiaries and their business, properties and assets to, a
third party who, without any solicitation, initiation, encouragement, discussion
or negotiation, directly or indirectly, by or with Iron Mountain, any of its
Subsidiaries or any of their respective Representatives, or in furtherance
thereof makes a written, bona fide proposal regarding an Iron Mountain
Transaction that is not subject to any material contingencies relating to
financing and that is reasonably capable of being financed and is financially
superior to the consideration to be received by the Iron Mountain Stockholders
pursuant to the Merger (as determined in good faith by Iron Mountain's Board of
Directors after consultation with Iron Mountain's financial advisors) if
(1) Iron Mountain's Board of Directors determines in good faith, after
consultation with Iron Mountain's outside legal counsel, that such action is
required for Iron Mountain's Board of Directors to act in a manner consistent
with its fiduciary duties under Applicable Law and (2) prior to furnishing
information with respect to Iron Mountain and its Subsidiaries to such
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third party, Iron Mountain shall have received from such third party an executed
confidentiality agreement in reasonably customary form on terms not more
favorable to such Entity than the terms contained in the Confidentiality
Agreement. Notwithstanding the foregoing, the Board of Directors of Iron
Mountain may take and disclose to the Iron Mountain Stockholders a position with
regard to a tender offer or exchange offer to the extent required by
Rule 14e-2(a) under the Exchange Act. In the event of a purported termination of
this Agreement by Iron Mountain pursuant to Section 7.1(d)(ii), any violation
prior to such termination of the restrictions set forth in the preceding
sentence (after giving effect to the proviso contained therein) by any
investment banker or financial advisor retained by Iron Mountain, whether or not
such Person is purporting to act on behalf of Iron Mountain or any of its
Subsidiaries or otherwise, shall be deemed to constitute a breach of this
Section 5.7(b) by Iron Mountain. Iron Mountain shall promptly advise Pierce
Leahy of, and (unless the Board of Directors of Iron Mountain concludes that
such disclosure is inconsistent with its fiduciary duties under Applicable Law)
communicate the material terms of, any proposal it may receive, or any inquiries
it receives which may reasonably be expected to lead to such a proposal relating
to an Iron Mountain Transaction, and the identity of the Person making it. Iron
Mountain shall further advise Pierce Leahy of the status and changes in the
material terms (unless the Board of Directors of Pierce Leahy concludes that
such disclosure is inconsistent with its fiduciary duties under Applicable Law)
of any such proposal or inquiry (or any amendment to any of them). During the
term of this Agreement, except as contemplated or permitted by this
Section 5.7(b), Iron Mountain shall not enter into any agreement (other than a
confidentiality agreement), whether oral or written and whether or not legally
binding, with any Person that provides for, or in any way facilitates, an Iron
Mountain Transaction.
(c) In the event Pierce Leahy or Iron Mountain shall determine to provide
any information or negotiate as described above, or shall receive any offer of
the type referred to above, it shall (i) immediately provide the other Party a
copy of all information provided to the third party, and (ii) inform the other
Party that information is to be provided, that negotiations are to take place or
that an offer has been received, as the case may be.
Section 5.8. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless each Person who is now, or has been at any
time prior to the date of this Agreement or who becomes prior to the Effective
Time, an officer or director of Pierce Leahy or any of its Subsidiaries
(collectively, the "Indemnified Parties") against all Claims or amounts that,
with the approval of the Surviving Corporation as to settlements only, are paid
in settlement of or otherwise in connection with any Claim based in whole or in
part on or arising in whole or in part out of the fact that such Person is or
was a director or officer of Pierce Leahy or any of its Subsidiaries and
pertaining to any matter existing or arising out of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, any
Claims arising out of this Agreement, the Merger or any Transaction), whether
asserted or claimed prior to, at or after the Effective Time, in each case to
the fullest extent currently provided under Pierce Leahy's or the applicable
Subsidiary's Organic Documents (but only to the extent permitted under
Applicable Law), and shall pay any expenses, as incurred, in advance of the
final disposition of any such action or proceeding to each Indemnified Party to
the fullest extent permitted under Applicable Law, upon receipt from the
Indemnified Party to whom expenses are advanced of an undertaking to repay such
advances to the extent required under Applicable Law. Without limiting the
foregoing, in the event any such Claim is brought against any of the Indemnified
Parties, such Indemnified Parties may retain counsel (including local counsel)
satisfactory to them and which shall be reasonably satisfactory to the Surviving
Corporation, and the Surviving Corporation shall pay all reasonable fees and
expenses of such counsel for such Indemnified Parties. The Indemnified Parties
as a group shall retain only one law firm (plus appropriate local counsel) to
represent them with respect to each such Claim unless there is, as determined by
counsel to the Indemnified Parties, under applicable standards of professional
conduct, a conflict or a reasonable likelihood of a conflict on
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any significant issue between the positions of any two or more Indemnified
Parties, in which event such Indemnified Party shall be entitled to retain
separate legal counsel at the expense of the Surviving Corporation.
(b) Pierce Leahy, Iron Mountain and the Surviving Corporation shall maintain
Pierce Leahy's existing officers' and directors' liability insurance policy for
a period of not less than six (6) years after the Closing Date; provided,
(i) that the Surviving Corporation may substitute therefor policies of
substantially similar coverage and amounts containing terms no less advantageous
to such former directors or officers and (ii) if the existing officers' and
directors' liability insurance expires or is canceled during such period, the
Surviving Corporation will obtain substantially similar officers' and directors'
liability insurance to the extent available. Pierce Leahy and Iron Mountain
agree that the officers and directors of Pierce Leahy on the Closing Date and
their respective heirs and legal representatives shall be third party
beneficiaries of this Section 5.8.
(c) In the event the Surviving Corporation or its successors or assigns
(i) consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or Entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
Person, then and in each such case, proper provisions shall be made so that the
successors and assigns of the Surviving Corporation shall assume the obligations
set forth in this Section 5.8.
Section 5.9. NOTIFICATION OF CERTAIN MATTERS. Each Party shall give prompt
written notice to the other of the occurrence or non-occurrence of any Event the
occurrence or non-occurrence of which would be likely to cause in any material
respect (i) any representation or warranty made by it contained in this
Agreement to be untrue or inaccurate, (ii) any change to be made in the Pierce
Leahy Disclosure Schedule or the Iron Mountain Disclosure Schedule, as the case
may be, or (iii) any failure of Pierce Leahy or Iron Mountain, as the case may
be, to comply with or satisfy, or be able to comply with or satisfy, any
material covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.9 shall not limit or otherwise affect the remedies available hereunder
to the Party receiving such notice.
Section 5.10. PUBLIC ANNOUNCEMENTS. Until the Closing, or in the event of
termination of this Agreement, each party shall consult with the other before
issuing any press release or otherwise making any public statements with respect
to this Agreement, the Merger or any Transaction and shall not issue any such
press release or make any such public statement without the prior consent of the
other, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, each Party acknowledges and agrees that the other
Party may, without the prior consent of such Party, issue such press releases or
make such public statements as may be required by Applicable Law or by the terms
of any agreement or instrument with any exchange, including without limitation
the NYSE, on which such Party's securities are listed (each, a "Required
Disclosure"), in which case, to the extent practicable, the Party making the
Required Disclosure will consult with, and exercise in good faith, all
reasonable business efforts to agree with the other regarding the nature, extent
and form of such press release or public statement, and, in any event, with
prior notice to the other Party.
Section 5.11. CERTAIN ACTIONS CONCERNING BUSINESS COMBINATIONS. Neither
Pierce Leahy nor Iron Mountain will apply, nor will it take any action resulting
in the application of, or otherwise elect to apply, the provisions of applicable
state takeover laws, if any, with respect to or as a result of the Merger or the
Transactions. If any "fair price" or "control share acquisition" or
"anti-takeover" statute, or other similar statute or regulation shall become
applicable to the transactions contemplated hereby, Pierce Leahy and Iron
Mountain and the members of their respective Boards of Directors shall grant
such approvals and take such actions as are necessary so that the Merger and the
Transactions may be consummated as promptly as practicable on the terms
contemplated hereby, and otherwise act to minimize the effects of such statute
or regulation on the Merger and the Transactions.
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Section 5.12. OPTION SECURITIES. (a) Prior to the Effective Time, Iron
Mountain and Pierce Leahy shall take such action as may be necessary to cause
each Iron Mountain Option to be automatically converted in accordance with
Section 2.5. At the Effective Time, all references in the stock option
agreements to Iron Mountain shall be deemed to refer to the Surviving
Corporation. As of the Effective Time, the Surviving Corporation shall assume
all of Iron Mountain's obligations with respect to Iron Mountain Options as so
amended.
(b) Without the prior written consent of the other Party, except as set
forth on Section 5.12(b) of the Pierce Leahy Disclosure Schedule, neither Party
will accelerate, or cause an acceleration of, the exercise, exchange or vesting
schedule of any of its Option Securities. Notwithstanding the foregoing,
(i) Pierce Leahy may accelerate the vesting of any Pierce Leahy Options
described on Section 5.12(b) of the Pierce Leahy Disclosure Schedule owned by
current employees under the Pierce Leahy Nonqualified Option Plan, which
acceleration shall occur no later than immediately prior to the Effective Time
and (ii) Pierce Leahy may accelerate the vesting of any Pierce Leahy Options
described on Section 5.12(b) of the Pierce Leahy Disclosure Schedule owned by
current non-employee directors of Pierce Leahy, which acceleration shall occur
no later than immediately prior to the Effective Time.
Section 5.13. TAX TREATMENT. Each of Iron Mountain and Pierce Leahy shall
use its reasonable best efforts to cause the Merger to qualify as a tax-free
reorganization under the provisions of Section 368(a) of the Code and to obtain
the opinions of counsel referred to in Sections 6.2(d) and 6.3(c).
Section 5.14. REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS.
(a) As promptly as practicable after the date of this Agreement, Pierce
Leahy will prepare and file with the SEC a registration statement (the
"Registration Statement") in connection with the registration under the
Securities Act of the Pierce Leahy Common Stock to be issued pursuant to the
Merger, which Registration Statement shall contain (i) a preliminary joint proxy
statement to be mailed by Pierce Leahy and Iron Mountain to their respective
shareholders and stockholders in connection with the vote of such shareholders
and stockholders with respect to the Merger and the Transactions and (ii) a
preliminary prospectus of Pierce Leahy in connection with such registration
under the Securities Act (together, the "Joint Proxy Statement/Prospectus").
Each of Pierce Leahy and Iron Mountain shall use its reasonable best efforts to
(i) have the Registration Statement declared effective under the Securities Act
as promptly as practicable after such filing, and (ii) to cause the Joint Proxy
Statement/Prospectus to be mailed to their respective shareholders and
stockholders as promptly as practicable after the Registration Statement is
declared effective under the Securities Act. Pierce Leahy shall also take any
action (other than qualifying to do business in any jurisdiction in which it is
not now so qualified or consenting to service of process in any jurisdiction in
which it has not previously so consented in any action other than one arising
out of the offering of the Pierce Leahy Common Stock in such jurisdiction)
required to be taken to qualify the Pierce Leahy Common Stock to be issued in
the Merger under any applicable state securities or "blue sky" laws prior to the
Effective Time, and Iron Mountain shall furnish all information concerning Iron
Mountain and the Iron Mountain Stockholders as may be requested in connection
with any such action.
(b) Pierce Leahy and Iron Mountain shall cooperate with each other and
provide to each other all information necessary in order to prepare the
Registration Statement. Pierce Leahy and Iron Mountain shall use their
respective reasonable best efforts to respond to any comments of the SEC with
respect to the Registration Statement as promptly as practicable. If at any time
prior to the Effective Time there shall occur any Event with respect to Pierce
Leahy or Iron Mountain or any of their respective Subsidiaries, as the case may
be, or with respect to other information supplied by Pierce Leahy or Iron
Mountain, as the case may be, for inclusion in the Registration Statement, in
either case which Event is required to be described in an amendment of, or a
supplement to, the Joint Proxy Statement/ Prospectus or the Registration
Statement, Pierce Leahy or Iron Mountain shall notify the other Party,
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and such Event shall be so described, and such amendment or supplement shall be
promptly filed with the SEC and, as required by Applicable Law, disseminated to
the Pierce Leahy Shareholders and the Iron Mountain Stockholders. Pierce Leahy
shall notify Iron Mountain promptly upon (i) the declaration by the SEC of the
effectiveness of the Registration Statement, (ii) the issuance or threatened
issuance of any stop order or other order preventing or suspending the use of
any prospectus relating to the Registration Statement, (iii) any suspension or
threatened suspension of the use of any prospectus relating to the Registration
Statement in any state, (iv) any proceedings commenced or threatened to be
commenced by the SEC or any state securities commission that might result in the
issuance of a stop order or other order or suspension of use or (v) any request
by the SEC to supplement or amend the Joint Proxy Statement/Prospectus after the
effectiveness thereof. Pierce Leahy and, to the extent applicable, Iron
Mountain, shall use their reasonable best efforts to prevent or promptly remove
any stop order or other order preventing or suspending the use of any prospectus
relating to the Registration Statement and to comply with any such request by
the SEC or any state securities commission to amend or supplement the
Registration Statement or the Joint Proxy Statement/ Prospectus.
(c) Pierce Leahy and Iron Mountain will notify each other promptly of the
receipt by such Party or its Representatives of any comments from the SEC or its
staff or any other appropriate government official and of any requests by the
SEC or its staff or any other appropriate government official for amendments or
supplements to the Registration Statement or the Joint Proxy
Statement/Prospectus or for additional information and will supply the other
Party with copies of all correspondence between Pierce Leahy, Iron Mountain or
any of their respective Representatives, on the one hand, and the SEC or its
staff or any other appropriate government official, on the other hand, with
respect thereto.
(d) None of the information supplied or to be supplied by Pierce Leahy or
Iron Mountain or any Pierce Leahy Shareholder or Iron Mountain Stockholder for
inclusion in (i) the Registration Statement will, at the time the Registration
Statement is filed with the SEC, at any time it is amended or supplemented or at
the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(ii) the Joint Proxy Statement/Prospectus or any other proxy statement or
information furnished to the Pierce Leahy Shareholders or Iron Mountain
Stockholders in connection with the Special Meetings will, at the date it is
first mailed to such shareholders or stockholders or at the time of the
applicable Special Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Joint Proxy Statement/Prospectus and the
Registration Statement will comply as to form in all material respects with the
requirements of the Securities Act.
Section 5.15. EXCHANGE LISTING. Pierce Leahy shall use its reasonable best
efforts to effect, at or before the Effective Time, authorization for listing on
the NYSE, upon official notice of issuance, of the shares of Pierce Leahy Common
Stock to be issued pursuant to the Merger.
Section 5.16. DISCLOSURE SCHEDULES. Iron Mountain shall deliver to Pierce
Leahy within thirty (30) days after the date of this Agreement, Sections 4.1(c)
(except such sections otherwise required in Section 4.1(c) to be delivered as of
the date of this Agreement) and 4.16(c) of the Iron Mountain Disclosure Schedule
and Pierce Leahy shall deliver to Iron Mountain within thirty (30) days after
the date of this Agreement, Sections 3.1(c) (except such sections otherwise
required in Section 3.1(c) to be delivered as of the date of this Agreement) and
3.16(c) of the Pierce Leahy Disclosure Schedule. Pierce Leahy shall deliver to
Iron Mountain one (1) business day prior to the Closing Date an update to
Section 3.11(a) of the Pierce Leahy Disclosure Schedule, which update shall also
include the number of Option Securities outstanding (with a breakdown for each
Pierce Leahy Option Plan and an indication of how many Option Securities are
then currently exercisable) under the Pierce Leahy Option Plans, as of such
date; provided, however, that the only changes to the information contained in
Section 3.11(a)
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of the Pierce Leahy Disclosure Schedule between the date of this Agreement and
the Closing Date shall be changes contemplated or permitted by this Agreement.
Iron Mountain shall deliver to Pierce Leahy one (1) business day prior to the
Closing Date an update to Section 4.11(a) of the Iron Mountain Disclosure
Schedule, which update shall also include the number of Option Securities
outstanding (with a breakdown for each Iron Mountain Option Plan and an
indication of how many Option Securities are then currently exercisable) under
the Iron Mountain Option Plans, as of such date; provided, however, that the
only changes to the information contained in Section 4.11(a) of the Iron
Mountain Disclosure Schedule between the date of this Agreement and the Closing
Date shall be changes contemplated or permitted by this Agreement. All other
Sections of the Pierce Leahy Disclosure Schedule and the Iron Mountain
Disclosure Schedule shall have been delivered on the date of this Agreement.
Section 5.17. PIERCE LEAHY INDEBTEDNESS. Pierce Leahy shall assist Iron
Mountain in, and shall take such actions as Iron Mountain may reasonably request
in order to facilitate, the amendment, repayment, redemption, refinancing or
other restructuring of outstanding Indebtedness of Pierce Leahy on or after the
Effective Time in connection with the Merger.
Section 5.18. PIERCE LEAHY COMMAND COMPANY. Prior to or at the Effective
Time, Pierce Leahy shall cause J. Peter Pierce to transfer his entire ownership
interests in PLC Command I, Inc. and PLC Command II, Inc. to Pierce Leahy or one
of its Subsidiaries for no consideration, such that, after giving effect to such
transfer, PLC Command I, L.P. and PLC Command II, L.P. are wholly owned
Subsidiaries of Pierce Leahy.
Section 5.19. STOCK DIVIDEND. Prior to the Effective Time the Board of
Directors of Pierce Leahy may declare and pay a stock dividend on outstanding
shares of Pierce Leahy Common Stock in an amount equal to one-tenth ( 1/10) of a
share of Pierce Leahy Common Stock for each share of Pierce Leahy Common Stock
outstanding (the "Stock Dividend"). Pierce Leahy shall convert a holder's right
to receive shares of Pierce Leahy Common Stock pursuant to the Stock Dividend
into a right to receive the highest whole number of shares of Pierce Leahy
Common Stock payable with respect to certificates representing Pierce Leahy
Common Stock plus cash in lieu of fractional shares in a reasonable amount based
on the market value of Pierce Leahy Common Stock, as Pierce Leahy shall
determine. Upon the effectiveness of the Stock Dividend, the number of shares
subject to each Pierce Leahy Option and the exercise price thereof shall be
proportionately adjusted to give effect to the Stock Dividend.
Section 5.20. PIERCE LEAHY SHAREHOLDERS' AGREEMENT. Pierce Leahy shall use
its reasonable best efforts to cause each Pierce Leahy Principal Shareholder who
has not executed the Pierce Leahy Shareholders' Agreement on the date of this
Agreement to execute and become party to the Pierce Leahy Shareholders'
Agreement on or before November 3, 1999. Pierce Leahy shall keep Iron Mountain
informed of the results of such efforts and shall deliver to Iron Mountain
original counterparts executed by each Pierce Leahy Principal Shareholder who
has become party to such Agreement. In the event Iron Mountain does not receive
original, executed counterparts of the Pierce Leahy Shareholders' Agreement from
all Pierce Leahy Principal Shareholders on or before November 3, 1999, Iron
Mountain shall have the right to terminate this Agreement in accordance with
this Section and Section 7.1(d)(iv) by delivering written notice thereof to
Pierce Leahy on or before 5:00 p.m. local time on November 8, 1999.
Section 5.21. TERMINATION OF PLANS. At least one (1) day prior to the
Closing Date, Pierce Leahy shall, at the request of Iron Mountain, take all
actions necessary to terminate its participation in any Plan that complies or is
intended to comply with Section 401 of the Code. If such a Plan is terminated in
accordance with this Section 5.21, benefit accruals, including contributions of
salary reduction contributions, if any, shall cease. For a period of three
(3) years following the Closing Date, if the Surviving Corporation maintains any
Plan intended to comply with Section 401 of the Code, service with Pierce Leahy
prior to the Closing Date shall, to the extent permitted by ERISA and the Code,
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count as service with the Surviving Corporation for purposes of the
participation, vesting and benefit accrual provisions of any such Plan to the
extent such service is recognized for similarly situated employees of Iron
Mountain as of the Closing Date; provided, however, that there may be a
reasonable delay in the effective date of participation in any such Plan; and
provided, further, that participation may be limited by the Surviving
Corporation to one such Plan if a similar limitation is imposed by the Surviving
Corporation with respect to Iron Mountain employees as of the Closing Date.
ARTICLE 6.
CLOSING CONDITIONS
Section 6.1. CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each Party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by Applicable Law:
(a) This Agreement, the Merger and the Transactions shall have been
approved and adopted in accordance with the PBCL and the DGCL by the affirmative
vote of the Pierce Leahy Shareholders and the Iron Mountain Stockholders,
respectively, holding at least the minimum number of shares of Pierce Leahy
Common Stock and Iron Mountain Common Stock, as applicable, then issued and
outstanding as are required by Applicable Law, Pierce Leahy's Organic Documents
and Iron Mountain's Organic Documents, as applicable, for such approval and
adoption;
(b) As of the Closing Date, no Legal Action shall be pending by or before
any Authority seeking to restrain, prohibit, make illegal or delay materially,
or to impose any Adverse conditions, or which might, in the reasonable business
judgment of Iron Mountain or Pierce Leahy, as the case may be, reasonably be
expected to have an Adverse Effect on the Surviving Corporation and its
Subsidiaries taken as a whole assuming consummation of the Merger;
(c) Other than the filing of the certificate of merger in accordance with
the DGCL and articles of merger in accordance with the PBCL, all authorizations,
consents, waivers, orders or approvals required to be obtained, and all filings,
submissions, registrations, notices or declarations required to be made, by Iron
Mountain or Pierce Leahy or any of their respective Subsidiaries prior to the
consummation of the Merger and the Transactions shall have been obtained from,
and made with, all required Authorities, except for such authorizations,
consents, waivers, orders, approvals, filings, registrations, notices or
declarations the failure to obtain or make would not, in the reasonable judgment
of Pierce Leahy or Iron Mountain, as applicable, assuming consummation of the
Merger, reasonably be expected to have an Adverse Effect on the Surviving
Corporation;
(d) The waiting periods (and any extension thereof) applicable to the
Merger under the HSR Act shall have expired or been terminated, and neither the
FTC, DOJ nor any other Authority shall have authorized the institution of
enforcement proceedings (that have not been dismissed or otherwise disposed of)
to delay, prohibit, or otherwise restrain the transactions contemplated by the
Agreement;
(e) The shares of Pierce Leahy Common Stock issuable to Iron Mountain
Stockholders pursuant to this Agreement shall have been approved for listing on
the NYSE, subject only to official notice of issuance; and
(f) The Registration Statement shall have been declared effective, and no
stop order suspending the effectiveness of the Registration Statement shall be
in effect.
Section 6.2. CONDITIONS TO OBLIGATIONS OF IRON MOUNTAIN. The obligations
of Iron Mountain to effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of the following
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conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by Applicable Law:
(a) The representations and warranties of Pierce Leahy contained in
Section 3.11(a) of the Pierce Leahy Disclosure Schedule (as updated pursuant to
Section 5.16) shall be true and correct in all material respects at and as of
the Closing Date with the same force and effect as though made on and as of such
date, and all other representations and warranties of Pierce Leahy contained in
this Agreement or otherwise made in connection with the Merger and the
Transactions shall be true and correct at and as of the Closing Date with the
same force and effect as though made on and as of such date except those which
speak as of a certain date which shall continue to be true and correct as of
such date on the Closing Date, except for such failure of such other
representations and warranties to be true and correct as would not reasonably be
expected to have an Adverse Effect on Pierce Leahy or the Surviving Corporation;
each and all of the covenants and conditions to be performed or satisfied by
Pierce Leahy hereunder at or prior to the Closing Date shall have been duly
performed or satisfied in all material respects; and Pierce Leahy shall have
furnished Iron Mountain with such certificates and other documents evidencing
Pierce Leahy's compliance with the foregoing provisions as Iron Mountain shall
have reasonably requested;
(b) As of the Closing Date, there shall not have occurred and be continuing
any Adverse Change affecting Pierce Leahy from the condition thereof (financial
and other) reflected in the most recent Pierce Leahy Financial Statements;
(c) Each of the officers and directors of Pierce Leahy (other than J. Peter
Pierce, who shall continue as the President and as a director of the Surviving
Corporation) and each trustee under each Plan shall have submitted his or her
unqualified written resignation, dated as of the Closing Date, from all such
positions held with Pierce Leahy and as a trustee for each such Plan;
(d) Iron Mountain shall have received a favorable opinion, dated the
Closing Date, of Sullivan & Worcester LLP, its special tax counsel, to the
effect that this Agreement constitutes a tax-free plan of reorganization in
accordance with the provisions of Section 368(a) of the Code and as to the
consequences thereof to the Iron Mountain Stockholders;
(e) J. Peter Pierce shall have executed and delivered an employment
agreement in the form of EXHIBIT 6.2(E) attached hereto (the "Employment
Agreement");
(f) The Pierce Leahy Principal Shareholders eligible to become parties to
the Registration Rights Agreement in accordance with Section 5.6(b) shall have
executed and delivered the Registration Rights Agreement Joinder; and
(g) All agreements, certificates, opinions and other documents shall be
reasonably satisfactory in form, scope and substance to Iron Mountain and its
counsel, and Iron Mountain and its counsel shall have received all information
and copies of all documents, including records of corporate proceedings, which
they may reasonably request in connection therewith, such documents where
appropriate to be certified by proper corporate officers.
Section 6.3. CONDITIONS TO OBLIGATIONS OF PIERCE LEAHY. The obligations of
Pierce Leahy to effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived, in whole or in part to the extent permitted by Applicable Law:
(a) The representations and warranties of Iron Mountain contained in
Section 4.11(a) of the Iron Mountain Disclosure Schedule (as updated pursuant to
Section 5.16) shall be true and correct in all material respects at and as of
the Closing Date with the same force and effect as though made on and as of such
date, and all other representations and warranties of Iron Mountain contained in
this Agreement or otherwise made in connection with the Merger and the
Transactions shall be true and
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correct at and as of the Closing Date with the same force and effect as though
made on and as of such date except those which speak as of a certain date which
shall continue to be true and correct as of such date on the Closing Date,
except for such failure of such other representations and warranties to be true
and correct as would not reasonably be expected to have an Adverse Effect on
Iron Mountain or the Surviving Corporation; each and all of the covenants and
conditions to be performed or satisfied by Iron Mountain hereunder at or prior
to the Closing Date shall have been duly performed or satisfied in all material
respects; and Iron Mountain shall have furnished Pierce Leahy with such
certificates and other documents evidencing Iron Mountain's compliance with the
foregoing provisions as Pierce Leahy shall have reasonably requested;
(b) As of the Closing Date, there shall not have occurred and be continuing
any Adverse Change affecting Iron Mountain from the condition thereof (financial
and other) reflected in the most recent Iron Mountain Financial Statements;
(c) Pierce Leahy shall have received a favorable opinion, dated the Closing
Date, of Cozen and O'Connor, its special tax counsel, to the effect that this
Agreement constitutes a tax-free plan of reorganization in accordance with the
provisions of Section 368(a) of the Code and as to the consequences thereof to
Pierce Leahy;
(d) Iron Mountain shall have executed and delivered the Registration Rights
Agreement Joinder; and
(e) All agreements, certificates, opinions and other documents shall be
reasonably satisfactory in form, scope and substance to Pierce Leahy and its
counsel, and Pierce Leahy and its counsel shall have received all information
and copies of all documents, including records of corporate proceedings, which
they may reasonably request in connection therewith, such documents where
appropriate to be certified by proper corporate officers.
ARTICLE 7.
TERMINATION, AMENDMENT AND WAIVER
Section 7.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement,
the Merger and the Transactions by the Pierce Leahy Shareholders and the Iron
Mountain Stockholders as follows:
(a) by mutual consent of Iron Mountain and Pierce Leahy;
(b) by either Iron Mountain or Pierce Leahy:
(i) if any permanent injunction, decree, judgment, statute or regulation
of or by any Authority preventing the consummation of the Merger shall have
become final and nonappealable; or
(ii) if the Merger and the Transactions fail to receive the approval
required by Applicable Law and the Organic Documents by vote of the Pierce
Leahy Shareholders or the Iron Mountain Stockholders at the applicable
Special Meeting;
(c) by Pierce Leahy:
(i) in the event (A) Pierce Leahy is not in material breach of any
covenant or agreement in this Agreement, unless such breach is capable of
being cured by and will not prevent or delay consummation of the Merger by
or beyond the Termination Date, and (B) either (I) Iron Mountain is in
breach of this Agreement or its representations or warranties in
Section 4.11 shall have become and continue to be untrue in any material
respect (other than as a result of any action expressly permitted by the
terms hereof) or any of its other representations or warranties
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shall have become and continue to be untrue and such breach or untruth would
reasonably be expected to have an Adverse Effect on Iron Mountain or the
Surviving Corporation, unless such breach or untruth is capable of being
cured by and will not prevent or delay consummation of the Merger by or
beyond the Termination Date, or (II) the Merger and the Transactions have
not been consummated by the Termination Date;
(ii) prior to the approval and adoption of this Agreement and the
Transactions by the Pierce Leahy Shareholders, if Pierce Leahy's Board of
Directors shall withdraw its recommendation of this Agreement, the Merger
and the Transactions and recommend any Other Transaction to its
shareholders; provided, however, that (i) Pierce Leahy is not then in breach
of Section 5.7(a), (ii) prior to such termination, Pierce Leahy has
negotiated with Iron Mountain in good faith to make such adjustments in the
terms and conditions of this Agreement as would enable Pierce Leahy to
proceed with the Transactions, (iii) Pierce Leahy's Board of Directors has
determined in good faith (on the basis of the terms of such Other
Transaction and the terms of this Agreement, after giving effect to any
adjustments offered by Iron Mountain pursuant to clause (ii) above), after
consultation with Pierce Leahy's outside legal counsel, that such
termination is required for the Board of Directors to act in a manner
consistent with its fiduciary duties under Applicable Law and (iv) Pierce
Leahy shall provide to Iron Mountain prior written notice of such
termination; or
(iii) if (A) the Board of Directors of Iron Mountain shall
(I) withdraw, modify or change its recommendation so that it is not in favor
of this Agreement, the Merger or the Transactions, or shall have resolved to
do any of the foregoing, or (II) have recommended or resolved to recommend
to the Iron Mountain Stockholders any Iron Mountain Transaction, or
(B) Iron Mountain shall have entered into or agreed to enter into any Iron
Mountain Transaction.
(d) by Iron Mountain:
(i) in the event (A) Iron Mountain is not in material breach of any
covenant or agreement in this Agreement, unless such breach is capable of
being cured by and will not prevent or delay consummation of the Merger by
or beyond the Termination Date, and (B) either (I) Pierce Leahy is in
material breach of this Agreement or its representations or warranties in
Section 3.11 shall have become and continue to be untrue in any material
respect (other than as a result of any action expressly permitted by the
terms hereof) or any of its other representations or warranties shall have
become and continue to be untrue and such breach or untruth would reasonably
be expected to have an Adverse Effect on Pierce Leahy or the Surviving
Corporation, unless such breach or untruth is capable of being cured by and
will not prevent or delay consummation of the Merger by or beyond the
Termination Date, or (II) the Merger and the Transactions have not been
consummated prior to the Termination Date;
(ii) prior to the approval and adoption of this Agreement and the
Transactions by the Iron Mountain Stockholders, if Iron Mountain's Board of
Directors shall withdraw its recommendation of this Agreement, the Merger
and the Transactions and recommend any Iron Mountain Transaction to its
stockholders; provided, however, that (i) Iron Mountain is not then in
breach of Section 5.7(b), (ii) Iron Mountain's Board of Directors has
determined in good faith (on the basis of the terms of such Iron Mountain
Transaction and the terms of this Agreement), after consultation with Iron
Mountain's outside legal counsel, that such termination is required for the
Board of Directors to act in a manner consistent with its fiduciary duties
under Applicable Law and (iii) Iron Mountain shall provide to Pierce Leahy
prior written notice of such termination;
(iii) if (A) the Board of Directors of Pierce Leahy shall (I) withdraw,
modify or change its recommendation so that it is not in favor of this
Agreement, the Merger or the Transactions, or shall have resolved to do any
of the foregoing, or (II) have recommended or resolved to
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recommend to the Pierce Leahy Shareholders any Other Transaction, or
(B) Pierce Leahy shall have entered into or agreed to enter into any Other
Transaction; or
(iv) in accordance with Section 5.20 hereof.
Section 7.2. EFFECT OF TERMINATION. In the event of termination by Pierce
Leahy or Iron Mountain pursuant to Section 7.1, written notice shall promptly be
given to the other Party hereto and this Agreement shall forthwith become void,
there shall be no liability on the part of any Party, or any of their respective
officers or directors, to the other and all rights and obligations of any Party
shall cease, except as provided in Sections 5.1, 5.10, 7.2 and 7.5; provided,
however, that such termination shall not relieve any Party from liability for
the breach of any of its representations, warranties, covenants or agreements
set forth in this Agreement, or impair the right of Pierce Leahy, on the one
hand, and Iron Mountain, on the other hand, to compel specific performance of
the other Party of its obligations under this Agreement.
Section 7.3. AMENDMENT. This Agreement may be amended by the Parties by
action taken by or on behalf of the respective Boards of Directors thereof at
any time prior to the Effective Time; provided, however, that, after approval of
this Agreement and the Merger by the Pierce Leahy Shareholders or the Iron
Mountain Stockholders, no amendment, which under Applicable Law may not be made
without the approval of the applicable shareholders or stockholders, may be made
without such approval. This Agreement may not be amended except by an instrument
in writing signed by the Parties hereto.
Section 7.4. WAIVER. At any time prior to the Effective Time, except to
the extent Applicable Law does not permit, either Iron Mountain or Pierce Leahy
may extend the time for the performance of any of the obligations or other acts
of the other, subject, however, to the terms and conditions of Section 7.1,
waive any inaccuracies in the representations and warranties of the other
contained herein or in any document delivered pursuant hereto and waive
compliance by the other with any of the agreements, covenants or conditions
contained herein. Any such extension or waiver shall be valid only if set forth
in an agreement in writing signed by the Party or Parties to be bound thereby.
Section 7.5. FEES, EXPENSES AND OTHER PAYMENTS.
(a) All costs and expenses incurred in connection with this Agreement, the
Merger and the Transactions, and compliance with Applicable Law and Contractual
Obligations as a consequence hereof and thereof, including, without limitation,
fees and disbursements of counsel, financial advisors and accountants, incurred
by the Parties shall be borne solely and entirely by the Party which has
incurred such costs and expenses (except as otherwise provided in
Section 5.5(e)); provided, however, that all filing fees for all filings made by
Pierce Leahy, Iron Mountain or their respective Affiliates in connection with
the Transactions that are associated with the Registration Statement and the HSR
Act shall be borne one half by each Party.
(b) In order to induce Iron Mountain to, among other things, enter into
this Agreement, Pierce Leahy agrees that if this Agreement is terminated (A) by
Iron Mountain pursuant to Section 7.1(d)(iii) hereof, (B) by Pierce Leahy
pursuant to Section 7.1(c)(ii) hereof, or (C) by Pierce Leahy or Iron Mountain
pursuant to Section 7.1(b)(ii) hereof and (1) Pierce Leahy's Board of Directors
shall have materially modified or withdrawn its approval, determination or
recommendation of this Agreement and the Transactions prior to the Pierce Leahy
Special Meeting or (2) there shall have been a proposal for an Other Transaction
(an "Other Proposal") and such proposal shall not have been withdrawn prior to
the Pierce Leahy Special Meeting and within one (1) year thereafter Pierce Leahy
enters into a definitive agreement with respect to such Other Proposal
(including any definitive agreement relating to an Other Proposal offered by the
same proponent or its Affiliate as such Other Proposal), then Pierce Leahy shall
promptly pay Iron Mountain a fee of $35 million. Any payment required by this
Section 7.5(b) shall be made in same day funds to Iron Mountain by Pierce Leahy
no later than five (5) business days following termination of this Agreement by
Pierce Leahy or Iron Mountain, as the case may be, or if applicable, within five
(5) days after execution of such definitive agreement.
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(c) In order to induce Pierce Leahy to, among other things, enter into this
Agreement, Iron Mountain agrees that if this Agreement is terminated (A) by
Pierce Leahy pursuant to Section 7.1(c)(iii) hereof, (B) by Iron Mountain
pursuant to Section 7.1(d)(ii) hereof, or (C) by Pierce Leahy or Iron Mountain
pursuant to Section 7.1(b)(ii) hereof and (1) Iron Mountain's Board of Directors
shall have materially modified or withdrawn its approval, determination or
recommendation of this Agreement and the Transactions prior to the Iron Mountain
Special Meeting or (2) there shall have been a proposal for an Iron Mountain
Transaction (a "Iron Mountain Proposal") and such proposal shall not have been
withdrawn prior to the Iron Mountain Special Meeting and within one (1) year
thereafter Iron Mountain enters into a definitive agreement with respect to such
Iron Mountain Proposal (including any definitive agreement relating to an Iron
Mountain Proposal offered by the same proponent or its Affiliate as such Iron
Mountain Proposal), then Iron Mountain shall promptly pay Pierce Leahy a fee of
$35 million. Any payment required by this Section 7.5(c) shall be made in same
day funds to Pierce Leahy by Iron Mountain no later than five (5) business days
following termination of this Agreement by Iron Mountain or Pierce Leahy, as the
case may be, or if applicable, within five (5) days after execution of such
definitive agreement.
Section 7.6. EFFECT OF INVESTIGATION. The right of any Party to terminate
this Agreement pursuant to Section 7.1 shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any Party, or
any Person controlling any such party or any of their respective Representatives
whether prior to or after the execution of this Agreement.
ARTICLE 8.
GENERAL PROVISIONS
Section 8.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties in this Agreement shall not survive the Closing,
and after the Effective Time neither Pierce Leahy, Iron Mountain or any of their
respective Subsidiaries or officers or directors shall have any further
obligation with respect thereto.
Section 8.2. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by giving
written notice) or sent by confirmed electronic transmission to the telecopier
number specified below:
(a) If to Iron Mountain:
745 Atlantic Avenue
Boston, MA 02111
Attention: C. Richard Reese
Chairman and Chief Executive Officer
Telecopier No.: (617) 535-4734
with a copy (which shall not constitute notice) to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Attention: William J. Curry, Esq.
Telecopier No.: (617) 338-2880
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(b) If to Pierce Leahy:
631 Park Avenue
King of Prussia, PA 19406
Attention: J. Peter Pierce
President and Chief Executive Officer
Telecopier No.: (610) 992-8394
with a copy (which shall not constitute notice) to:
Cozen and O'Connor
1900 Market Street
Philadelphia, PA 19103
Attention: Richard J. Busis, Esq.
Telecopier No.: (215) 665-2013
Section 8.3. HEADINGS. The headings contained in this Agreement are for
purposes of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.4. SEVERABILITY. If any term or provision of this Agreement
shall be held or deemed to be, or shall in fact be, invalid, inoperative,
illegal or unenforceable as applied to any particular case in any jurisdiction
or jurisdictions, or in all jurisdictions or in all cases, because of the
conflict of any provision with any constitution or statute or rule of public
policy or for any other reason, such circumstance shall not have the effect of
rendering the provision or provisions in question invalid, inoperative, illegal
or unenforceable in any other jurisdiction or in any other case or circumstance
or of rendering any other provision or provisions herein contained invalid,
inoperative, illegal or unenforceable to the extent that such other provisions
are not themselves actually in conflict with such constitution, statute or rule
of public policy, but this Agreement shall be reformed and construed in any such
jurisdiction or case as if such invalid, inoperative, illegal or unenforceable
provision had never been contained herein and such provision reformed so that it
would be valid, operative and enforceable to the maximum extent permitted in
such jurisdiction or in such case. Notwithstanding the foregoing, in the event
of any such determination the effect of which is to Affect Materially and
Adversely either Party, the Parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible to the fullest extent permitted by Applicable Law in an acceptable
manner to the end that the Transactions are fulfilled and consummated to the
maximum extent possible.
Section 8.5. ENTIRE AGREEMENT. This Agreement (together with the
Confidentiality Agreement, the Pierce Leahy Disclosure Schedule, the Iron
Mountain Disclosure Schedule and the other Collateral Documents delivered in
connection herewith) constitutes the entire agreement of the Parties and
supersedes all prior agreements and undertakings, both written and oral (other
than the Confidentiality Agreement), between the Parties, or any of them, with
respect to the subject matter hereof.
Section 8.6. ASSIGNMENT. This Agreement shall not be assigned by any of
the Parties hereto (including, without limitation, by operation of law) and any
purported assignment shall be null and void.
Section 8.7. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each Party (except as specifically set forth in
Section 5.8(b)), and, except for such Section, nothing in this Agreement,
express or implied, is intended to or shall confer upon any Person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 8.8. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by, and construed in accordance
with, the applicable laws of the United States of America and the laws of the
State of Delaware applicable to contracts made and performed
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in such state and, in any event, without giving effect to any choice or conflict
of laws provision or rule that would cause the application of domestic
substantive laws of any other jurisdiction, except to the extent that the
provisions of the PBCL apply to the Merger. Anything in this Agreement to the
contrary notwithstanding, in the event of any dispute between the parties which
results in a Legal Action, the prevailing party shall be entitled to receive
from the non-prevailing party reimbursement for reasonable legal fees and
expenses incurred by such prevailing party in such Legal Action.
Section 8.9. ENFORCEMENT OF THE AGREEMENT. Each Party recognizes and
agrees that each other Party's remedy at law for any breach of the provisions of
this Agreement would be inadequate and agrees that for breach of such
provisions, such Party shall, in addition to such other remedies as may be
available to it at law or in equity or as provided in this Agreement, be
entitled to injunctive relief and to enforce its rights by an action for
specific performance to the extent permitted by Applicable Law. Each Party
hereby waives any requirement for security or the posting of any bond or other
surety in connection with any temporary or permanent award of injunctive,
mandatory or other equitable relief. Nothing herein contained shall be construed
as prohibiting a Party from pursuing any other remedies available to such Party
for any breach or threatened breach hereof or failure to take or refrain from
any action as required hereunder to consummate the Merger and carry out the
Transactions.
Section 8.10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different Parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement. Any signature by facsimile
shall be deemed to be a manual signature for purposes of the execution of this
Agreement.
Section 8.11. MUTUAL DRAFTING. This Agreement is the result of the joint
efforts of Iron Mountain and Pierce Leahy, and each provision hereof has been
subject to the mutual consultation, negotiation and agreement of the parties and
there shall be no construction against any Party based on any presumption of
that Party's involvement in the drafting thereof.
ARTICLE 9.
DEFINITIONS
As used herein, unless the context otherwise requires, the following terms
(or any variant in the form thereof) have the following respective meanings.
Terms defined in the singular shall have a comparable meaning when used in the
plural, and VICE VERSA, and the reference to any gender shall be deemed to
include all genders. Unless otherwise defined or the context otherwise clearly
requires, terms for which meanings are provided herein shall have such meanings
when used in the Pierce Leahy Disclosure Schedule, the Iron Mountain Disclosure
Schedule and each Collateral Document, notice, certificate, communication,
opinion or other document executed or required to be executed pursuant hereto or
thereto or otherwise delivered, from time to time, pursuant hereto or thereto.
ADVERSE, ADVERSELY, when used alone or in conjunction with other terms
(including without limitation "Affect," "Change" and "Effect") shall mean, with
respect to Pierce Leahy or Iron Mountain, as the case may be, any Event which
would reasonably be expected to (a) adversely affect, in any material respect,
the validity or enforceability of this Agreement or any Collateral Document or
the likelihood of consummation of the Merger, (b) to result in a material
adverse effect on the business, operations, management, properties or the
condition, (financial or other), or results of operation (including without
limitation, earnings before interest, taxes, depreciation and amortization) of
Pierce Leahy and its Subsidiaries taken as a whole, or Iron Mountain and its
Subsidiaries taken as a whole, as the case may be (it being understood that
(i) a reduction in the market value of Iron Mountain Common Stock or Pierce
Leahy Common Stock shall not, in and of itself, constitute or be deemed to
reflect an Adverse
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Change, (ii) changes in general economic conditions or in the industry of Pierce
Leahy and Iron Mountain shall not constitute or be deemed to reflect an Adverse
Change and (iii) any obligation to repay, redeem or purchase Indebtedness of
Pierce Leahy in accordance with the terms thereof as in effect on the date of
this Agreement solely as a result of the Merger and the Transactions shall not
constitute or be deemed to reflect an Adverse Change), (c) materially impair
Pierce Leahy's or Iron Mountain's, as the case may be, ability to fulfill its
obligations under the terms of this Agreement or any Collateral Document, or
(d) materially adversely affect the aggregate rights and remedies of Iron
Mountain or Pierce Leahy, as the case may be, under this Agreement or any
Collateral Document.
AFFILIATE, AFFILIATED shall mean, with respect to any Person, (a) any other
Person at the time directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person, (b) any other Person of
which such Person at the time owns, or has the right to acquire, directly or
indirectly, ten percent (10%) or more of any class of the capital stock (other
than Pierce Leahy Preferred Stock) or beneficial interest of such Person,
(c) any other Person which at the time owns, or has the right to acquire,
directly or indirectly, ten percent (10%) or more of any class of the capital
stock (other than Pierce Leahy Preferred Stock) or beneficial interest of such
Person, (d) any executive officer or director of such Person, and (e) with
respect to any partnership, joint venture or similar Entity, any general partner
thereof.
AFFILIATE AGREEMENT shall have the meaning given to it in Section 5.6(a).
AGREEMENT shall mean this Agreement as originally in effect, including
unless the context otherwise specifically requires, all schedules and exhibits
hereto, as the same may from time to time be supplemented, amended, modified or
restated in the manner herein or therein provided.
APPLICABLE LAW shall mean any Law of any Authority, whether domestic or
foreign, including without limitation the DGCL, the PBCL, all federal and state
securities laws, the Code, ERISA and Environmental Laws, to or by which a Person
or it or any of its business or operations is subject or any of its property or
assets is bound.
AUTHORITY shall mean any governmental or quasi-governmental authority,
whether administrative, executive, judicial or legislative, whether foreign or
domestic.
BENEFIT ARRANGEMENT shall mean any material benefit arrangement that is not
a Plan, including (i) any employment or consulting agreement, (ii) any
arrangement providing for insurance coverage or workers' compensation benefits,
(iii) any incentive bonus or deferred bonus arrangement, (iv) any arrangement
providing termination allowance, severance, salary continuation for disability,
or other leave of absence, supplemental unemployment benefits, lay-off,
reduction in force or similar benefits, (v) any equity compensation plan,
(vi) any deferred compensation plan, (vii) any compensation policy and practice,
(viii) any educational assistance arrangements or policies and (ix) any change
of control arrangements or policies.
CLAIMS shall mean any and all debts, liabilities, obligations, losses,
damages, deficiencies, assessments and penalties, together with all Legal
Actions, pending or threatened in writing, claims and judgments of whatever kind
and nature relating thereto, and all fees, costs, expenses and disbursements
(including without limitation reasonable attorneys' and other legal fees, costs
and expenses) relating to any of the foregoing.
CLOSING shall have the meaning given to it in Section 1.3.
CLOSING DATE shall have the meaning given to it in Section 1.3.
COBRA shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, as set forth in Section 4980B of the Code and Part 6 of Title I of
ERISA.
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CODE shall have the meaning given to it in the recitals to this Agreement.
COLLATERAL DOCUMENTS shall mean the Pierce Leahy Shareholders' Agreement,
the Iron Mountain Voting Agreement, the Employment Agreement and the
Registration Rights Agreement Joinder.
CONFIDENTIALITY AGREEMENT shall have the meaning given to it in
Section 5.1(a).
CONTRACT, CONTRACTUAL OBLIGATION shall mean any term, condition, provision,
representation, warranty, agreement, covenant, undertaking, commitment,
indemnity or other obligation which is outstanding or existing under any
instrument, contract, lease or other contractual undertaking to which the
obligee is a party or by which it or any of its business is subject or property
or assets is bound.
CONTROL (including the terms "controlled," "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or properties,
whether through the ownership of stock, equity or other ownership, by contract,
arrangement or understanding, or as trustee or executor, by contract or credit
arrangement or otherwise.
CONVERTIBLE SECURITIES shall mean any evidences of indebtedness, shares of
capital stock (other than common stock), equity interests or other securities
directly or indirectly convertible into or exchangeable for shares of capital
stock, equity interests or other securities, whether or not the right to convert
or exchange thereunder is immediately exercisable or is conditioned upon the
passage of time, the occurrence or non-occurrence or existence or non-existence
of some other Event, or both.
DGCL shall have the meaning given to it in the recitals to this Agreement.
DISTRIBUTION shall mean, with respect to Pierce Leahy or Iron Mountain or
any of their respective Subsidiaries: (a) the declaration or payment of any
dividend on or in respect of any shares of any class of capital stock or other
equity interests of Pierce Leahy or Iron Mountain or any of their respective
Subsidiaries owned by a Person other than Pierce Leahy or Iron Mountain,
respectively, or any of their respective Subsidiaries, (b) the purchase,
redemption or other retirement of any shares of any class of capital stock or
other equity interest of Pierce Leahy or Iron Mountain or any of their
respective Subsidiaries owned by a Person other than Pierce Leahy or Iron
Mountain, respectively, or any of their respective Subsidiaries, and (c) any
other distribution on or in respect of any shares of any class of capital stock
or other equity interests of Pierce Leahy or Iron Mountain or any of their
respective Subsidiaries owned by a Person other than Pierce Leahy or Iron
Mountain, respectively, or any of their respective Subsidiaries.
DOJ shall mean the Department of Justice of the United States or any
successor Authority.
EFFECTIVE TIME shall have the meaning given to it in Section 1.4.
EMPLOYMENT AGREEMENT shall have the meaning given to it in Section 6.2(e).
ENFORCEABILITY EXCEPTIONS shall have the meaning set forth in
Section 3.1(b).
ENTITY shall mean any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual, business
trust, joint stock company, joint venture or other organization, entity or
business, whether acting in an individual, fiduciary or other capacity.
ENVIRONMENTAL LAW shall mean any Law relating to or otherwise imposing
liability or standards of conduct concerning pollution or protection of the
environment or occupational health and safety, including without limitation Laws
relating to emissions, discharges, releases or threatened releases of
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Hazardous Materials or other pollutants, contaminants, chemicals, noises, odors
or industrial, toxic or hazardous substances, materials or wastes, whether as
matter or energy, into the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata) or
otherwise relating to the manufacture, processing, generation, distribution,
use, treatment, storage, disposal, cleanup, transport or handling of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances, materials
or wastes.
ERISA shall mean the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, all as from time to time in effect, or any
successor law, rules or regulations, and any reference to any statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
ERISA AFFILIATE shall mean any Person that is or has ever been treated as a
single employer with Pierce Leahy or Iron Mountain, as applicable, under
Sections 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA.
EVENT shall mean the occurrence or existence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission or incident, or
any set or combination of any of the foregoing.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934, and the rules
and regulations of the Commission thereunder, all as from time to time in
effect, or any successor law, rules or regulations, and any reference to any
statutory or regulatory provision shall be deemed to be a reference to any
successor statutory or regulatory provision.
EXCHANGE AGENT shall have the meaning given to it in Section 2.2(a).
FTC shall mean the Federal Trade Commission of the United States or any
successor Authority.
GAAP shall mean generally accepted accounting principles as in effect from
time to time in the United States of America.
GOVERNMENTAL AUTHORIZATIONS shall mean all approvals, concessions, consents,
franchises, licenses, permits, plans, registrations and other authorizations of
all Authorities.
GOVERNMENTAL FILINGS shall mean all filings, including franchise and similar
Tax filings, and the payment of all fees, assessments, interest and penalties
associated with such filings, with all Authorities.
HAZARDOUS MATERIALS shall mean any substance (in whatever state of matter):
(a) the presence of which requires investigation or remediation under any
Environmental Law; (b) that is defined as a "hazardous waste", "hazardous
material" or "hazardous substance" under any Environmental Law; (c) that is
toxic, explosive, corrosive, pollutive, contaminating, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is regulated by any
Authority; or (d) that contains or consists of petroleum or petroleum products,
PCBs, asbestos, or urea formaldehyde foam insulation.
HSR ACT shall mean the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
and the rules and regulations thereunder, all as from time to time in effect, or
any successor law, rules or regulations, and any reference to any statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
INDEBTEDNESS shall mean, all obligations, contingent or otherwise, which in
accordance with GAAP should be classified upon the applicable Party's
consolidated balance sheet as liabilities in respect of borrowed money and all
guarantees, endorsements and other contingent obligations in respect of
Indebtedness of others (it being understood that obligations of a Party in
respect of trade payables and capitalized leases incurred in the ordinary course
of business shall not be included in the definition of Indebtedness).
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IRON MOUNTAIN shall have the meaning given to it in the recitals to this
Agreement.
IRON MOUNTAIN/ATSI OPTION PLAN shall have the meaning given to it in
Section 4.11(b).
IRON MOUNTAIN COMMON STOCK shall have the meaning given to it in
Section 2.1(c).
IRON MOUNTAIN DISCLOSURE SCHEDULE shall mean the disclosure schedule dated
as of the date of this Agreement delivered by Iron Mountain to Pierce Leahy;
provided, however, that Sections 4.1(c) (to the extent provided in
Section 4.1(c) of this Agreement) and 4.16(c) of the Iron Mountain Disclosure
Schedule shall be delivered by Iron Mountain to Pierce Leahy no later than
thirty (30) days following the date of this Agreement; and provided further,
that Section 4.11(a) of the Iron Mountain Disclosure Schedule shall be updated
one (1) business day prior to the Closing Date.
IRON MOUNTAIN ESPP PLAN shall have the meaning given to it in
Section 4.11(b).
IRON MOUNTAIN FINANCIAL STATEMENTS shall have the meaning given to it in
Section 4.2(b).
IRON MOUNTAIN 1995 OPTION PLAN shall have the meaning given to it in
Section 4.11(b).
IRON MOUNTAIN OPTION PLANS shall have the meaning given to it in
Section 4.11(b).
IRON MOUNTAIN OPTIONS shall have the meaning given to it in Section 2.5.
IRON MOUNTAIN PROPOSAL shall have the meaning given to it in
Section 7.5(c).
IRON MOUNTAIN SEC REPORTS shall have the meaning given to it in
Section 4.2(a).
IRON MOUNTAIN SPECIAL MEETING shall have the meaning given to it in
Section 1.2(b).
IRON MOUNTAIN STOCKHOLDERS shall have the meaning given to it in the
recitals to this Agreement.
IRON MOUNTAIN TRANSACTION shall mean a transaction or series of related
transactions (other than the Merger) resulting in any "change in control" of
Iron Mountain (as defined in Iron Mountain's indentures).
IRON MOUNTAIN VOTING AGREEMENT shall mean that certain Voting Agreement of
even date herewith among certain principal stockholders of Iron Mountain, Pierce
Leahy and Iron Mountain, together with all schedules and exhibits thereto, as
the same may from time to time be supplemented, amended, modified or restated in
the manner therein provided.
IRON MOUNTAIN'S KNOWLEDGE (including the term "to the knowledge of Iron
Mountain") means the knowledge, information or belief of C. Richard Reese, John
F. Kenny, Jr. and John P. Lawrence, without any duty to investigate or conduct
any inquiry.
JOINT PROXY STATEMENT/PROSPECTUS shall have the meaning given to it in
Section 5.14(a).
LAW shall mean any administrative, judicial, legislative or other action,
code, consent decree, constitution, decree, enactment, law, injunction,
judgment, order, ordinance, regulation, requirement, rule, rule of law,
settlement agreement, statute or writ of any Authority, domestic or foreign.
LEASE shall mean any lease of property, whether real, personal or mixed, and
all amendments thereto.
LEGAL ACTION shall mean any litigation or legal or other actions,
arbitrations, counterclaims, proceedings or suits, at law or in arbitration,
equity or admiralty commenced by any Person, whether or not purported to be
brought on behalf of a party hereto affecting such party or any of such party's
business, property or assets.
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LIEN shall mean any of the following: mortgage; lien (statutory or other);
or other security agreement; hypothecation, pledge or other deposit arrangement;
assignment; charge; levy; executory seizure; attachment; garnishment;
encumbrance (including any easement, exception, variance, reservation or
limitation, right of way, zoning restriction, building or use restriction, and
the like); conditional sale, title retention or other similar agreement,
arrangement, device or restriction; the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction; or
restriction on sale, transfer, assignment, disposition or other alienation (it
being understood that any Contractual Obligation which restrains, limits or
impedes the Party or any of its Subsidiaries from freely engaging in any
business or competing anywhere in the world shall not, in any event, be
considered to be a Lien for purposes of this Agreement).
MATERIAL OR MATERIALITY for the purposes of this Agreement, shall, unless
specifically stated to the contrary, be determined without regard to the fact
that various provisions of this Agreement set forth specific dollar amounts.
MATERIAL AGREEMENT shall mean any (i) employment agreement requiring
payments of base compensation in excess of $250,000 per year; (ii) joint venture
or similar contract or agreement; (iii) note, mortgage, indenture, guaranty,
other obligation, agreement or other instrument for or relating to any
Indebtedness (including assumed Indebtedness) of $1,000,000 or more;
(iv) Contractual Obligation which restrains, limits or impedes the Party or any
of its Subsidiaries from freely engaging in any business or competing anywhere
in the world; or (v) other Contractual Obligations involving an estimated total
future payment or payments by Pierce Leahy or Iron Mountain or any of their
respective Subsidiaries in excess of $2,000,000 annually or $5,000,000 in the
aggregate (it being understood that leases and customer contracts shall not, in
any event, be considered to be Material Agreements for purposes of this
Agreement).
MERGER shall have the meaning given to it in the recitals to this Agreement.
MULTIEMPLOYER PLAN shall mean a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA.
NYSE shall mean the New York Stock Exchange or any successor stock exchange
or market.
OPTION SECURITIES shall mean all rights, options and warrants, and calls or
commitments evidencing the right, to subscribe for, purchase or otherwise
acquire shares of capital stock, equity interests or Convertible Securities,
whether or not the right to subscribe for, purchase or otherwise acquire is
immediately exercisable or is conditioned upon the passage of time, the
occurrence or non-occurrence or the existence or non-existence of some other
Event.
ORGANIC DOCUMENTS shall mean, with respect to any Party, the Articles or
Certificate of Incorporation, by-laws or other organizational documents and all
shareholder or stockholder agreements, voting trusts and similar arrangements
applicable to any of its capital stock to which such Party is a party, each as
in effect from time to time.
OTHER PROPOSAL shall have the meaning given to it in Section 7.5(b).
OTHER TRANSACTION shall mean a transaction or series of related transactions
(other than the Merger) resulting in (a) any change in control of Pierce Leahy,
(b) any merger or consolidation of Pierce Leahy, regardless of whether Pierce
Leahy is the surviving Entity (other than any such transaction pursuant to which
Pierce Leahy acquires assets or a business so long as (i) such transaction is
not prohibited by Section 5.2 and (ii) Pierce Leahy is the surviving
corporation), (c) any tender offer or exchange offer for any securities of
Pierce Leahy or any other acquisition of greater than 20% of the Pierce Leahy
Common Stock outstanding, or (d) any sale or other disposition of assets of
Pierce Leahy
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or its Subsidiaries if the fair market value of such assets exceeds 20% of the
aggregate fair market value of the assets of Pierce Leahy and its Subsidiaries.
PARTY shall mean a signatory to this Agreement.
PBCL shall have the meaning given to it in the recitals to this Agreement.
PBGC shall mean the Pension Benefit Guaranty Corporation and any Entity
succeeding to any or all of its functions under ERISA.
PERMITTED INDEBTEDNESS shall mean shares of preferred stock of Pierce Leahy
or additional Indebtedness of Pierce Leahy (other than borrowings under existing
agreements as in effect on the date of this Agreement) that is redeemable or
repayable, as the case may be, at any time at the option of Pierce Leahy for
cash without the payment of any penalty or premium so long as (i) such preferred
stock or Indebtedness does not represent Option Securities or Convertible
Securities and (ii) the sum of (A) the aggregate liquidation preference and
other amounts required to be paid to redeem such shares and (B) the aggregate
principal amount outstanding or available for borrowing (whichever is higher)
under such Indebtedness does not exceed $50 million.
PERMITTED LIENS shall mean any of the following Liens: (i) building and
zoning ordinances and by-laws of any applicable Authority; (ii) taxes assessed
or to be assessed for the then current year to the extent the same are not yet
due or payable; and (iii) rights, easements and restrictions of record, provided
the same do not materially interfere with the current occupancy and use of any
property of Pierce Leahy or Iron Mountain or any of their respective
Subsidiaries.
PERSON shall mean any natural individual or any Entity.
PIERCE LEAHY shall have the meaning given to it in the introductory
paragraph to this Agreement.
PIERCE LEAHY COMMON STOCK shall have the meaning given to it in
Section 2.1(a).
PIERCE LEAHY DISCLOSURE SCHEDULE shall mean the disclosure schedule dated as
of the date of this Agreement delivered by Pierce Leahy to Iron Mountain;
provided, however, that Sections 3.1(c) (to the extent provided in
Section 3.1(c) of this Agreement) and 3.16(c) of the Pierce Leahy Disclosure
Schedule shall be delivered by Pierce Leahy to Iron Mountain no later than
thirty (30) days following the date of this Agreement; and provided further,
that Section 3.11(a) of the Pierce Leahy Disclosure Schedule shall be updated
one (1) business day prior to the Closing Date.
PIERCE LEAHY FINANCIAL STATEMENTS shall have the meaning given to it in
Section 3.2(b).
PIERCE LEAHY 1997 OPTION PLAN shall have the meaning given to it in
Section 3.11(b).
PIERCE LEAHY NONQUALIFIED OPTION PLAN shall have the meaning given to it in
Section 3.11(b).
PIERCE LEAHY OPTION PLANS shall have the meaning given to it in
Section 3.11(b).
PIERCE LEAHY OPTIONS shall have the meaning given to it in Section 2.4.
PIERCE LEAHY PREFERRED STOCK shall have the meaning given to it in
Section 2.1(b).
PIERCE LEAHY PRINCIPAL SHAREHOLDERS shall mean those shareholders of Pierce
Leahy identified on Section 9 of the Pierce Leahy Disclosure Schedule.
PIERCE LEAHY SEC REPORTS shall have the meaning given to it in
Section 3.2(a).
PIERCE LEAHY SHAREHOLDERS shall have the meaning given to it in the recitals
to this Agreement.
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PIERCE LEAHY SHAREHOLDERS' AGREEMENT shall mean that certain Shareholders'
Agreement of even date herewith among all or a portion of the Pierce Leahy
Principal Shareholders, Iron Mountain and Pierce Leahy, together with all
schedules and exhibits thereto, as the same may from time to time be
supplemented, amended, modified or restated in the manner therein provided.
PIERCE LEAHY SPECIAL MEETING shall have the meaning given to it in
Section 1.2(a).
PIERCE LEAHY'S KNOWLEDGE (including the term "to the knowledge of Pierce
Leahy") means the knowledge, information or belief of J. Peter Pierce, Douglas
B. Huntley and Joseph P. Linaugh, without any duty to investigate or conduct any
inquiry.
PLAN shall mean, at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which Pierce Leahy or Iron Mountain, or, in
the case of any such plan subject to Title IV of ERISA, an ERISA Affiliate is
(or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer," as defined in Section 3(5) of ERISA, other
than a Multiemployer Plan.
PRIVATE AUTHORIZATIONS shall mean all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than Authorities) including without limitation those with respect to patents,
trademarks, service marks, trade names, copyrights, computer software programs,
technology and know-how, but not including those with respect to Leases.
REDEEMABLE PREFERRED STOCK shall have the meaning given to it in
Section 5.2(viii).
REGISTERED STOCK shall mean those shares of Pierce Leahy Common Stock to be
issued in accordance with Section 2.1(c) and to be registered pursuant to the
Securities Act.
REGISTRATION RIGHTS AGREEMENT shall have the meaning given to it in
Section 5.6(b).
REGISTRATION RIGHTS AGREEMENT JOINDER shall have the meaning given to it in
Section 5.6(b).
REGISTRATION STATEMENT shall mean the registration statement (including the
Joint Proxy Statement/ Prospectus, exhibits, financial statements and schedules
included therein), and all amendments thereof (including post-effective
amendments) and supplements to the Joint Proxy Statement/Prospectus which are a
part thereof, filed under the Securities Act registering the Registered Stock.
REPRESENTATIVES of a Party shall mean the officers, directors, employees,
accountants, counsel, financial advisors, consultants and other representatives
of such Party.
REQUIRED DISCLOSURE shall have the meaning given to it in Section 5.10.
SEC shall mean the Securities and Exchange Commission of the United States
or any successor Authority.
SECURITIES ACT shall mean the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as from time to time in effect, or
any successor law, rules or regulations, and any reference to any statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
SPECIAL MEETINGS shall have the meaning given to it in Section 1.2(b).
STOCK DIVIDEND shall have the meaning given to it in Section 5.19.
SUBSIDIARY shall mean, with respect to any Person, (i) each Entity of which
such Person owns, either directly or indirectly, 50% or more of the stock or
other equity interests, (ii) each partnership in which such Person or another
Subsidiary of such Person is a general partner or a managing partner and
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(iii) each limited liability company in which such Person or another Subsidiary
of such Persons is a managing member or otherwise controls.
SURVIVING CORPORATION shall have the meaning given to it in Section 1.1.
TAX (and "Taxable", which shall mean subject to Tax), shall mean (a) all
taxes (domestic or foreign), including without limitation any income (net, gross
or other including recapture of any tax items such as investment tax credits),
alternative or add-on minimum tax, gross income, gross receipts, gains, sales,
use, leasing, lease, user, ad valorem, transfer, recording, franchise, profits,
property (real or personal, tangible or intangible), fuel, license, withholding
on amounts paid to or by Pierce Leahy or Iron Mountain, payroll, employment,
unemployment, social security, excise, severance, stamp, occupation, premium,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest, levies, assessments, charges, penalties, addition to tax or additional
amount imposed by any Taxing Authority, (b) any joint or several liability of
Pierce Leahy or Iron Mountain with any other Person for the payment of any
amounts of the type described in (a), and (c) any liability of Pierce Leahy or
Iron Mountain for the payment of any amounts of the type described in (a) as a
result of any express or implied obligation to indemnify any other Person.
TAX RETURN OR RETURNS shall mean all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
TAXING AUTHORITY shall mean any Authority responsible for the imposition of
any Tax.
TERMINATION DATE shall mean April 30, 2000 or such other date as the Parties
may, from time to time, mutually agree.
TRANSACTIONS shall mean the transactions contemplated by this Agreement or
the Merger or by any Collateral Document executed or required to be executed in
connection herewith or therewith, including, without limitation, the election of
directors contemplated by Section 1.8.
VOTING DEBT shall have the meaning given to it in Section 3.11(a).
YEAR 2000 SYSTEM shall mean any software programs, computer hardware and
networks, telephone and voicemail systems and electronically-based systems
utilized to manage inventory, billing, financial transactions or reporting,
facility security, or fire suppression.
[Signatures appear on following page.]
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IN WITNESS WHEREOF, Iron Mountain and Pierce Leahy have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
IRON MOUNTAIN INCORPORATED
By: /s/ C. RICHARD REESE
----------------------------------------------------------------------
Name: C. Richard Reese
Title: Chairman and Chief Executive
Officer
PIERCE LEAHY CORP.
By: /s/ J. PETER PIERCE
----------------------------------------------------------------------
Name: J. Peter Pierce
Title: Chief Executive Officer
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ANNEX B
SHAREHOLDERS' AGREEMENT
SHAREHOLDERS' AGREEMENT, dated as of October 20, 1999, among Iron Mountain
Incorporated, a Delaware corporation ("Iron Mountain"), Pierce Leahy Corp., a
Pennsylvania corporation ("Pierce Leahy"), and those shareholders of Pierce
Leahy listed on Schedule A, as updated from time to time in accordance with
Section 5.8 hereof, and signatory hereto (the "Shareholders").
W I T N E S S E T H:
WHEREAS, each of the Shareholders is the beneficial and/or record owner of
shares of Common Stock, $.01 par value per share ("Pierce Leahy Common Stock"),
of Pierce Leahy;
WHEREAS, on the date hereof, Pierce Leahy and Iron Mountain are entering
into an Agreement and Plan of Merger (as such agreement may be amended,
modified, supplemented and in effect from time to time, the "Merger Agreement")
pursuant to which Iron Mountain will be merged with and into Pierce Leahy (the
"Merger"), with Pierce Leahy continuing as the Surviving Corporation; and
WHEREAS, in order to induce Pierce Leahy and Iron Mountain to enter into the
Merger Agreement and perform its obligations thereunder, the Shareholders wish
to make certain representations, warranties, covenants and agreements in
connection with the Merger.
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Capitalized terms used herein but not otherwise defined
herein shall have the respective meanings ascribed thereto in the Merger
Agreement and the following terms shall have the following meanings:
"BENEFICIALLY OWN" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
"COMMON STOCK" shall mean the Common Stock of Pierce Leahy or the Surviving
Corporation, as the context indicates.
"CUMULATIVE LIMITATION AMOUNT" shall mean the number of shares of Common
Stock of the Surviving Corporation equal to the greater of (i) one percent (1%)
of the shares of Common Stock of the Surviving Corporation outstanding as shown
by the most recent report or statement published by the Surviving Corporation or
(ii) the average weekly reported volume of trading in such securities on all
national securities exchanges and/or reported through the automated quotation
system of a registered securities association during the four calendar weeks
prior to the date of sale.
"EQUITY SECURITIES" shall have the meaning set forth in Rule 405 under the
Securities Act.
"MERGER AGREEMENT" shall have the meaning set forth in the second recital of
this Agreement.
"PERMITTED ASSIGNEE" shall mean with respect to each Shareholder, (x) such
Shareholder's spouse, lineal or adopted descendants, siblings and lineal or
adopted descendants of siblings, (y) a trust primarily for the benefit of, the
estate of, executors, personal representatives, administrators, guardians or
conservators of, any of the individuals referred to in the foregoing clause (x)
(but only in their capacity as such) and (z) charitable trusts and charitable
foundations. Notwithstanding anything to the
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contrary contained herein, from and after the Closing Date, charitable trusts
and charitable foundations shall not be bound by the provisions of this
Agreement.
"QUARTER" shall mean any of the following calendar quarters: (i) January,
February and March; (ii) April, May and June; (iii) July, August and September;
and (iv) October, November and December.
"RESTRICTED SHAREHOLDER" shall mean any Shareholder that, individually or
together with its Affiliates, the other Shareholders and Permitted Assignees of
the Shareholders (but only to the extent of Transfers of shares of Common Stock
to them after the date hereof), beneficially owns, or is a member of a "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) that beneficially
owns, 5% or more of Common Stock.
"SHAREHOLDER" shall mean each Shareholder party to this Agreement
(including, without limitation, any such Person that becomes party to this
Agreement after the date hereof in accordance with Sections 3.1, 3.4 and 5.8
hereof).
"SHAREHOLDER DISCLOSURE SCHEDULE" shall mean the disclosure schedule
attached to this Agreement, which shall be updated to reflect any Shareholder
that becomes a party hereto after the date hereof.
"SUBJECT SHARES" shall mean those shares of Common Stock of Pierce Leahy or
the Surviving Corporation, as the case may be, identified as such on
Section 2.1(a) of the Shareholder Disclosure Schedule.
"TRANSFER" shall mean any sale, transfer, assignment, pledge, encumbrance or
other disposition, including through any "short sale" or derivative
transactions.
"VOTING AGREEMENT" shall mean the Amended and Restated Voting Agreement
dated as of February 27, 1998 among Pierce Leahy, the Voting Trustees and the
other shareholders of Pierce Leahy party thereto.
"VOTING AGREEMENT INTERESTS" shall mean interests in the Voting Agreement,
as represented by certificates issued under the Voting Agreement.
"VOTING SECURITIES" shall have the meaning set forth in Rule 405 under the
Securities Act.
"VOTING TRUSTEES" shall mean Leo W. Pierce, Sr. and J. Peter Pierce, in
their capacity as Voting Trustees under the Voting Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
2.1 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each Shareholder
represents and warrants, severally but not jointly, to Iron Mountain as follows:
(a) OWNERSHIP OF PIERCE LEAHY COMMON STOCK. Set forth on Section 2.1(a) of
the Shareholder Disclosure Schedule next to the name of such Shareholder are all
(i) shares of Pierce Leahy Common Stock and Voting Agreement Interests owned of
record by such Shareholder, (ii) "Margin Shares" or "Designated Shares"
(designated as "Proxy Shares" on the Shareholder Disclosure Schedule) held by
such Shareholder as designated under the Voting Agreement, (iii) Option and
Convertible Securities beneficially owned by Shareholder that are exchangeable
for or convertible into shares of capital stock of Pierce Leahy, and
(iv) Subject Shares held by or attributable to such Shareholder. Except as set
forth on Section 2.1(a) of the Shareholder Disclosure Schedule, (i) such
Shareholder owns (whether beneficially or of record) such securities free and
clear of all Liens and (ii) there are no options, warrants or other rights,
agreements, arrangements or commitments of any character to which such
Shareholder is a party relating to the pledge, disposition or voting of any such
securities (other than
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this Agreement, the Voting Agreement, the Merger Agreement and any agreements
relating to the implementation of Section 3.4 of this Agreement). Except for
shares of Pierce Leahy Common Stock subject to the Voting Agreement or as set
forth on Section 2.1(a) of the Shareholder Disclosure Schedule, such Shareholder
does not beneficially own any shares of Pierce Leahy Common Stock.
(b) AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. Such Shareholder has the
full legal right and power and all authority required to enter into, execute and
deliver this Agreement and to perform fully such Shareholder's obligations
hereunder. The execution and delivery of this Agreement by such Shareholder have
been duly authorized by all requisite organizational action, if any, on the part
of such Shareholder. This Agreement has been duly executed and delivered and
constitutes the legal, valid and binding obligation of such Shareholder,
enforceable against such Shareholder in accordance with its terms (subject to
the Enforceability Exceptions).
(c) NO CONFLICTS; CONSENTS. (i) Except as set forth in Section 2.1(c) of
the Shareholder Disclosure Schedule, the execution and delivery by such
Shareholder of this Agreement do not, and the consummation of the transactions
contemplated hereby will not, conflict with or result in any violation of or
default (with or without notice or lapse of time, or both) under (A) any
contract, agreement or other binding arrangement to which such Shareholder is a
party or (B) any judgment, order, writ, injunction or decree of any court,
governmental body, administrative agency or arbitrator applicable to such
Shareholder.
(ii) No Governmental Authorizations or Private Authorizations are required
to be obtained or made by such Shareholder in connection with the execution and
delivery by such Shareholder of this Agreement and the consummation of the
transactions contemplated hereby.
(d) INVESTIGATION. Such Shareholder has had a full opportunity to review
and discuss this Agreement and the Merger Agreement and to ask all questions of
Iron Mountain, Pierce Leahy and Pierce Leahy's directors and executive officers
necessary in order for such Shareholder to make an informed decision to enter
into this Agreement.
ARTICLE III
COVENANTS
3.1 NO DISPOSITION OR ACQUISITION OF SHARES PRIOR TO CLOSING. Each
Shareholder agrees that prior to the Closing of the Merger such Shareholder
shall not (i) Transfer any of the shares of Pierce Leahy Common Stock
(including, without limitation, any Subject Shares) or Voting Agreement
Interests set forth opposite his, her or its name on Section 2.1(a) of the
Shareholder Disclosure Schedule as to which such Shareholder has or shares
dispositive power, (ii) withdraw any voting trust certificates under the Voting
Agreement and (iii) designate the shares of Pierce Leahy Common Stock
represented by Voting Agreement Interests as "Margin Shares" or "Designated
Shares" under the Voting Agreement; PROVIDED, HOWEVER, that each Shareholder
shall have the right to Transfer such shares of Pierce Leahy Common Stock or
Voting Agreement Interests to a Permitted Assignee if such Permitted Assignee
becomes a party to this Agreement and agrees to be bound by the terms hereof
(but only with respect to such Transferred shares); PROVIDED, FURTHER, HOWEVER,
that prior to the Closing Date the Shareholders shall be entitled to transfer up
to an aggregate of 50,000 shares of Pierce Leahy Common Stock to Permitted
Assignees described under clause (z) of the definition thereof and such
Transfers shall be free and clear of the obligations set forth in this
Agreement. Each Shareholder agrees that the certificates representing the shares
of Pierce Leahy Common Stock or Voting Agreement Interests owned by him shall
bear a legend indicating that such shares are subject to this Agreement, which
legend shall be removed upon termination of this Agreement.
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3.2 VOTING ARRANGEMENTS; VOTING AGREEMENT.
(a) Each Shareholder agrees that, except pursuant to this Agreement or the
Voting Agreement, prior to the Closing he, she or it shall not grant any
proxies, deposit any shares of Pierce Leahy Common Stock into a voting trust or
enter into any voting agreement with respect to any shares of Pierce Leahy
Common Stock now or hereafter owned, beneficially or of record, by him, her or
it.
(b) The Shareholders agree that they shall take no action to terminate or
rescind the Voting Agreement which will be effective on or prior to the Closing
Date. Without intending to limit the generality of the foregoing, Leo W. Pierce,
Sr. and J. Peter Pierce each agrees that, in his capacity as a Voting Trustee,
he will not resign from his position as a Voting Trustee prior to the Closing
Date and will not execute a deed of termination under the Voting Agreement which
will be effective on or prior to the Closing Date.
3.3 STANDSTILL. Each Shareholder agrees that, (i) from the date hereof
until the Closing Date and (ii) from and after the Closing Date for so long as
he, she or it shall be a Restricted Shareholder, he, she or it shall not,
without the prior written consent of the board of directors of Iron Mountain or
the Surviving Corporation, (A) in any manner acquire, agree to acquire or make
any proposal to acquire, directly or indirectly, any Equity Securities of Pierce
Leahy, Iron Mountain or the Surviving Corporation (other than (x) shares of
Pierce Leahy Common Stock received in connection with the Stock Dividend,
(y) pursuant to options granted to such Shareholder by Pierce Leahy or the
Surviving Corporation and (z) acquisitions of shares of Common Stock in an
aggregate amount not to exceed $10 million), (B) propose to enter into, directly
or indirectly, a merger or other business combination involving Pierce Leahy,
Iron Mountain or the Surviving Corporation or propose to purchase, directly or
indirectly, a material portion of the assets of Pierce Leahy, Iron Mountain or
the Surviving Corporation, (C) make, or in any way participate, directly or
indirectly, in, any "solicitation" of "proxies" (as such terms are used in
Regulation 14A under the Exchange Act) to vote or consent or seek to advise or
influence any Person with respect to the voting of, or granting of a consent
with respect to, any Voting Securities of Iron Mountain or the Surviving
Corporation (provided, however, to the extent such Shareholder is a director or
officer of the Surviving Corporation, the foregoing shall not limit the ability
of such Shareholder to fulfill his or her duties as such), (D) form, join or in
any way participate in a "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) for the purpose of acquiring, holding, voting or Transferring of
any Equity Securities of Iron Mountain or the Surviving Corporation (other than
the powers granted the Voting Trustees under the Voting Agreement or pursuant to
the other terms and conditions of the Voting Agreement or of this Agreement),
(E) otherwise act, alone or in concert with others, to seek to control or
influence in any public manner or public forum the management or policies of
Iron Mountain or the Surviving Corporation (provided, however, that the
foregoing shall not limit the ability to vote any shares of any Equity
Securities of Iron Mountain or the Surviving Corporation or to the extent such
Shareholder is a director or officer of the Surviving Corporation, fulfill his
or her duties as such), (F) disclose any intention, plan or arrangement
inconsistent with the foregoing, (G) advise, assist (including by knowingly
providing or arranging financing for that purpose) or encourage any other Person
in connection with any of the foregoing or (H) take any action which might
require Iron Mountain or the Surviving Corporation to make a public announcement
regarding the possibility of a transaction between such Shareholder and Iron
Mountain or the Surviving Corporation, as the case may be (including any of
their respective Affiliates).
3.4 RESTRICTIONS ON SALE AFTER THE CLOSING.
(a) Each Shareholder agrees that until the first to occur of (i) the fifth
anniversary of the Closing Date, (ii) the Subject Shares then owned by the
Shareholders represent less than 5% of the Common Stock of the Surviving
Corporation outstanding, or (iii) J. Peter Pierce no longer serves as a director
of the Surviving Corporation (other than as a result of his resignation or his
refusal to accept nomination by the Board of Directors of the Surviving
Corporation), such Shareholder will not Transfer any Subject
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Shares if after giving effect to such Transfer and all other Transfers of
Subject Shares by the Shareholders during the same Quarter, Transfers by the
Shareholders of Subject Shares during such Quarter shall exceed the Cumulative
Limitation Amount. The foregoing sentence is not intended to limit or restrict
(A) Transfers of Subject Shares pursuant to an underwritten offering, (B) BONA
FIDE pledges of Subject Shares so long as such pledge and any obligations
underlying, or that are secured by, such pledge are recourse to the Shareholder
or Transfers of such Subject Shares by the pledgee, (C) Transfers to Permitted
Assignees or upon the death, divorce or dissolution of such Shareholder so long
as the transferee executes an instrument in form reasonably satisfactory to the
Surviving Corporation pursuant to which such transferee shall agree to be bound
by and to perform all obligations of a Shareholder hereunder with respect to
such Transferred Subject Shares, or (D) Transfers in connection with an
extraordinary corporate transaction, such as a tender offer, merger,
consolidation, business combination, reorganization, recapitalization or
liquidation involving the Surviving Corporation. Any Subject Shares Transferred
pursuant to clauses (A) or (D) or by a pledgee under clause (B) shall no longer
be subject to this Agreement.
(b) Each Shareholder agrees that (i) the certificates representing Subject
Shares owned by him, her or it shall bear a legend indicating that such shares
are subject to this Agreement, which legend shall be removed upon termination of
this Agreement, and (ii) in connection with, and as a condition to, any Transfer
he, she or it shall be required to deliver to the Surviving Corporation or its
transfer agent an instrument certifying compliance by such Shareholder with this
Section 3.4.
ARTICLE IV
VOTING; WAIVER OF RIGHTS
4.1 AGREEMENT TO VOTE. Each Shareholder hereby agrees that, at any meeting
of the shareholders of Pierce Leahy, however called, and at every adjournment
thereof, and in any action by written consent of the shareholders of Pierce
Leahy, to (a) vote all of the shares of Pierce Leahy Common Stock to which he,
she or it is entitled to vote (including, without limitation, in any such
Shareholder's capacity as a Voting Trustee under the Voting Agreement) in favor
of the adoption of the Merger Agreement and the Transactions and each of the
other transactions contemplated thereby and any action required in furtherance
thereof, and (b) vote such shares against any Other Transaction; PROVIDED,
HOWEVER, that, if a Shareholder is a member of the Board of Directors of Pierce
Leahy, nothing herein shall be construed to obligate such Shareholder or
representative to act in his capacity as a director in any manner which may
conflict with such Person's fiduciary duties as a director of Pierce Leahy.
4.2 WAIVER OF CERTAIN RIGHTS. Each Shareholder hereby waives and agrees
not to assert any claims or rights it may have against any officer or director
of Pierce Leahy relating to or arising out of actions or omissions occurring at
or prior to the Effective Time, including, without limitation, in respect of
approval or adoption of the Merger Agreement or the consummation of the Merger
or the other transactions contemplated thereby.
ARTICLE V
MISCELLANEOUS
5.1 TERMINATION. This Agreement shall terminate upon the earlier to occur
of (i) the mutual consent of Iron Mountain and all of the Shareholders,
(ii) the termination of the Merger Agreement prior to the consummation of the
Merger (provided, however, in the event of a termination of the Merger Agreement
under circumstances where Iron Mountain is entitled to the fee contemplated by
Section 7.5(b) thereof, the provisions of Section 4.1 shall survive the
termination of the Merger
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Agreement and this Agreement for a period of one (1) year after such
termination); and (iii) the tenth anniversary of the Closing Date.
5.2 AMENDMENT. This Agreement may be amended only by a written instrument
executed by the parties or their respective successors or assigns.
5.3 NOTICES. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered or transmitted, and shall be effective upon receipt, if
delivered personally, mailed by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified in a written notice delivered in
accordance with the terms hereof) or sent by confirmed electronic transmission
to the telecopier number specified below:
If to Iron Mountain, to:
745 Atlantic Avenue
Boston, MA 02111
Attention: C. Richard Reese
Chairman and Chief Executive Officer
Telecopier No.: (617) 535-4734
with a copy (which shall not constitute notice) to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Telecopier No.: (617) 338-2880
Attention: William J. Curry, Esq.
If to the Shareholders, to
such Shareholder at the address set forth on Section 2.1(a) of the
Shareholder Disclosure Schedule
with a copy (which shall not constitute notice) to:
Cozen and O'Connor
1900 Market Street
Philadelphia, PA 19103
Attention: Richard J. Busis, Esq.
Telecopier No.: (215) 665-2013
5.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts and each counterpart shall be deemed to be an original, but all of
which shall constitute one and the same original.
5.5 APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with the laws of the Commonwealth of Pennsylvania without reference
to choice of law principles, including all matters of construction, validity and
performance.
5.6 SEVERABILITY; ENFORCEMENT. The invalidity of any portion hereof shall
not affect the validity, force or effect of the remaining portions hereof. If it
is ever held that any restriction hereunder is too broad to permit enforcement
of such restriction to its fullest extent, each party agrees that a court of
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competent jurisdiction may enforce such restriction to the maximum extent
permitted by law, and each party hereby consents and agrees that such scope may
be judicially modified accordingly in any proceeding brought to enforce such
restriction.
5.7 FURTHER ASSURANCES. Each party hereto shall execute and deliver such
additional documents as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
5.8 ADDITIONAL SHAREHOLDERS; ASSIGNMENT. The parties hereto agree that,
from time to time after the date hereof, additional Shareholders may be added as
parties hereto by executing a counterpart of this Agreement or an instrument,
reasonably acceptable to Pierce Leahy and Iron Mountain or the Surviving
Corporation, as applicable, whereby such Shareholder shall join in and become a
party to this Agreement as a Shareholder and shall agree to be bound by and to
perform all obligations of a Shareholder hereunder, without in either case
further action by any party hereto or thereto. In each such event, the
Shareholder Disclosure Schedule shall be updated to reflect information relating
to such Shareholder. Except as otherwise expressly provided in this Agreement,
neither this Agreement nor any of the rights, interest or obligations hereunder
shall be assigned by any of the parties hereto without the prior written consent
of the other parties. Notwithstanding the foregoing, after the Merger, the
Surviving Corporation may assign its rights under this Agreement to any Entity
it is merged into or consolidates with.
5.9 ENTIRE AGREEMENT. This Agreement, the Merger Agreement and the
Collateral Documents contain the entire understanding of the parties hereto and
thereto with respect to the subject matter contained herein and therein, and
supersede and cancel all prior agreements, negotiations, correspondence,
undertakings and communications of the parties, oral or written, respecting such
subject matter. There are no restrictions, promises, representations,
warranties, agreements or undertakings of any party hereto or to the Merger
Agreement or any of the Collateral Documents with respect to the transactions
contemplated by this Agreement and the Merger Agreement and the Collateral
Documents other than those set forth or made reference to herein or therein or
made hereunder or thereunder.
5.10 SPECIFIC PERFORMANCE. The parties hereto agree that the remedy at law
for any breach of this Agreement will be inadequate and that any party by whom
this Agreement is enforceable shall be entitled to specific performance in
addition to any other appropriate relief or remedy. Such party may, in its sole
discretion, apply to a court of competent jurisdiction for specific performance
or injunctive or such other relief as such court may deem just and proper in
order to enforce this Agreement or prevent any violation hereof and, to the
extent permitted by applicable law, each party waives any objection to the
imposition of such relief.
5.11 HEADINGS; REFERENCES. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. All references herein to
"Sections" or "Exhibits" shall be deemed to be references to Articles or
Sections hereof or Exhibits hereto unless otherwise indicated.
5.12 SEVERAL AND NOT JOINT OBLIGATIONS. The obligations of the
Shareholders under this Agreement are the several and not joint obligations of
each such Shareholder, each Shareholder has made an individual and separate
decision relating to his, her or its execution of this Agreement, and the
Shareholders shall not by action of this Agreement (i) be deemed to be acting in
concert or as a "group" (within the meaning of Section 13(d)(3) of the Exchange
Act) or (ii) be deemed to have formed a partnership or joint venture.
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IN WITNESS WHEREOF, each of the parties hereto had caused this Agreement to
be duly executed and delivered as of the day and year first above written.
<TABLE>
<S> <C> <C>
IRON MOUNTAIN INCORPORATED
By: /s/ C. RICHARD REESE
-----------------------------------------
Name: C. Richard Reese
Title: Chairman and Chief Executive
Officer
PIERCE LEAHY CORP.
By: /s/ J. PETER PIERCE
-----------------------------------------
Name: J. Peter Pierce
Title:
SHAREHOLDERS:
By: /s/ LEO W. PIERCE, SR.
-----------------------------------------
Leo W. Pierce, Sr., Trustee u/a/t dated
January 6, 1997
/s/ LEO W. PIERCE, SR.
---------------------------------------------
Leo W. Pierce, Sr.
/s/ J. PETER PIERCE
---------------------------------------------
J. Peter Pierce
/s/ J. PETER PIERCE
---------------------------------------------
J. Peter Pierce, Trustee
Leo W. Pierce Trust for the family of J. Peter
Pierce
/s/ J. PETER PIERCE
---------------------------------------------
J. Peter Pierce, Trustee
Karen Pierce 1996 Irrevocable Trust
/s/ LEO W. PIERCE, JR.
---------------------------------------------
Leo W. Pierce, Jr.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
/s/ LEO W. PIERCE, JR.
---------------------------------------------
Leo W. Pierce, Jr., Trustee Under Irrevocable
Agreement of Trust dated March 6, 1997
/s/ MICHAEL J. PIERCE
---------------------------------------------
Michael J. Pierce
/s/ MARY E. PIERCE
---------------------------------------------
Mary E. Pierce
/s/ BARBARA P. QUINN
---------------------------------------------
Barbara P. Quinn
/s/ BARBARA P. QUINN
---------------------------------------------
Barbara P. Quinn, Trustee under Irrevocable
Agreement of Trust dated December 30, 1996
f/b/o Michael J. Pierce
/s/ CONSTANCE P. BUCKLEY
---------------------------------------------
Constance P. Buckley
/s/ CONSTANCE P. BUCKLEY, TRUSTEE
---------------------------------------------
Constance P. Buckley, Trustee under Irrevocable
Trust Agreement dated December 23, 1996
/s/ KATHRYN COX
---------------------------------------------
Kathryn Cox
</TABLE>
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ANNEX C
VOTING AGREEMENT
VOTING AGREEMENT (this "AGREEMENT"), dated as of October 20, 1999, among
(i) Piece Leahy Corp., a Pennsylvania corporation ("PIERCE LEAHY"), (ii) Kent P.
Dauten, Vincent J. Ryan, Schooner Capital LLC, B. Thomas Golisano and C. Richard
Reese (each a "STOCKHOLDER" and collectively, the "STOCKHOLDERS"), each of which
is a stockholder of Iron Mountain Incorporated, a Delaware corporation ("IRON
MOUNTAIN") and (iii) Iron Mountain.
W I T N E S S E T H:
WHEREAS, each of the Stockholders is the beneficial and record owner of the
shares of common stock, par value $.01 per share, of Iron Mountain (the "IRON
MOUNTAIN STOCK"), set forth opposite each such Stockholder's name on SCHEDULE A
hereto;
WHEREAS, concurrently with the execution of this Agreement, Iron Mountain
and Pierce Leahy are entering into an Agreement and Plan of Merger (as such
agreement may be amended, modified, supplemented and in effect from time to
time, the "MERGER AGREEMENT") pursuant to which Iron Mountain will merge with
and into Pierce Leahy (the "MERGER"), with Pierce Leahy continuing as the
Surviving Corporation; and
WHEREAS, in order to induce Pierce Leahy and Iron Mountain to enter into the
Merger Agreement, the Stockholders wish to make certain representations,
warranties, covenants and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Capitalized terms used herein but not otherwise defined
herein shall have the respective meanings ascribed thereto in the Merger
Agreement and the following terms shall have the following meanings:
"BENEFICIALLY OWN" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
"IRON MOUNTAIN" shall have the meaning set forth in the opening paragraph of
this Agreement.
"IRON MOUNTAIN STOCK" shall have the meaning set forth in the first recital
of this Agreement.
"MERGER" shall have the meaning set forth in the second recital of this
Agreement.
"MERGER AGREEMENT" shall have the meaning set forth in the second recital of
this Agreement.
"PERMITTED ASSIGNEE" shall mean with respect to each Stockholder, (x) such
Stockholder's spouse, lineal or adopted descendants, siblings and lineal or
adopted descendants of siblings, (y) a trust primarily for the benefit of, the
estate of, executors, personal representatives, administrators, guardians or
conservators of, any of the individuals referred to in the foregoing clause (x)
(but only in their capacity as such) and (z) charitable trusts and charitable
foundations.
"PIERCE LEAHY" shall have the meaning set forth in the opening paragraph of
this Agreement.
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"STOCKHOLDER OR STOCKHOLDERS" shall have the meanings set forth in the
opening paragraph of this Agreement (including, without limitation, any such
Person that becomes party to this Agreement after the date hereof in accordance
with Sections 3.1 and 4.8 hereof).
"STOCKHOLDER DISCLOSURE SCHEDULE" shall mean the disclosure schedule
attached to this Agreement, which shall be updated to reflect any Stockholder
that becomes a party hereto after the date hereof.
"TRANSFER" shall mean any sale, transfer, assignment, pledge, encumbrance or
other disposition, including through any "short sale" or derivative
transactions.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
2.1 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each Stockholder
represents and warrants, severally but not jointly, to Pierce Leahy as follows:
(a) OWNERSHIP OF IRON MOUNTAIN STOCK. Except as disclosed in
Section 2.1(a) of the Stockholder Disclosure Schedule, such Stockholder is the
beneficial owner of the shares of Iron Mountain Stock set forth opposite such
Stockholder's name on SCHEDULE A and, except for this Agreement or as otherwise
set forth in Section 2.1(a) of the Stockholder Disclosure Schedule, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character to which such Stockholder is a party relating to the voting of any
shares of the Iron Mountain Stock that are owned by such Stockholder, and there
are no voting trusts or voting agreements with respect to such shares. The
shares of Iron Mountain Stock set forth opposite such Stockholder's name on
SCHEDULE A constitute all of the outstanding shares of Iron Mountain Stock owned
beneficially or of record by such Stockholder.
(b) AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. Such Stockholder has the
full legal right and power and all authority required to enter into, execute and
deliver this Agreement and to perform fully such Stockholder's obligations
hereunder. The execution and delivery of this Agreement by such Stockholder have
been duly authorized by all requisite organizational action, if any, on the part
of such Stockholder. This Agreement has been duly executed and delivered and
constitutes the legal, valid and binding obligation of such Stockholder,
enforceable against such Stockholder in accordance with its terms (subject to
the Enforceability Exceptions).
(c) NO CONFLICTS; CONSENTS. (i) Except as set forth in Section 2.1(c) of
the Stockholder Disclosure Schedule, the execution and delivery by such
Stockholder of this Agreement does not, and the consummation of the transactions
contemplated hereby will not, conflict with or result in any violation of or
default (with or without notice or lapse of time, or both) under (A) any
contract, agreement or other binding arrangement to which such Stockholder is a
party or (B) any judgment, order, writ, injunction or decree of any court,
governmental body, administrative agency or arbitrator applicable to such
Stockholder.
(ii) Except as set forth in Section 2.1(c) of the Stockholder Disclosure
Schedule, no Governmental Authorizations or Private Authorizations are required
to be obtained or made by such Stockholder in connection with the execution and
delivery by such Stockholder of this Agreement and the consummation of the
transactions contemplated hereby.
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ARTICLE III
COVENANTS; VOTING
3.1 NO DISPOSITION OR ACQUISITION OF SHARES PRIOR TO CLOSING. Except as
set forth on Section 3.1 of the Stockholder Disclosure Schedule, each
Stockholder agrees that prior to the Closing of the Merger such Stockholder
shall not Transfer any of the shares of Iron Mountain Common Stock set forth
opposite his or its name on Schedule A; PROVIDED, HOWEVER, that each Stockholder
shall have the right to Transfer such shares to a Permitted Assignee if such
Permitted Assignee becomes a party to this Agreement and agrees to be bound by
the terms hereof.
3.2 VOTING. Each of the Stockholders hereby agrees that, at any meetings
of the stockholders of Iron Mountain where such matters are addressed and voted
upon, however called, and at every adjournment thereof, and in any action by
written consent of the stockholders of Iron Mountain, to vote all of the shares
of Iron Mountain Stock to which he or it is entitled to vote (a) in favor of the
adoption of the Merger Agreement and the Transactions and each of the other
transactions contemplated thereby and any action required in furtherance
thereof, and (b) vote such shares against any Iron Mountain Transaction;
PROVIDED, HOWEVER, that, if any Stockholder is a member of the Board of
Directors of Iron Mountain, nothing herein shall be construed to obligate such
Stockholder or representative to act in his capacity as a director in any manner
inconsistent with or which may conflict with such Person's fiduciary duties as a
director of Iron Mountain.
3.3 VOTING ARRANGEMENTS. To the extent any such action would materially
impair such Stockholder's ability to perform his obligations under Section 3.2
of this Agreement, each of the Stockholders agrees that, except pursuant to this
Agreement, he shall not grant any proxies, deposit any shares of Iron Mountain
Stock into a voting trust or enter into any voting agreement with respect to any
shares of Iron Mountain Stock now or hereafter owned, beneficially or of record,
by him.
ARTICLE IV
MISCELLANEOUS
4.1 TERMINATION. This Agreement shall terminate upon the earlier to occur
of (i) the mutual consent of Pierce Leahy, Iron Mountain and all of the
Stockholders, (ii) the termination of the Merger Agreement prior to the
consummation of the Merger (provided, however, in the event of a termination of
the Merger Agreement under circumstances where Pierce Leahy is entitled to the
fee contemplated by Section 7.5(c) thereof, the provisions of Section 3.2 shall
survive the termination of the Merger Agreement and this Agreement for a period
of one (1) year after such termination), or (iii) the consummation of the
Merger.
4.2 AMENDMENT. This Agreement may be amended only by a written instrument
executed by the parties or their respective successors or assigns.
4.3 NOTICES. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered or transmitted, and shall be effective upon receipt, if
delivered personally, mailed by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified in a written notice delivered in
accordance with the terms hereof) or sent by confirmed electronic transmission
to the telecopier number specified below:
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If to Pierce Leahy, to:
631 Park Avenue
King of Prussia, PA 19406
Attention: J. Peter Pierce
President and Chief Executive Officer
Telecopier No.: (610) 992-8394
with a copy (which shall not constitute notice) to:
Cozen and O'Connor
1900 Market Street
Philadelphia, PA 19103
Attention: Richard J. Busis, Esq.
Telecopier No.: (215) 665-2013
If to the Stockholders or Iron Mountain, to:
c/o C. Richard Reese
745 Atlantic Avenue
Boston, MA 02111
Telecopier No.: (617) 535-4734
with a copy (which shall not constitute notice) to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Telephone: (617) 338-2800
Telecopy: (617) 338-2880
Attention: William J. Curry, Esq.
4.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts and each counterpart shall be deemed to be an original, but all of
which shall constitute one and the same original.
4.5 APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Delaware without reference to choice of
law principles, including all matters of construction, validity and performance.
4.6 SEVERABILITY; ENFORCEMENT. The invalidity of any portion hereof shall
not affect the validity, force or effect of the remaining portions hereof. If it
is ever held that any restriction hereunder is too broad to permit enforcement
of such restriction to its fullest extent, each party agrees that a court of
competent jurisdiction may enforce such restriction to the maximum extent
permitted by law, and each party hereby consents and agrees that such scope may
be judicially modified accordingly in any proceeding brought to enforce such
restriction.
4.7 FURTHER ASSURANCES. Each party hereto shall execute and deliver such
additional documents as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
4.8 ADDITIONAL STOCKHOLDERS; ASSIGNMENT. The parties hereto agree that,
from time to time after the date hereof, additional Stockholders may be added as
parties hereto by executing a counterpart of this Agreement or an instrument,
reasonably acceptable to Pierce Leahy and Iron Mountain whereby such Stockholder
shall join in and become a party to this Agreement as a Stockholder and shall
agree to be bound by and to perform all obligations of a Stockholder hereunder,
without in either case further action by any party hereto or thereto. In each
such event, Schedule A and the Stockholder Disclosure Schedule shall be updated
to reflect information relating to such Stockholder. Neither this
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Agreement nor any of the rights, interest or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties.
4.9 ENTIRE AGREEMENT. This Agreement and the Merger Agreement contain the
entire understanding of the parties hereto and thereto with respect to the
subject matter contained herein and therein, and supersede and cancel all prior
agreements, negotiations, correspondence, undertakings and communications of the
parties, oral or written, respecting such subject matter. There are no
restrictions, promises, representations, warranties, agreements or undertakings
of any party hereto or to the Merger Agreement with respect to the transactions
contemplated by this Agreement and the Merger Agreement other than those set
forth herein or therein or made hereunder or thereunder.
4.10 SPECIFIC PERFORMANCE. The parties hereto agree that the remedy at law
for any breach of this Agreement will be inadequate and that any party by whom
this Agreement is enforceable shall be entitled to specific performance in
addition to any other appropriate relief or remedy. Such party may, in its sole
discretion, apply to a court of competent jurisdiction for specific performance
or injunctive or such other relief as such court may deem just and proper in
order to enforce this Agreement or prevent any violation hereof and, to the
extent permitted by applicable law, each party waives any objection to the
imposition of such relief.
4.11 HEADINGS; REFERENCES. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. All references herein to
"Articles", "Sections", "Schedules" or "Exhibits" shall be deemed to be
references to Articles or Sections hereof or Schedules or Exhibits hereto unless
otherwise indicated.
4.12 SEVERAL AND NOT JOINT OBLIGATIONS. The obligations of the
Stockholders under this Agreement are the several and not joint obligations of
each such Stockholder, each Stockholder has made an individual and separate
decision relating to his or its execution of this Agreement, and the
Stockholders shall not by action of this Agreement (i) be deemed to be acting in
concert or as a "group" (within the meaning of Section 13(d)(3) of the Exchange
Act) or (ii) be deemed to have formed a partnership or joint venture.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto had caused this Agreement to
be duly executed and delivered as of the day and year first above written.
<TABLE>
<S> <C> <C>
PIERCE LEAHY CORP.
By: /s/ J. PETER PIERCE
-----------------------------------------
Name: J. Peter Pierce
Title: Chief Executive Officer
THE STOCKHOLDERS:
/S/ KENT P. DAUTEN
-----------------------------------------
Kent P. Dauten
/s/ B. THOMAS GOLISANO
-----------------------------------------
B. Thomas Golisano
/s/ VINCENT J. RYAN
-----------------------------------------
Vincent J. Ryan
SCHOONER CAPITAL LLC
BY: SCHOONER CAPITAL TRUST, its sole member
By: /s/ VINCENT J. RYAN
-----------------------------------------
Name:Vincent J. Ryan
Title: Chairman
IRON MOUNTAIN INCORPORATED
BY: /S/ C. RICHARD REESE
-----------------------------------------
Name: C. Richard Reese
Title: Chairman and CEO
/s/ C. RICHARD REESE
-----------------------------------------
Name: C. Richard Reese
</TABLE>
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ANNEX D
COMMONWEALTH OF PENNSYLVANIA
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
IRON MOUNTAIN INCORPORATED
In compliance with the requirements of 15 Pa.C.S. Section1915 of the
Business Corporation Law of 1988 (relating to articles of amendment), the
undersigned business corporation, desiring to amend and restate its Articles of
Incorporation, hereby states that:
FIRST: The name of the Corporation is Iron Mountain Incorporated.
SECOND: The address of this Corporation's current registered office in this
Commonwealth is:
Corporation Service Company
319 Market Street
Harrisburg, PA 17101
Dauphin County
THIRD: The Corporation is incorporated under the provisions of the Business
Corporation Law of 1988, as amended. The date of incorporation of the
Corporation was March 5, 1997.
FOURTH: The aggregate number of shares which the corporation shall have the
authority to issue is One Hundred Sixty Million (160,000,000) shares, to be
divided into One Hundred Fifty Million (150,000,000) shares of Common Stock, par
value $0.01 per share, and Ten Million (10,000,000) shares of Preferred Stock,
par value $0.01 per share.
The Board of Directors is authorized to provide for the issuance of the
shares of Preferred Stock as a class without series or in one or more series,
and, by filing a statement pursuant to applicable law of the Commonwealth of
Pennsylvania, to establish from time to time the number of shares to be included
in each such class or series, and to fix the designations, powers, preferences
and rights of the shares of each such class or series.
Any or all classes and series of shares, or any part thereof, may be
represented by uncertificated shares to the extent determined by the Board of
Directors, except that shares represented by a certificate that is issued and
outstanding shall continue to be represented thereby until the certificate is
surrendered to the Corporation.
FIFTH: The shareholders shall not have the right to cumulate their shares in
voting for the election of Directors.
SIXTH: Subchapter E (Sections 2541-2548), Subchapter G (Sections 2561-2568) and
Subchapter H (Section 2571-2578) of the Pennsylvania Business Corporation Law of
1988, as amended, shall not be applicable to this Corporation.
SEVENTH: These Amended and Restated Articles of Incorporation supersede the
Corporation's original Articles of Incorporation and all amendments thereto and
prior restatement thereof.
EIGHTH: The duration of the Corporation is perpetual.
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ANNEX E
AMENDED AND RESTATED
BYLAWS
OF
IRON MOUNTAIN INCORPORATED
ARTICLE I--OFFICE
Section 1.1. REGISTERED OFFICE. The registered office of the Corporation
shall be located within the Commonwealth of Pennsylvania at such place as the
Board of Directors (hereinafter referred to as the "Board of Directors" or the
"Board") shall determine from time to time.
ARTICLE II--MEETINGS OF SHAREHOLDERS
Section 2.1. PLACE OF MEETINGS OF SHAREHOLDERS. Meetings of shareholders
shall be held at such places, within or without the Commonwealth of
Pennsylvania, as may be fixed from time to time by the Board of Directors. If no
such place is fixed by the Board of Directors, meetings of the shareholders
shall be held at the registered office of the Corporation.
Section 2.2. ANNUAL MEETING OF SHAREHOLDERS.
(a) TIME. A meeting of the shareholders of the Corporation shall be held in
each calendar year, commencing with the year 1998, at such time as the
Board of Directors may determine.
(b) ELECTION OF DIRECTORS. At such annual meeting, there shall be held an
election of Directors.
Section 2.3. SPECIAL MEETINGS OF SHAREHOLDERS. Except as expressly
required by law, special meetings of the shareholders may be called at any time
only by:
(a) the Chairman of the Board, if any, if such officer is serving as the
chief executive officer of the Corporation, and otherwise the President
of the Corporation; or
(b) the Board of Directors.
Upon the written request of any person who has called a special meeting,
under these Bylaws or applicable law, which request specifies the general nature
of the business to be transacted at such meeting, it shall be the duty of the
Secretary to fix the time and place of such meeting, which shall be held not
less than five nor more than 60 days after the receipt of such request, and to
give due notice thereof as required by Section 2.4 hereof. If the Secretary
neglects or refuses to fix the time and place of such meeting, the person or
persons calling the meeting may do so.
Section 2.4. NOTICES OF MEETINGS OF SHAREHOLDERS. Written notice,
complying with Article VI of these Bylaws, stating the place and time and, in
the case of special meetings, the general nature of the business to be
transacted at any meeting of the shareholders, shall be given to each
shareholder of record entitled to vote at the meeting, except as provided in
Section 1707 of the Pennsylvania Business Corporation Law of 1988, as amended
(the "Pennsylvania BCL"), at least five days prior to the day named for the
meeting, provided that notice shall be given at least ten days prior to the day
named for a meeting to consider a fundamental change under Chapter 19 of the
Pennsylvania BCL. Such notices may be given by, or at the direction of, the
Secretary or other authorized person. If the Secretary or other authorized
person neglects or refuses to give notice of a meeting, the person or persons
calling the meeting may do so.
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Section 2.5. QUORUM OF AND ACTION BY SHAREHOLDERS.
(a) GENERAL RULE. Except as provided in subsections (c), (d) and (e) of this
Section 2.5, the presence, in person or by proxy, of shareholders
entitled to cast at least a majority of the votes that all shareholders
are entitled to cast on a particular matter to be acted upon at the
meeting shall constitute a quorum for the purpose of consideration and
action on the matter. If two or more classes of stock are entitled to
vote as separate classes upon any matter, then, in the case of each such
class, a quorum for the consideration of such matter shall, except as
otherwise provided by law or by the Corporation's Articles of
Incorporation (the "Articles"), consist of the presence, in person or by
proxy, of shareholders entitled to cast at least a majority of the votes
that all holders of shares of that class are entitled to cast on such
matter. To the extent that a quorum is present with respect to
consideration of any action or particular matter or matters but a quorum
is not present as to any other matter or matters, consideration of an
action on the matter or matters for which a quorum is present may occur
and, after such consideration and action, the meeting may be adjourned
for purposes of the consideration of and action on a matter or matters
for which a quorum is not present. Unless the Pennsylvania BCL permits
otherwise, this Section 2.5(a) may be modified only by a Bylaw amendment
adopted by the shareholders.
(b) ACTION BY SHAREHOLDERS. Except as otherwise provided by law, whenever
any corporate action is to be taken by vote of the shareholders of the
Corporation at a duly organized meeting of shareholders, it shall be
authorized upon receiving the affirmative vote of a majority of the votes
properly cast at the meeting with respect to such matter and, if any
shareholders are entitled to vote thereon as a class, upon receiving the
affirmative vote of a majority of the votes properly cast by the
shareholders entitled to vote as a class. Unless the Pennsylvania BCL
permits otherwise, this Section 2.5(b) may be modified only by a Bylaw
amendment adopted by the shareholders.
(c) WITHDRAWAL. The shareholders present at a duly organized meeting can
continue to do business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
(d) ELECTION OF DIRECTORS AT ADJOURNED MEETINGS. In the case of any meeting
called for the election of Directors, those shareholders who attend a
meeting called for the election of Directors that has been previously
adjourned for lack of a quorum (whether with respect to a particular
matter or all matters to be considered and acted upon at such meeting),
although less than a quorum as fixed in subsection (a), shall
nevertheless constitute a quorum for the purpose of electing Directors.
(e) CONDUCT OF OTHER BUSINESS AT ADJOURNED MEETINGS. Those shareholders
entitled to vote who attend a meeting of shareholders that has been
previously adjourned for one or more periods aggregating at least
15 days because of an absence of a quorum (whether with respect to a
particular matter or all matters to be considered and acted upon at such
meeting), although less than a quorum as fixed in subsection (a), shall
nevertheless constitute a quorum for the purpose of acting upon any
matter set forth in the notice of meeting if the notice states that those
shareholders who attend the adjourned meeting shall nevertheless
constitute a quorum for the purpose of acting upon the matter.
Section 2.6. ADJOURNMENTS.
(a) GENERAL RULE. Any regular or special meeting of the shareholders,
including one at which Directors are to be elected, may be adjourned for
such period as the shareholders present and entitled to vote shall
direct.
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(b) LACK OF QUORUM. If a meeting cannot be organized because a quorum has
not attended, those present may, except as otherwise provided in this
Section 2.6, adjourn the meeting to such time and place as they may
determine.
(c) NOTICE OF AN ADJOURNED MEETING. When a meeting of shareholders is
adjourned, it shall not be necessary to give any notice of the adjourned
meeting or of the business to be transacted at an adjourned meeting,
other than by announcement at the meeting at which the adjournment is
taken, unless the Board fixes a new record date for the adjourned meeting
or applicable law requires notice of the business to be transacted and
such notice has not previously been given.
Section 2.7. VOTING LIST, VOTING AND PROXIES.
(a) VOTING LIST. The officer or agent having charge of the transfer books
for shares of the Corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by
each. The list shall be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting for the purposes thereof, except
that, if the Corporation has 5,000 or more shareholders, in lieu of
making the list, the Corporation may make the information therein
available at the meeting by any other means.
(b) VOTING. Except as otherwise specifically provided by law, all matters
coming before the meeting shall be determined by a vote of shares. Such
vote shall be taken by voice unless the presiding officer determines, or
required by a vote of the shareholders, before the vote begins, that it
be taken by ballot.
(c) PROXIES. At all meetings of shareholders, shareholders entitled to vote
may attend and vote either in person or by proxy. Every proxy shall be
executed in writing by the shareholder or by such shareholder's duly
authorized attorney-in-fact and filed with the Secretary of the
Corporation. A proxy, unless coupled with an interest (as defined in
Section 1759(d) of the Pennsylvania BCL), shall be revocable at will,
notwithstanding any other agreement or any provision in the proxy to the
contrary, but the revocation of a proxy shall not be effective until
written notice thereof has been given to the Secretary of the
Corporation. An unrevoked proxy shall not be valid after three years from
the date of its execution unless a longer time is expressly provided
therein. A proxy shall not be revoked by the death or incapacity of the
maker unless, before the vote is counted or the authority is exercised,
written notice of the death or incapacity is given to the Secretary of
the Corporation.
(d) JUDGES OF ELECTION. In advance of any meeting of shareholders of the
Corporation, the Board of Directors may appoint one or three Judges of
Election, who need not be shareholders and who will have such duties as
provided in Section 1765(a)(3) of the Pennsylvania BCL, to act at the
meeting or any adjournment thereof. If one or three Judges of Election
are not so appointed, the presiding officer of the meeting may, and on
the request of any shareholder shall, appoint one or three Judges of
Election at the meeting. In case any person appointed as a Judge of
Election fails to appear or refuses to act, the vacancy may be filled by
appointment made by the Board of Directors in advance of the convening of
the meeting or at the meeting by the presiding officer. A person who is a
candidate for office to be filled at the meeting shall not act as a Judge
of Election. Unless the Pennsylvania BCL permits otherwise, this
Section 2.7(d) may be modified only by a Bylaw amendment adopted by the
shareholders.
Section 2.8. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. The Board
may provide by resolution, or the presiding officer may permit, with respect to
a particular meeting of shareholders that one or more persons may participate in
that meeting of the shareholders, be counted for the purposes of determining a
quorum and exercise all rights and privileges to which such person might be
entitled
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were such person personally in attendance, including the right to vote, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Unless the Board
so provides, or the presiding officer so permits, no person may participate in a
meeting of the shareholders by means of conference telephone or similar
communications equipment.
Section 2.9. NO CONSENTS IN LIEU OF MEETING. Subject to the rights of
holders of shares of any class or series of Preferred Stock in respect of
actions to be taken by holders of such shares, no action of the shareholders
shall be taken by either unanimous or partial written consent or other consent
in lieu of a meeting.
Section 2.10. BUSINESS AT MEETINGS OF SHAREHOLDERS. (a) Except as
otherwise provided by law (including but not limited to Rule 14a-8 of the
Securities Exchange Act of 1934, as amended, or any successor provision thereto)
or in these Bylaws, the business which shall be conducted at any meeting of the
shareholders shall (i) have been specified in the written notice of the meeting
(or any supplement thereto) given by the Corporation, (ii) be brought before the
meeting at the direction of the Board of Directors, (iii) be brought before the
meeting by the presiding officer of the meeting unless a majority of the
Directors then in office object to such business being conducted at the meeting,
or (iv) in the case of an annual meeting of shareholders, have been specified in
a written notice given to the Secretary of the Corporation, by or on behalf of
any shareholder who shall have been a shareholder of record on the record date
for such meeting and who shall continue to be entitled to vote thereat (the
"Shareholder Notice"), in accordance with all of the following requirements:
(A) Each Shareholder Notice must be delivered to, or mailed and received
at, the principal executive offices of the Corporation (i) in the case of an
annual meeting that is called for a date that is within 30 days before or
after the anniversary date of the immediately preceding annual meeting of
shareholders, not less than 60 days nor more than 90 days prior to the first
anniversary (the "Anniversary") of the date the Corporation's proxy
statement was released to shareholders in connection with the previous
year's annual meeting of shareholders, and (ii) in the case of an annual
meeting that is called for a date that is not within 30 days before or after
the anniversary date of the immediately preceding annual meeting, not later
than the later of (x) the 90(th) day prior to such annual meeting or
(y) the close of business on the tenth day following the day on which public
disclosure of the date of the meeting was made;
(B) Each such Shareholder Notice must set forth: (i) the name and
address of the shareholder who intends to bring the business before the
meeting; (ii) the general nature of the business which such shareholder
seeks to bring before the meeting, the reasons for conducting such business
and, if a specific action is to be proposed, the text of the resolution or
resolutions which the proposing shareholder proposes that the shareholders
adopt; (iii) a representation that the shareholder is a holder of record of
the stock of the Corporation entitled to vote at such meeting, including the
class and number of shares of such stock that are owned beneficially and of
record by such shareholder, and intends to appear in person or by proxy at
the meeting to bring the business specified in the notice before the
meeting; (iv) whether such shareholder intends to deliver a proxy statement
and form of proxy to holders of at least the percentage of the Corporation's
voting shares required under these bylaws and applicable law to carry the
proposal (an affirmative statement of such intent, a "Solicitation Notice");
and (v) any material interest of the shareholder in any proposed action. The
presiding officer of the meeting may, in such officer's sole discretion,
refuse to acknowledge any business proposed by a shareholder not made in
compliance with the foregoing procedure; and
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(C) If the shareholder has provided the Corporation with a Solicitation
Notice, such shareholder must have delivered a proxy statement and form of
proxy to holders of at least the percentage of the Corporation's voting
shares required under applicable law to carry such proposal. If no
Solicitation Notice relating thereto has been timely provided pursuant to
this Section 2.10, the shareholder proposing such business must not have
solicited a number of proxies sufficient to have required the delivery of
such a Solicitation Notice under this Section 2.10.
(D) Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at an annual meeting except in accordance with
the procedures set forth in this Section 2.10. The chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting and in accordance with
the procedures prescribed by this Section 2.10, and if he should so
determine, he shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted. Notwithstanding
the foregoing provisions of this Section 2.10, a shareholder shall also
comply with all applicable requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder with respect to
the matters set forth in this Section 2.10 and any shareholder proposal not
required to be considered by such rules need not be considered.
ARTICLE III--BOARD OF DIRECTORS
Section 3.1. POWERS, NUMBER, CLASSIFIED BOARD, ETC.
(a) GENERAL POWERS. Except as otherwise provided by law and these
Bylaws, all powers of the Corporation shall be exercised by or under the
authority of, and the business and affairs of the Corporation shall be
managed under the direction of, the Board of Directors. Unless the
Pennsylvania BCL permits otherwise, this Section 3.1(a) may be modified only
by a Bylaw amendment adopted by the shareholders.
(b) NUMBER. The number of members of the Board of Directors shall be the
number of Directors serving at the time of adoption of this Section 3.1, or
such other number as may thereafter from time to time (i) be determined by
the Board of Directors, or (ii) be set forth in a notice of a meeting of
shareholders called for the election of a full Board of Directors; provided,
that if such notice contemplates a change in the size of the Board of
Directors, such change shall take effect as of the time the election called
for by the notice is held.
(c) CLASSIFIED BOARD OF DIRECTORS. The Directors, other than Directors
to be elected by holders of any series of Preferred Stock or any other
series or class of stock as set forth in the Articles, shall be classified,
with respect to the duration of the term for which they severally hold
office, into three classes (denominated Class I, Class II and Class III) as
nearly equal in number as reasonably possible. The Board of Directors shall
increase or decrease the number of Directors in one or more classes as may
be appropriate whenever it increases or decreases the number of Directors in
order to ensure that the three classes shall be as nearly equal in number as
reasonably as possible. The term of office of the initial Class I Directors
shall expire at the annual meeting of shareholders in 1998, the term of
office of the initial Class II Directors shall expire at the annual meeting
of shareholders in 1999 and the term of office of the initial Class III
directors shall expire at the annual meeting of shareholders in 2000. At the
annual meeting of shareholders, beginning in 1998, the successors of the
class of Directors whose term expires at the meeting shall be elected to
hold office for a term expiring at the annual meeting of shareholders held
in the third year following the year of their election. When a Director is
elected, such director's class shall be identified.
(d) TERM; VACANCIES. Each Director shall hold office until the
expiration of the term for which he was selected and until his successor has
been selected and qualified or until his earlier death,
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resignation or removal. Any vacancies on the Board of Directors, including
vacancies resulting from an increase in the number of Directors, may be
filled by a majority vote of the remaining members of the Board (though less
than a quorum) or by a sole remaining Director or by the shareholders and
each person so selected shall be a Director to serve for the balance of the
unexpired term. A director selected to fill a vacancy on the Board shall be
selected for a term expiring at the annual meeting when the term of a
Director in such class would naturally expire.
(e) QUALIFICATION. A Director must be a natural person at least
18 years of age.
Section 3.2. PLACE OF MEETINGS. Meetings of the Board of Directors may be
held at such place within or without the Commonwealth of Pennsylvania as a
majority of the Directors may determine from time to time or as may be
designated in the notice of the meeting.
Section 3.3. REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held annually, immediately following the annual meeting of the
shareholders, at the place where such meeting of the shareholders is held or at
such other place and time as a majority of the Directors in office after the
annual meeting of shareholders may designate. At such meeting, the Board of
Directors shall elect officers of the Corporation. In addition to such regular
meeting, the Board of Directors shall have the power to fix by resolution the
place and time of other regular meetings of the Board.
Section 3.4. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held whenever ordered by the Chairman of the Board, if any, by the
President (if there is not then a Chairman of the Board), by a majority of the
executive committee of the Board, if any, or by a majority of the Directors in
office.
Section 3.5. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Any
Director may participate in any meeting of the Board of Directors or of any
committee (provided such Director is otherwise entitled to participate), be
counted for the purpose of determining a quorum thereof and exercise all rights
and privileges to which such Director might be entitled were he or she
personally in attendance, including the right to vote, or any other rights
attendant to presence in person at such meeting, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
Section 3.6. NOTICES OF MEETINGS OF BOARD OF DIRECTORS.
(a) REGULAR MEETINGS. No notice shall be required to be given of any
regular meeting, unless the same is held at other than the place or
time for holding such meeting as fixed in accordance with
Section 3.3 of these Bylaws, in which event five days' notice shall
be given of the place and time of such meeting complying with
Article VI of these Bylaws.
(b) SPECIAL MEETINGS. Written notice stating the place and time of any
special meeting of the Board of Directors shall be sufficient if
given at least twenty-four (24) hours in advance of the time fixed
for the meeting.
Section 3.7. QUORUM ACTION BY THE BOARD OF DIRECTORS. A majority of the
Directors in office shall be necessary to constitute a quorum for the
transaction of business and the acts of a majority of the Directors present and
voting at a meeting at which a quorum is present shall be the acts of the Board
of Directors. If there is no quorum present at a duly convened meeting of the
Board of Directors, the majority of those present may adjourn the meeting from
time to time and place to place.
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Section 3.8. ACTION BY UNANIMOUS CONSENT OF THE BOARD OF DIRECTORS. Any
action required or permitted to be taken at a meeting of the Directors, or of
the members of any committee of the Board of Directors, may be taken without a
meeting if, prior or subsequent to the action, a written consent or consents
thereto by all of the Directors in office (or all of the members of the
committee with respect to committee action) is filed with the Secretary of the
Corporation. In addition to other means of filing with the Secretary, insertion
of such consent in the minute book of the Corporation shall be deemed filing
with the Secretary regardless of whether the Secretary or some other authorized
person has actual possession of the minute book. Written consents by all of the
directors or committee members, as the case may be, executed pursuant to this
Section 3.8 may be executed in any number of counterparts and shall be deemed
effective as of the date set forth therein.
Section 3.9. COMMITTEES.
(a) ESTABLISHMENT AND POWERS. The Board of Directors of the Corporation
may, by resolution adopted by a majority of the Directors in office,
establish one or more committees to consist of one (1) or more
Directors of the Corporation. Any committee, to the extent provided
in the resolution of the Board of Directors or in the Bylaws, shall
have and may exercise all of the powers and authority of the Board of
Directors, except that a committee shall not have any power or
authority as to the following:
(i) The submission to shareholders of any action requiring approval
of shareholders under the Pennsylvania BCL.
(ii) The creation or filling of vacancies in the Board of Directors.
(iii) The adoption, amendment or repeal of the Bylaws.
(iv) The amendment or repeal of any resolution of the Board of
Directors that by its terms is amendable or repealable only by the Board
of Directors.
(v) Action on matters committed by the Bylaws or resolution of the
Board of Directors to another committee of the Board of Directors.
(b) ALTERNATE MEMBERS. The Board of Directors may designate one or more
Directors as alternate members of any committee who may replace any
absent or disqualified member at any meeting of the committee or for the
purpose of any written action by the committee. In the absence or
disqualification of a member and alternate member or members of a
committee, the member or members thereof present at a meeting and not
disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another Director to act at the meeting in the
place of the absent or disqualified member.
(c) TERM. Each committee of the Board of Directors shall serve at the
pleasure of the Board of Directors.
(d) STATUS OF COMMITTEE ACTION. The term "Board of Directors" or "Board,"
when used in any provision of these Bylaws relating to the organization
or procedures of or the manner of taking action by the Board of
Directors, shall be construed to include and refer to any executive or
other committee of the Board of Directors. Any provision of these Bylaws
relating or referring to action to be taken by the Board of Directors or
the procedure required therefor shall be satisfied by the taking of
corresponding action by a committee of the Board of Directors to the
extent authority to take the action has been delegated to the committee
pursuant to this Section. Notwithstanding the foregoing, in the event
that the Corporation has an executive committee of the Board of Directors
that consists of four members, three members shall constitute a quorum
for the transaction of business and the acts of three of the members of
the executive committee present and voting at a meeting at which a quorum
is present shall be the acts of the executive committee.
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Section 3.10. NOMINATIONS. (a) Notwithstanding the provisions of
Section 2.10 of these Bylaws (dealing with business at meetings of
shareholders), nominations for the election of Directors may be made by only the
Board of Directors, a committee appointed by the Board of Directors or by any
shareholder of record entitled to vote in the election of Directors who is a
shareholder at the record date of the meeting and also on the date of the
meeting at which Directors are to be elected; provided, however, that with
respect to a nomination made by a shareholder, such shareholder must provide
timely written notice to the Chairman of the Board of the Corporation or, if
there be none, the President of the Corporation in accordance with the following
requirements, except as otherwise provided by law:
(A) To be timely, a shareholder's notice must be delivered to, or mailed and
received at, the principal executive offices of the Corporation addressed
to the attention of the Chairman of the Board or, if there be none, the
President (i) in the case of an annual meeting that is called for a date
that is within 30 days before or after the anniversary date of the
immediately preceding annual meeting of shareholders, not less than
60 days nor more than 90 days prior to the Anniversary, and (ii) in the
case of an annual meeting that is called for a date that is not within
30 days before or after the anniversary date of the immediately preceding
annual meeting, or in the case of a special meeting of shareholders
called for the purpose of electing Directors, not later than the later of
(x) the 90(th) day prior to such meeting or (y) the close of business on
the tenth day following the day on which public disclosure of the date of
the meeting was made; PROVIDED, HOWEVER, such time periods shall be
subject to Rule 14a-8 of the Securities Exchange Act of 1934, as amended,
or any successor provision thereto, to the extent applicable;
(B) Each such written notice must set forth: (i) the name and address of the
shareholder who intends to make the nomination; (ii) the name, age and
address of the person or persons to be nominated; (iii) a representation
that the shareholder is a holder of record of shares of the Corporation
entitled to vote at such meeting, including the class and number of
shares of such stock that are owned beneficially and of record by such
shareholder, and intends to appear in person or by proxy at the meeting
to nominate the person or persons specified in the notice; (iv) a
Solicitation Notice or a statement that the shareholder does not intend
to deliver a proxy statement and form of proxy to holders of a sufficient
number of holders of the Corporation's voting shares to elect such
nominee or nominees; (v) a description of all arrangements or
understandings between the shareholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (vi) such
other information regarding each nominee proposed by such shareholder as
would have been required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had
the nominee been nominated, or intended to be nominated, by the Board of
Directors (including, without limitation, the principal occupation or
employment of such person); and (vii) the written consent of each nominee
to serve as a Director of the Corporation if so elected. The presiding
officer of the meeting may refuse, in such officer's sole discretion, to
acknowledge the nomination of any person as not made in compliance with
the foregoing procedure; and
(C) If the shareholder has provided the Corporation with a Solicitation
Notice, such shareholder must have delivered a proxy statement and form
of proxy to holders of a percentage of the Corporation's voting shares
reasonably believed by such shareholder to be sufficient to elect the
nominee or nominees proposed to be nominated by such shareholder. If no
Solicitation Notice relating thereto has been timely provided pursuant to
this Section 3.10 the shareholder proposing such nomination must not have
solicited a number of proxies sufficient to have required the delivery of
such a Solicitation Notice under this Section 3.10.
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(D) No person shall be eligible to serve as a Director of the Corporation
unless nominated in accordance with the procedures set forth in this
Section 3.10. The Chairman of the meeting shall, as the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this Section 3.10, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded. Notwithstanding the foregoing provisions
of this Section 3.10, a shareholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder with respect to the matters set forth in
this Section 3.10 and any shareholder proposal not required to be
considered by such rules need not be considered.
Section 3.11. PAYMENTS TO DIRECTORS. Directors may be reimbursed for the
expenses of attending Board meetings and committee meetings and may be paid a
fixed sum for attendance at each meeting or such other compensation for their
services as may, from time to time, be fixed by the Board of Directors. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 3.12. DISTRIBUTIONS. The Directors may, to the extent permitted by
law, authorize and the Corporation may make distributions from time to time.
ARTICLE IV--OFFICERS
Section 4.1. ELECTION AND OFFICE. The Corporation shall have a President,
a Secretary and a Treasurer who shall be elected by the Board of Directors. The
Board of Directors may elect as additional officers a Chairman of the Board, a
Chairman Emeritus, one or more Vice Chairmen of the Board, one or more Vice
Presidents, a Chief Financial Officer, and one or more other officers or
assistant officers. Any number of offices may be held by the same person. The
President and the Secretary shall be natural persons of the age of 18 years or
older. The Treasurer may be a corporation, but if a natural person shall be of
the age of 18 years or older.
Section 4.2. TERM. The officers and assistant officers shall each serve at
the pleasure of the Board of Directors until the first meeting of the Board of
Directors following the next annual meeting of shareholders, unless removed from
office by the Board of Directors during their respective tenures. Officers may,
but need not, be Directors.
Section 4.3. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. The Chairman
of the Board of Directors, if any, shall be the chief executive officer of the
Corporation, and, subject to the direction of the Board of Directors, shall have
general charge of the management and direction of the business, affairs and
property of the Corporation, and general supervision over its other officers and
agents, and, when present, shall preside at all meetings of the shareholders and
the Board of Directors. The Chairman of the Board of Directors shall perform
such other duties and have such other powers as the Board of Directors shall
designate from time to time.
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Section 4.4. CHAIRMAN EMERITUS. A Chairman Emeritus may be designated from
time to time by the Board of Directors. The Chairman Emeritus shall, at the
pleasure of the Board of Directors, receive notice of, and be invited to attend
and participate in, all meetings of the Board of Directors; provided, however,
that the Chairman Emeritus shall not have a vote on any matter brought before
such meeting. The Chairman Emeritus shall not have any power or authority to act
on behalf of the Corporation other than in connection with the performance of
such duties as the Board of Directors shall from time to time designate.
Section 4.5. POWERS AND DUTIES OF THE PRESIDENT. In the absence of a
Chairman of the Board, the President shall have duties and powers given in these
Bylaws to the Chairman of the Board. If there is a Chairman of the Board and
unless otherwise determined by the Board of Directors, the President shall be
the chief operating officer of the Corporation. In general, he shall perform all
duties incident to the office of President and, unless otherwise determined by
the Board of Directors, chief operating officer and shall see that all orders
and resolutions of the Board of Directors and the Chairman of the Board, if any,
are carried into effect and shall perform such other executive, supervisory and
management functions and duties as may be assigned to him from time to time by
the Board of Directors or the Chairman of the Board.
Section 4.6. POWERS AND DUTIES OF THE SECRETARY. Unless otherwise
determined by the Board of Directors, the Secretary shall be responsible for the
keeping of the minutes of all meetings of the Board of Directors and the
shareholders, in books provided for that purpose, and for the giving and serving
of all notices for the Corporation. The Secretary shall perform all other duties
ordinarily incident to the office of Secretary and shall have such other powers
and perform such other duties as may be assigned to the Secretary by the Board
of Directors. The minute books of the Corporation may be held by a person other
than the Secretary.
Section 4.7. POWERS AND DUTIES OF THE TREASURER. Unless otherwise
determined by the Board of Directors, the Treasurer shall have charge of all the
funds and securities of the Corporation which may come into such officer's
hands. When necessary or proper, unless otherwise determined by the Board of
Directors, the Treasurer shall endorse for collection on behalf of the
Corporation checks, notes and other obligations, and shall deposit the same to
the credit of the Corporation to such banks or depositories as the Board of
Directors may designate and may sign all receipts and vouchers for payments made
to the Corporation. The Treasurer shall sign all checks made by the Corporation,
except when the Board of Directors shall otherwise direct. The Treasurer shall
be responsible for the regular entry in books of the Corporation to be kept for
such purpose of a full and accurate account of all funds and securities received
and paid by the Treasurer on account of the Corporation. Whenever required by
the Board of Directors, the Treasurer shall render a statement of the financial
condition of the Corporation. The Treasurer shall have such other powers and
shall perform the duties as may be assigned to such officer from time to time by
the Board of Directors. The Treasurer shall give such bond, if any, for the
faithful performance of the duties of such office as shall be required by the
Board of Directors. If the Corporation has a Chief Financial Officer, the Chief
Financial Officer shall have such power and authority as determined by the Board
of Directors, including without limitation, the powers provided herein of the
Treasurer.
Section 4.8. POWERS AND DUTIES OF VICE PRESIDENTS AND ASSISTANT OFFICERS.
Unless otherwise determined by the Board of Directors, each Vice Chairman, Vice
President and each assistant officer shall have the powers and perform the
duties of his or her respective superior officer. Vice Presidents and assistant
officers shall have such rank as may be designated by the Board of Directors.
Vice Presidents may be designated as having responsibility for a specific area
of the Corporation's affairs, in which event such Vice President shall be
superior to the other Vice Presidents in relation to matters within his or her
area. The President shall be the superior officer of the Vice Presidents. The
Chairman of the Board shall be the superior officer of the Vice Chairmen and the
President. The Treasurer and
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Secretary shall be the superior officers of the Assistant Treasurers and
Assistant Secretaries, respectively.
Section 4.9. DELEGATION OF OFFICE. The Board of Directors may delegate the
powers or duties of any officer of the Corporation to any other person from time
to time.
Section 4.10. VACANCIES. The Board of Directors shall have the power to
fill any vacancies in any office occurring for any reason.
ARTICLE V--CAPITAL STOCK
Section 5.1. SHARE CERTIFICATES.
(a) EXECUTION. Except as otherwise provided in Section 5.6, the shares of
the Corporation shall be represented by certificates. Unless otherwise
provided by the Board of Directors, every share certificate shall be
signed by two officers and sealed with the corporate seal, which may be
a facsimile, engraved or printed, but where such certificate is signed
by a transfer agent or a registrar, the signature of any corporate
officer upon such certificate may be a facsimile, engraved or printed.
In case any officer who has signed, or whose facsimile signature has
been placed upon, any share certificate shall have ceased to be such
officer because of death, resignation or otherwise, before the
certificate is issued, it may be issued with the same effect as if the
officer had not ceased to be such at the date of its issue. In case the
corporate seal which has been affixed to, impressed on, or reproduced in
any such certificate or certificates shall cease to be the seal of the
Corporation before such certificate or certificates have been delivered
by the Corporation, such certificate or certificates may nevertheless be
issued and delivered by the Corporation as though the seal affixed
thereto, impressed thereon or reproduced therein had not ceased to be
the seal of the Corporation. The provisions of this Section 5.1 shall be
subject to any inconsistent or contrary agreement at the time between
the Corporation and any transfer agent or registrar.
(b) DESIGNATIONS, ETC. To the extent the Corporation is authorized to issue
shares of more than one class or series, every certificate shall set
forth upon the face or back of the certificate (or shall state on the
face or back of the certificate that the Corporation will furnish to any
shareholder upon request and without charge) a full or summary statement
of the designations, voting rights, preferences, limitations and special
rights of the shares of each class or series authorized to be issued so
far as they have been fixed and determined and the authority of the
Board of Directors to fix and determine the designations, voting rights,
preferences, limitations and special rights of the classes and series of
shares of the Corporation.
(c) FRACTIONAL SHARES. Except as otherwise determined by the Board of
Directors, shares or certificates therefor may be issued as fractional
shares for shares held by any dividend reinvestment plan or employee
benefit plan created or approved by the Corporation's Board of
Directors, but not by any other person.
Section 5.2. TRANSFER OF SHARES. Transfer of certificated shares shall be
made on the books of the Corporation only upon surrender of the share
certificate, duly endorsed or with duly executed stock powers attached and
otherwise in proper form for transfer (which shall include, without limitation,
such proof or guaranty of the authenticity of the signature as the Corporation
or its agents may require), which certificate shall be cancelled at the time of
the transfer. In the event the Board authorizes uncertificated shares, as
permitted by the Articles, the Board shall adopt alternative procedures for
registration of transfers of such uncertificated shares. The Corporation shall
be entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person whether or not it shall have express or other notice thereof,
save as expressly
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provided by law, by the Articles or these Bylaws. It shall be the duty of each
shareholder to notify the Corporation of his or her post office address.
Section 5.3. DETERMINATION OF SHAREHOLDERS OF RECORD.
(a) FIXING RECORD DATE. The Board of Directors of the Corporation may fix a
time prior to the date of any meeting of shareholders as a record date
for the determination of the shareholders entitled to notice of, or to
vote at, the meeting, which time, except in the case of an adjourned
meeting, shall be not more than 90 days prior to the date of the meeting
of shareholders. Only shareholders of record on the date fixed shall be
so entitled notwithstanding any transfer of shares on the books of the
Corporation after any record date fixed as provided in this subsection.
The Board of Directors may similarly fix a record date for the
determination of shareholders of record for any other purpose. When a
determination of shareholders of record has been made as provided in
this section for purposes of a meeting, the determination shall apply to
any adjournment thereof unless the Board of Directors fixes a new record
date for the adjourned meeting.
(b) DETERMINATION WHEN NO RECORD DATE FIXED. If a record date is not fixed:
(i) The record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of
business on the day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the day
immediately preceding the day on which the meeting is held.
(ii) The record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
(c) CERTIFICATION BY NOMINEE. The Board of Directors may adopt a procedure
whereby a shareholder of the Corporation may certify in writing to the
Corporation that all or a portion of the shares registered in the name
of the shareholder are held for the account of a specified person or
persons. The resolution of the Board of Directors may set forth:
(i) the classification of shareholder who may certify;
(ii) the purpose or purposes for which the certification may be made;
(iii) the form of certification and information to be contained therein;
(iv) if the certification is with respect to a record date, the time
after the record date within which the certification must be
received by the Corporation; and
(v) such other provisions with respect to the procedure as are deemed
necessary or desirable.
Upon receipt by the Corporation of a certification complying with the
procedure, the persons specified in the certification shall be deemed, for the
purposes set forth in the certification, to be the holders of record of the
number of shares specified in place of the shareholder making the certification.
Section 5.4. LOST SHARE CERTIFICATES. Unless waived in whole or in part by
the Board of Directors, any person requesting the issuance of a new certificate
in lieu of an alleged lost, destroyed, mislaid or wrongfully taken certificate
shall (a) give to the Corporation his or her bond of indemnity with an
acceptable surety, and (b) satisfy such other requirements as may be imposed by
the Corporation. Thereupon, a new share certificate shall be issued to the
registered owner or his or her assigns in lieu of the alleged lost, destroyed,
mislaid or wrongfully taken certificate, provided that the request therefor and
issuance thereof have been made before the Corporation has notice that such
shares have been acquired by a bona fide purchaser.
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Section 5.5. CLOSING OF TRANSFER BOOKS. The stock transfer books of the
Corporation may, if deemed appropriate by the Board of Directors, be closed for
such length of time not exceeding fifty (50) days as the Board of Directors (but
not the shareholders) may determine, preceding the date of any meeting of
shareholders or the date for the payment of any dividend or the date for the
allotment of rights or the date when any issuance, change, conversion or
exchange of capital stock shall go into effect, during which time no transfer of
stock on the books of the Corporation may be made.
Section 5.6. UNCERTIFICATED SHARES. Notwithstanding anything herein to the
contrary, any or all classes and series of shares, or any part thereof, may be
represented by uncertificated shares to the extent determined by the Board of
Directors, except that shares represented by a certificate that is issued and
outstanding shall continue to be represented thereby until the certificate is
surrendered to the Corporation. Within a reasonable time after the issuance or
transfer of uncertificated shares, the Corporation shall send to the registered
owner thereof, a written notice containing the information required to be set
forth or stated on certificates. The rights and obligations of the holders of
shares represented by certificates and the rights and obligations of the holders
of uncertificated shares of the same class and series shall be identical.
Notwithstanding anything herein to the contrary, the provisions of Section 5.2
shall be inapplicable to uncertificated shares and in lieu thereof the Board of
Directors shall adopt alternative procedures for registration of transfers.
ARTICLE VI--NOTICES--COMPUTING TIME PERIODS
Section 6.1. CONTENTS OF NOTICE. Whenever any notice of a meeting is
required to be given pursuant to these Bylaws, the Articles or otherwise, the
notice shall specify: (a) the place, date and time of the meeting; (b) in the
case of a special meeting of shareholders or where otherwise required by law or
the Bylaws, the general nature of the business to be transacted at such meeting;
and (c) any other information required by law.
Section 6.2. METHOD OF NOTICE. Whenever written notice is required to be
given to any person under the provisions of applicable law, the Articles or
these Bylaws, it may be given to the person either personally or by sending a
copy thereof by first class or express mail, postage prepaid, or by telegram
(with messenger service specified), telex or TWX (with answerback received) or
courier service, charges prepaid, or by facsimile transmission, to such person's
address (or to such person's telex, TWX or telecopier number) appearing on the
books of the Corporation or, in the case of Directors, supplied by such Director
to the Corporation for the purpose of notice. If the notice is sent by mail,
telegraph or courier service, it shall be deemed to have been given to the
person entitled thereto when deposited in the United States mail or with a
telegraph office or courier service for delivery to that person or, in the case
of telex, TWX or facsimile, when dispatched. Except as otherwise provided
herein, or as otherwise directed by the Board of Directors, notices of meetings
may be given by, or at the direction of, the Secretary.
Section 6.3. COMPUTING TIME PERIODS.
(a) DAYS TO BE COUNTED. In computing the number of days for purposes of
these Bylaws, all days shall be counted, including Saturdays, Sundays or a
holiday on which national banks are or may elect to be closed ("Holiday");
provided, however, that if the final day of any time period falls on a
Saturday, Sunday or Holiday, then the final day shall be deemed to be the
next day which is not a Saturday, Sunday or Holiday. In computing the number
of days for the purpose of giving notice of any meeting, the date upon which
the notice is given shall be counted but the day set for the meeting shall
not be counted.
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(b) ONE DAY NOTICE. In any case where only one day's notice is being
given, notice must be given at least 24 hours in advance of the date and
time specified for the meeting in question, by delivery in person,
telephone, telex, TWX, facsimile or similar means of communication.
Section 6.4. WAIVER OF NOTICE. Whenever any notice is required to be given
by law or the Articles or these Bylaws, a waiver thereof in writing, signed by
the person or persons entitled to the notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of the notice. Neither
the business to be transacted at, nor the purpose of, a meeting need be
specified in the waiver of notice of the meeting. Attendance of a person at any
meeting shall constitute a waiver of notice of the meeting except where a person
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting was not lawfully
called or convened.
Section 6.5. MODIFICATION OF PROPOSAL CONTAINED IN NOTICE. Whenever the
language of a proposed resolution is included in a written notice of a meeting
required to be given under the provisions of the Pennsylvania BCL, the Articles
or these Bylaws, the meeting considering the resolution may, without further
notice, adopt it with such clarifying or other amendments as do not enlarge its
original purpose.
Section 6.6. BULK MAIL. If the Corporation has more than 30 shareholders,
notice of any regular or special meeting of the shareholders, or any other
notice required by the Pennsylvania BCL or by the Articles of these Bylaws to be
given to all shareholders or to all holders of a class or a series of shares,
may be given by any class of post-paid mail if the notice is deposited in the
United States mail at least 20 days prior to the day named for the meeting or
any corporate or shareholder action specified in the notice.
Section 6.7. SHAREHOLDER WITHOUT FORWARDING ADDRESSES. Notice or other
communications need not be sent to any shareholder with whom the Corporation has
been unable to communicate for more than 24 consecutive months because
communications to the shareholder are returned unclaimed or the shareholder has
otherwise failed to provide the Corporation with a current address. Whenever the
shareholder provides the Corporation with a current address, the Corporation
shall commence sending notices and other communications to the shareholder in
the same manner as to other shareholders.
ARTICLE VII--LIMITATION OF DIRECTORS' LIABILITY AND
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 7.1. LIMITATION OF DIRECTORS' LIABILITY. No Director of the
Corporation shall be personally liable, as such, for monetary damages for any
action taken or any failure to take any action unless: (a) the Director has
breached or failed to perform the duties of his or her office under the
Pennsylvania BCL, and (b) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness; provided, however, that the
provisions of this Section shall not apply to the responsibility or liability of
a Director pursuant to any criminal statute, or to the liability of a Director
for the payment of taxes pursuant to Federal, state or local law.
Section 7.2. INDEMNIFICATION AND INSURANCE.
(a) Indemnification of Directors and Officers.
(i) Each Indemnitee (as defined below) shall be indemnified and held
harmless by the Corporation for all actions taken by him or her and for
all failures to take action (regardless of the date of any such action or
failure to take action) to the fullest extent permitted by Pennsylvania
law against all expense, liability and loss (including without limitation
attorneys fees, judgments, fines, taxes, penalties, and amounts paid or
to be paid in settlement) reasonably incurred by or imposed upon the
Indemnitee in connection with any Proceeding (as defined below). No
indemnification pursuant to this Section shall be made, however, in
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<PAGE>
any case where the act or failure to act giving rise to the claim for
indemnification is determined by a court to have constituted willful
misconduct or recklessness.
(ii) The right to indemnification provided in this Section shall
include the right to have the expenses incurred by the Indemnitee in
defending any Proceeding paid by the Corporation in advance of the final
disposition of the Proceeding to the fullest extent permitted by
Pennsylvania law; provided that, if Pennsylvania law continues so to
require, the payment of such expenses incurred by the Indemnitee in
advance of the final disposition of a Proceeding shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of the
Indemnitee, to repay all amounts so advanced without interest if it shall
ultimately be determined that the Indemnitee is not entitled to be
indemnified under this Section or otherwise.
(iii) Indemnification pursuant to this Section shall continue as to
an Indemnitee who has ceased to be a Director or officer and shall inure
to the benefit of his or her heirs, executors and administrators.
(iv) For purposes of this Article, (A) "Indemnitee" shall mean each
Director or officer of the Corporation (including, without limitation,
the Chairman Emeritus) who was or is a party to, or is threatened to be
made a party to, or is otherwise involved in, any Proceeding, by reason
of the fact that he or she is or was a representative of the Corporation
or is or was serving in any capacity at the request or for the benefit of
the Corporation as a representative of another corporation or any
partnership, joint venture, trust, employee benefit plan, or other
enterprise; and (B) "Proceeding" shall mean any threatened, pending or
completed action, suit or proceeding (including without limitation an
action, suit or proceeding by or in the right of the Corporation),
whether civil, criminal, administrative, investigative or through
arbitration.
(b) INDEMNIFICATION OF EMPLOYEES AND OTHER PERSONS. The Corporation may,
by action of its Board of Directors and to the extent provided in such
action, indemnify employees and other persons as though they were
Indemnitees. To the extent that any such employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
Proceeding or in defense of any claim, issue or matter therein, the
Corporation shall indemnify such person against expenses (including
attorneys' fees) actually and reasonably incurred by such person in
connection therewith.
(c) NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and to the
advancement of expenses provided in this Article shall not be exclusive of
any other rights that any person may have or hereafter acquire under any
statute, provision of the Articles or Bylaws, agreement, vote of
shareholders or Directors, or otherwise.
(d) INSURANCE. The Corporation may purchase and maintain insurance, at
its expense, for the benefit of any person on behalf of whom insurance is
permitted to be purchased by Pennsylvania law against any expense, liability
or loss, whether or not the Corporation would have the power to indemnify
such person under Pennsylvania or other law. The Corporation may also
purchase and maintain insurance to insure its indemnification obligations
whether arising hereunder or otherwise.
(e) FUND FOR PAYMENT OF EXPENSES. The Corporation may create a fund of
any nature, which may, but need not be, under the control of a trustee, or
otherwise may secure in any manner its indemnification obligations, whether
arising hereunder, under the Articles, by agreement, vote of shareholders or
Directors, or otherwise.
Section 7.3. AMENDMENT. The provisions of this Article VII relating to the
limitation of Directors' liability, to indemnification and to the advancement of
expenses shall constitute a contract
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between the Corporation and each of its Directors and officers which may be
modified as to any Director or officer in respect of any act or omission
occurring prior to the date of any such modification only with that person's
consent or as specifically provided in this Section. Notwithstanding any other
provision of these Bylaws relating to their amendment generally, any repeal or
amendment of this Article VII which is adverse to any Director or officer shall
apply to such Director or officer only on a prospective basis, and shall not
reduce any limitation on the personal liability of a Director of the
Corporation, or limit the rights of an Indemnitee to indemnification or to the
advancement of expenses with respect to any action or failure to act occurring
prior to the time of such repeal or amendment. Notwithstanding any other
provision of these Bylaws, no repeal or amendment of these Bylaws shall affect
any or all of this Article so as either to reduce the limitation of Directors'
liability or limit indemnification or the advancement of expenses in any manner
unless adopted by (a) the unanimous vote of the Directors of the Corporation
then serving, or (b) the affirmative vote of shareholders entitled to cast not
less than a majority of the votes that all shareholders are entitled to cast in
the election of Directors; provided that no such amendment shall have
retroactive effect inconsistent with the preceding sentence.
Section 7.4. CHANGES IN PENNSYLVANIA LAW. References in this Article VII
to Pennsylvania law or to any provision thereof shall be to such law as it
existed on the date this Article VII was adopted or as such law thereafter may
be changed; provided that (a) in the case of any change which expands the
liability of Directors or limits the indemnification rights or the rights to
advancement of expenses which the Corporation may provide, the rights to limited
liability, to indemnification and to the advancement of expenses provided in
this Article shall continue as theretofore to the extent permitted by law; and
(b) if such change permits the Corporation without the requirement of any
further action by shareholders or Directors to limit further the liability of
Directors (or limit the liability of officers) or to provide broader
indemnification rights or rights to the advancement of expenses than the
Corporation was permitted to provide prior to such change, then liability
thereupon shall be so limited and the rights to indemnification and the
advancement of expenses shall be so broadened to the extent permitted by law.
ARTICLE VIII--FISCAL YEAR
Section 8.1. DETERMINATION OF FISCAL YEAR. The Board of Directors shall
have the power by resolution to fix the fiscal year of the Corporation. If the
Board of Directors shall fail to do so, the Chairman of the Board or, if there
be none, the President of the Corporation shall fix the fiscal year.
ARTICLE IX--AMENDMENTS
Section 9.1. Except as otherwise expressly provided in Section 7.3:
(a) SHAREHOLDERS. The shareholders entitled to vote thereon shall have
the power to alter, amend, or repeal these Bylaws, by the vote of
shareholders entitled to cast at least a majority of the votes which all
shareholders are entitled to cast thereon, at any regular or special
meeting, duly convened after notice to the shareholders of such purpose. In
the case of a meeting of shareholders to amend or repeal these Bylaws,
written notice shall be given to each shareholder that the purpose, or one
of the purposes, of the meeting is to consider the adoption, amendment or
repeal of the Bylaws.
(b) BOARD OF DIRECTORS. The Board of Directors (but not a committee
thereof), by a vote of the majority of Directors then in office, shall have
the power to alter, amend, and repeal these Bylaws, regardless of whether
the shareholders have previously adopted the Bylaw being amended or
repealed, subject to the power of the shareholders to change such action,
provided that the Board of Directors shall not have the power to amend these
Bylaws on any subject that is expressly
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<PAGE>
committed to the shareholders by the express terms hereof, by Section 1504
of the Pennsylvania BCL or otherwise.
ARTICLE X--INTERPRETATION OF BYLAWS--SEPARABILITY
Section 10.1. INTERPRETATION. All words, terms and provisions of these
Bylaws shall be interpreted and defined by and in accordance with the
Pennsylvania BCL. If any provision of these Bylaws shall be inconsistent with
any provision of the Articles, the provision of the Articles shall prevail.
Where any provision of these Bylaws refers to a rule or process as set forth in
these Bylaws, the reference shall be construed to include and be satisfied by
any rule or process on the same subject set forth in the Articles.
Section 10.2. SEPARABILITY. The provisions of these Bylaws are independent
of and separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be invalid or unenforceable in whole or in part.
ARTICLE XI--DETERMINATIONS BY THE BOARD
Section 11.1. EFFECT OF BOARD DETERMINATIONS. Any determination involving
interpretation or application of these Bylaws made in good faith by the Board of
Directors shall be final, binding and conclusive on all parties in interest.
E-17
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ANNEX F
[BEAR STEARNS LETTERHEAD]
October 20, 1999
The Board of Directors
Iron Mountain Incorporated
745 Atlantic Avenue
Boston, MA 02111
Gentlemen:
We understand that Iron Mountain Incorporated ("Iron Mountain") and Pierce
Leahy Corp. ("Pierce Leahy") will enter into an agreement (the "Merger
Agreement") to be dated on or about October 20, 1999, pursuant to which Iron
Mountain will acquire Pierce Leahy (the "Merger"), with the effect equivalent to
a fixed exchange ratio of 1.10 shares of Iron Mountain common stock per Pierce
Leahy common share (as used herein, the "Exchange Ratio"). We understand that
Pierce Leahy will be the surviving legal entity in the Merger and that it will
be renamed "Iron Mountain Incorporated" upon consummation of the Merger.
Immediately prior to the Merger, existing Pierce Leahy shareholders will receive
a stock dividend of 0.10 common shares of Pierce Leahy for each Pierce Leahy
common share they own. As a result of the Merger, the former Iron Mountain
stockholders will receive 1.00 share of the surviving entity per Iron Mountain
share of common stock owned. You have provided us with a copy of the Merger
Agreement, together with the exhibits and schedules thereto, in substantially
final form.
You have asked us to render our opinion as to whether the Exchange Ratio is
fair, from a financial point of view, to the stockholders of Iron Mountain.
In the course of performing our review and analyses for rendering this
opinion, we have:
- reviewed the Merger Agreement, together with the exhibits and schedules
thereto, in substantially final form;
- reviewed Iron Mountain's and Pierce Leahy's Annual Reports on Form 10-K
for the years ended December 31, 1997 and 1998, and Quarterly Reports on
Form 10-Q for the periods ended March 31, 1999 and June 30, 1999;
- reviewed Iron Mountain's Current Reports on Form 8-K filed on January 19,
1999, April 16, 1999 and July 9, 1999 and on Form 8-K/A filed on
March 22, 1999;
- reviewed certain operating and financial information, including financial
projections and operational cost synergy estimates, provided to us by Iron
Mountain's management relating to Iron Mountain's and Pierce Leahy's
businesses and future prospects;
- met with certain members of Iron Mountain's and Pierce Leahy's senior
management to discuss their respective companies' businesses, operations,
historical and projected financial results and future prospects;
- reviewed the historical prices, valuation parameters and trading volumes
of the common stock of Iron Mountain and the common shares of Pierce
Leahy;
- reviewed publicly available financial data, stock market performance data
and valuation parameters of companies which we deemed generally comparable
to Iron Mountain and Pierce Leahy;
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<PAGE>
Iron Mountain Incorporated
October 20, 1999
Page 2
- reviewed the terms of recent acquisitions of companies which we deemed
generally comparable to Pierce Leahy;
- performed discounted cash flow analyses based on the projections and
operational cost synergy estimates for Pierce Leahy provided by Iron
Mountain's management;
- conducted an accretion/dilution analysis, comparing Iron Mountain's
stand-alone cash earnings per share of common stock with cash earnings per
common share of the surviving entity pro forma for the Merger;
- compared Iron Mountain's trading multiples with Pierce Leahy's valuation
multiples as implied in the Merger;
- performed a relative contribution analysis, comparing revenue, EBITDA and
free cash flow contributions to the relative enterprise value of the
combined entity and comparing cash earnings, net income and EBITDA minus
interest to equity ownership of the combined entity pro forma for the
Merger; and
- conducted such other studies, analyses, inquiries and investigations as we
deemed appropriate.
In the course of our review, we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information, including without limitation the financial projections and
operational cost synergy estimates, provided to us by Iron Mountain and Pierce
Leahy. With respect to Iron Mountain's and Pierce Leahy's projected financial
results and the estimated operational cost synergies that could be achieved upon
consummation of the Merger, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the senior managements of Iron Mountain and Pierce Leahy as to the
expected future performance of Iron Mountain and Pierce Leahy and the surviving
entity. We have not assumed any responsibility for the independent verification
of any such information or of the financial projections and operational cost
synergy estimates provided to us, and we have further relied upon the assurances
of the senior managements of Iron Mountain and Pierce Leahy that they are
unaware of any facts that would make the information, financial projections and
operational cost synergy estimates provided to us incomplete or misleading.
In arriving at our opinion, we have not performed or obtained any
independent appraisal of the assets or liabilities of Iron Mountain and Pierce
Leahy, nor have we been furnished with any such appraisals. We have assumed that
the Merger will qualify as a tax-free "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code. We have also assumed that the
Merger will be consummated in accordance with Merger Agreement without any
limitations, restrictions, conditions, amendments or modifications that
collectively would have a material effect on Iron Mountain. Our opinion is
necessarily based on economic, market and other conditions, and the information
made available to us, as of the date hereof.
We have acted as a financial advisor to Iron Mountain in connection with the
Merger and will receive a fee for such services. Bear, Stearns & Co. Inc. has
previously been engaged by Iron Mountain to provide certain investment banking
and financial advisory services and in connection with offerings of equity and
debt securities. In the ordinary course of business, Bear, Stearns & Co. Inc.
may actively trade the equity and debt securities of Iron Mountain and/or Pierce
Leahy for our own account and for the account of our customers and, accordingly,
may at any time hold a long or short position in such securities.
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<PAGE>
Iron Mountain Incorporated
October 20, 1999
Page 3
It is understood that this letter is intended for the benefit and use of the
Board of Directors of Iron Mountain and does not constitute a recommendation to
the Board of Directors of Iron Mountain or any holders of Iron Mountain common
stock as to how to vote in connection with the Merger. This opinion does not
address Iron Mountain's underlying business decision to pursue the Merger. This
letter is not to be used for any other purpose, or reproduced, disseminated,
quoted to or referred to at any time, in whole or in part, without our prior
written consent; provided, however, that this letter may be included in its
entirety in any joint proxy statement/prospectus to be distributed to the
holders of Iron Mountain common stock in connection with the Merger.
Based on and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair, from a financial point of view, to the
stockholders of Iron Mountain.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ J. ROBERT BURTON
- -------------------------
Senior Managing Director
F-3
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[First Union Securities, Inc. Letterhead]
ANNEX G
CONFIDENTIAL
October 20, 1999
The Board of Directors
Pierce Leahy Corp.
631 Park Avenue
King of Prussia, PA 19406
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the shareholders of Pierce Leahy Corp. ("Pierce
Leahy" or the "Company") of the consideration to be received by such
shareholders pursuant to the Agreement and Plan of Merger (the "Agreement")
dated as of October 6, 1999 between Pierce Leahy and Iron Mountain, Inc. ("Iron
Mountain"). As more fully described in the Agreement, the Company and Iron
Mountain will carry out a business combination transaction pursuant to which
Iron Mountain will merge with and into Pierce Leahy (the "Merger"). In order to
effect the Merger, prior to the Effective Time, the Company will declare a
one-for-ten stock dividend, and in connection with the Merger, at the Effective
Time and by virtue of the Merger, each share of Iron Mountain common stock, par
value $0.01 per share, will be converted into one share of Pierce Leahy common
stock, par value $0.01 per share.
In arriving at our opinion, we have, among other things:
- Reviewed the financial terms of the Merger, as set forth in the Agreement;
- Reviewed certain historical business, financial, and other information
related to Pierce Leahy and Iron Mountain;
- Reviewed certain financial forecasts and other data provided to us by
members of the Company's and Iron Mountain's management relating to the
respective businesses;
- Conducted discussions with members of Pierce Leahy's and Iron Mountain's
respective managements with respect to the business, prospects, and
financial forecasts of the Company and Iron Mountain;
- Compared the financial position and operating results of Pierce Leahy and
Iron Mountain with those of publicly traded companies we deemed relevant;
- Compared the financial terms of the Merger with certain of the financial
terms of other similar transactions we deemed relevant; and
- Conducted such other financial studies, analyses and investigations as we
deemed appropriate.
In connection with our review, we have relied upon the accuracy and
completeness of the information provided to us by members of Pierce Leahy's and
Iron Mountain's respective managements as well as independent audits of the
Company and Iron Mountain for fiscal 1999, and we have not assumed any
responsibility for any independent verification of such information. With
respect to Pierce Leahy's and Iron Mountain's respective financial forecasts, we
have assumed that they have been reasonably prepared and reflect the best
current estimates and judgement of management as to the future financial
performance of the Company and Iron Mountain, respectively. We have discussed
Pierce Leahy's and Iron Mountain's respective financial forecasts with
management of the Company
G-1
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and Iron Mountain, but we assume no responsibility for and express no view as to
Pierce Leahy's and Iron Mountain's respective financial forecasts or the
assumptions upon which they are based.
Our opinion is necessarily based on economic, market, financial, and other
conditions and the information made available to us as of the date hereof. In
rendering our opinion, we have assumed that the Merger will be consummated on
the terms described in the Agreement that we reviewed, without any waiver of any
material terms or conditions. Our opinion does not address the relative merits
of the Merger and the other business strategies considered by Pierce Leahy's
Board of Directors, nor does it address the Company's Board of Directors'
decision to proceed with the Merger.
First Union Securities, Inc. is an investment banking firm and an affiliate
of First Union Corporation. We have been engaged to render financial advisory
services to Pierce Leahy in connection with the Merger and will receive a fee
upon the delivery of this opinion. In the ordinary course of our business, we
and our affiliates may actively trade or hold the securities of Pierce Leahy and
Iron Mountain for our own account or for the account of our customers and,
accordingly, may at any time hold a long or short position in such securities.
In addition, First Union Securities, Inc. and its affiliates (including First
Union Corporation and its affiliates) may maintain relationships with Pierce
Leahy and Iron Mountain, and First Union National Bank is a participant in the
Company's existing revolving credit facility.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Pierce Leahy in its evaluation of the
proposed Merger and do not constitute a recommendation to the Company. Our
opinion may not be published or otherwise used or referred to, nor shall any
public reference to First Union Securities, Inc. or First Union Corporation be
made, without our prior written consent.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the consideration to be received
in the Merger by the shareholders of Pierce Leahy is fair, from a financial
point of view, to such shareholders.
Very truly yours,
/s/ FIRST UNION SECURITIES
FIRST UNION SECURITIES, INC.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subchapter D (Sections 1741 through 1750) of Chapter 17 the Pennsylvania
Business Corporation Law of 1988, as amended (the "PBCL"), contains provisions
for mandatory and discretionary indemnification of a corporation's directors,
officers, employees and agents (collectively "Representatives") and related
matters.
Under Section 1741, subject to certain limitations, a corporation has the
power to indemnify directors, officers and other Representatives under certain
prescribed circumstances against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with a threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative, to which any of them
is a party or threatened to be made a party by reason of his being a
Representative of the corporation or serving at the request of the corporation
as a Representative of another corporation, partnership, joint venture, trust or
other enterprise, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal proceeding, had no reasonable cause to believe his
conduct was unlawful.
Section 1742 provides for indemnification with respect to derivative and
corporate actions similar to that provided by Section 1741. However,
indemnification is not provided under Section 1742 in respect of any claim,
issue or matter as to which a Representative has been adjudged to be liable to
the corporation unless and only to the extent that the proper court determines
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, a Representative is fairly and reasonably
entitled to indemnity for the expenses that the court deems proper.
Section 1743 provides that indemnification against expenses is mandatory to
the extent that a Representative has been successful on the merits or otherwise
in defense of any such action or proceeding referred to in Section 1741 or 1742.
Section 1744 provides that unless ordered by a court, any indemnification
under Section 1741 or 1742 shall be made by the corporation as authorized in the
specific case upon a determination that indemnification of a Representative is
proper because the Representative met the applicable standard of conduct, and
such determination will be made by the board of directors by a majority vote of
a quorum of directors not parties to the action or proceeding; if a quorum is
not obtainable or if obtainable and a majority of disinterested directors so
directs, by independent legal counsel; or by the shareholders.
Section 1745 provides that expenses incurred by a Representative in
defending any action or proceeding referred to in Subchapter D of Chapter 17 of
the PBCL may be paid by the corporation in advance of the final disposition of
such action or proceeding upon receipt of an undertaking by or on behalf of the
Representative to repay such amount if it shall ultimately be determined that he
is not entitled to be indemnified by the corporation.
Section 1746 provides generally that except in any case where the act or
failure to act giving rise to the claim for indemnification is determined by a
court to have constituted willful misconduct or recklessness, the
indemnification and advancement of expenses provided by Subchapter D of Chapter
17 of the PBCL shall not be deemed exclusive of any other rights to which a
Representative seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding that office.
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Section 1747 grants a corporation the power to purchase and maintain
insurance on behalf of any Representative against any liability incurred by him
in his capacity as a Representative, whether or not the corporation would have
the power to indemnify him against that liability under Subchapter D of Chapter
17 of the PBCL.
Sections 1748 and 1749 apply the indemnification and advancement of expenses
provisions contained in Subchapter D of Chapter 17 of the PBCL to successor
corporations resulting from consolidation, merger or division and to service as
a representative of a corporation or an employee benefit plan.
Section 7.2 of the Company's Bylaws provides indemnification to directors
and officers for all actions taken by them and for all failures to take action
to the fullest extent permitted by Pennsylvania law against all expense,
liability and loss reasonably incurred or suffered by them in connection with
any threatened, pending or completed action, suit or proceeding (including,
without limitation, an action, suit or proceeding by or in the right of the
Company), whether civil, criminal, administrative, investigative or through
arbitration. Section 7.2 also permits the Company, by action of its Board of
Directors, to indemnify officers, employees and other persons to the same extent
as directors. Amendments, repeals or modifications of Section 7.2 can only be
prospective and such changes require the affirmative vote of not less than all
of the directors then serving or holders of a majority of the outstanding shares
of stock of the Company entitled to vote in elections of directors. Section 7.2
further permits the Company to maintain insurance, at its expense, for the
benefit of any person on behalf of whom insurance is permitted to be purchased
by Pennsylvania law against any such expenses, liability or loss, whether or not
the Company would have the power to indemnify such person against such expense,
liability or loss under Pennsylvania or other law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- --------------------- -------
<C> <S>
2.1 Agreement and Plan of Merger by and between Iron Mountain
and Pierce Leahy dated as of October 20, 1999 (included as
Annex A to the joint proxy statement/prospectus which forms
a part of this Registration Statement)
2.2 Agreement and Plan of Merger, dated as of June 5, 1998, by
and among Iron Mountain Records Management, Inc., Iron
Mountain/NUS, Inc. and National Underground Storage, Inc.
(confidential treatment granted as to certain portions)
(incorporated by reference to Exhibit 2.1 to Iron Mountain's
Current Report on Form 8-K dated July 10, 1998, File No.
0-27584)
2.3 Stock Purchase Agreement, dated as of February 28, 1999, by
and among Iron Mountain, Data Base, Inc. and all of the
stockholders of Data Base, Inc. (confidential treatment
granted as to certain portions) (incorporated by reference
to Exhibit 2.10 to Iron Mountain's Annual Report on Form
10-K for the year ended December 31, 1998, File No. 0-27584)
2.4 Stock Purchase Agreement, dated as of April 1, 1999, by and
among Iron Mountain Records Management, Inc., First American
Records Management, Inc. and all of the stockholders of
First American Records Management, Inc. (confidential
treatment granted as to certain portions) (incorporated by
reference to Exhibit 2.2 to Iron Mountain's Current Report
on Form 8-K dated April 16, 1999, File No. 0-27584)
3.1 Articles of Incorporation of Pierce Leahy (incorporated by
reference to Exhibit 3.1 to Pierce Leahy's Registration
Statement on Form S-1, File No. 333-23121)
3.2 By-laws of Pierce Leahy (incorporated by reference to
Exhibit 3.2 to Pierce Leahy's Registration Statement on Form
S-1, File No. 333-23121)
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- --------------------- -------
<C> <S>
3.3 Amended and Restated Articles of Incorporation of Pierce
Leahy (included as Annex D to the joint proxy
statement/prospectus which forms a part of this Registration
Statement)
3.4 Amended and Rested Bylaws of Pierce Leahy (included as Annex
E to the joint proxy statement/prospectus which forms a part
of this Registration Statement)
3.5 Designation, Rights and Preferences of the Series A
Redeemable Senior Pay-In-Kind Preferred Stock (incorporated
by reference to Exhibit 3.3 to Pierce Leahy's Annual Report
on Form 10-K for the year ended December 31, 1998)
5 Opinion of Cozen and O'Connor*
8.1 Tax Opinion of Cozen and O'Connor*
8.2 Tax Opinion of Sullivan & Worcester LLP*
9 Amended and Restated Voting Trust Agreement by and among
certain shareholders of Pierce Leahy (incorporated by
reference to Exhibit 9 to Pierce Leahy's Annual Report on
Form 10-K for the year ended December 31, 1997)
10.1 Pierce Leahy Shareholders' Agreement (included as Annex B to
the joint proxy statement/ prospectus which forms a part of
this Registration Statement)
10.2 Iron Mountain Voting Agreement (included as Annex C to the
joint proxy statement/ prospectus which forms a part of this
Registration Statement)
10.3 Form of employment agreement by and between Pierce Leahy and
J. Peter Pierce*
10.4 Pierce Leahy Non-Qualified Stock Option Plan (incorporated
by reference to Exhibit 10.3 to Pierce Leahy's Registration
Statement on Form S-4, File No. 333-9963)
10.5 Pierce Leahy 1997 Stock Option Plan (incorporated by
reference to Exhibit 10.2 to Pierce Leahy's Registration
Statement on Form S-1, File No. 333-23121)
10.6(a) Second Amended and Restated Credit Agreement dated as of
February 24, 1999, among Pierce Leahy, Pierce Leahy Command
Company, the several lenders from time to time parties
thereto, Canadian Imperial Bank of Commerce, as Canadian
Administrative Agent, and Canadian Imperial Bank of
Commerce, New York Agency, as U.S. Administrative Agent
(incorporated by reference to Exhibit 10.3(a) to Pierce
Leahy's Annual Report on Form 10-K for the year ended
December 31, 1998)
10.6(b) Credit Agreement dated as of August 12, 1997, as amended,
among Pierce Leahy, Pierce Leahy Command Company, the
several lenders from time to time parties thereto, Canadian
Imperial Bank of Commerce, as Canadian Administrative Agent,
and Canadian Imperial Bank of Commerce, New York Agency, as
U.S. Administrative Agent, together with certain collateral
documents attached thereto, including the form of US$ Note,
the form of Canadian$ Note, and the form of the U.S. Global
Guarantee and Security Agreement made by Pierce Leahy,
certain of its affiliates and subsidiaries and its
shareholders in favor of the U.S. Administrative Agent
(incorporated by reference to Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1997)
10.7 Indenture dated as of July 15, 1996 among the Pierce Leahy
as issuer and United States Trust Company of New York as
trustee (incorporated by reference to Exhibit 4.4 to Pierce
Leahy's Registration Statement on Form S-4, File
No. 333-9963)
10.8 Indenture dated as of July 7, 1997 among Pierce Leahy as
issuer and The Bank of New York as trustee (incorporated by
reference to Exhibit 10.5 to Pierce Leahy's Annual Report on
Form 10-K for the year ended December 31, 1997)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- --------------------- -------
<C> <S>
10.9 Indenture dated as of April 7, 1998 by and among Pierce
Leahy Command Company as issuer, Pierce Leahy, and The Bank
of New York as trustee (incorporated by reference to
Exhibit 4.1(c) to Pierce Leahy's Registration Statement on
Form S-4, File No. 333-58569)
10.10 Tax Indemnification Agreement among Pierce Leahy and certain
of its shareholders (incorporated by reference to
Exhibit 10.9 to Pierce Leahy's Registration Statement on
Form S-1, File No. 333- 23121)
10.11 Pierce Leahy Profit Sharing/401(K) Plan, as amended, dated
December 29, 1998 (incorporated by reference to Exhibit 10
to Pierce Leahy's Registration Statement on Form S-8, File
No. 333-69859)
10.12 Asset Purchase Agreement dated February 4, 1998, and
Amending Agreement dated April 7, 1998, among Pierce Leahy
Command Company, Archivex Inc., the shareholders of
Archivex Inc., and certain parties related to Archivex Inc.
(incorporated by reference to Exhibits 10.1 and 10.2 to
Pierce Leahy's Current Report on Form 8-K dated April 7,
1998)
10.13 Stock Purchase Agreement dated May 21, 1998 among Pierce
Leahy and the shareholders of Kestrel Holdings, Inc.
(incorporated by reference to Exhibit 10.1 to Pierce Leahy's
Current Report on Form 8-K dated July 2, 1998)
10.14 Share Purchase Agreement dated February 26, 1999 among
Charles Greaves Stuart-Menteth and Others, Pierce Leahy
Europe Limited and Eagle Trustees Limited as the Sole
Trustees of the Stuart-Menteth Family Trust*
10.15 First Amendment to Stock Purchase Agreement, dated as of
April 8, 1999, by and among Iron Mountain, Data Base, Inc.
and all of the stockholders of Data Base, Inc. (incorporated
by reference to Exhibit 10.1 to Iron Mountain's Current
Report on Form 8-K dated April 16, 1999, File No. 0-27584)
10.16 Second Amended and Restated Credit Agreement, dated as of
September 26, 1997, among Iron Mountain, the lenders party
thereto and The Chase Manhattan Bank, as Administrative
Agent (incorporated by reference to Exhibit 10.1 to Iron
Mountain's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997, File No. 0-27584)
10.17 Amendment No. 1 to the Second Amended and Restated Credit
Agreement, dated as of December 31, 1997, among Iron
Mountain, the lenders party thereto and The Chase Manhattan
Bank, as Administrative Agent (incorporated by reference to
Exhibit 10.2 to Amendment No. 1 to Iron Mountain's
Registration Statement on Form S-4, File No. 333-44187)
10.18 Amendment No. 2 to the Second Amended and Restated Credit
Agreement, dated as of November 9, 1998, among Iron
Mountain, the lenders party thereto and The Chase Manhattan
Bank, as Administrative Agent (incorporated by reference to
Exhibit 10.1 to Iron Mountain's Current Report on Form 8-K
dated January 19, 1999, File No. 0-27584)
10.19 Amendment No. 3 to the Second Amended and Restated Credit
Agreement, dated as of February 26, 1999, among Iron
Mountain, the lenders party thereto and The Chase Manhattan
Bank, as Administrative Agent (incorporated by reference to
Exhibit 10.1 to Iron Mountain's Current Report on Form 8-K
dated July 29, 1999, File No. 0-27584)
10.20 Amendment No. 4 to the Second Amended and Restated Credit
Agreement, dated as of April 6, 1999, among Iron Mountain,
the lenders party thereto and The Chase Manhattan Bank, as
Administrative Agent (incorporated by reference to
Exhibit 10.2 to Iron Mountain's Current Report on Form 8-K
dated July 29, 1999, File No. 0-27584)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- --------------------- -------
<C> <S>
10.21 Amendment No. 5 to the Second Amended and Restated Credit
Agreement, dated as of July 14, 1999, among Iron Mountain,
the lenders party thereto and The Chase Manhattan Bank, as
Administrative Agent (incorporated by reference to
Exhibit 10.3 to Iron Mountain's Current Report on Form 8-K
dated July 29, 1999, File No. 0-27584)
10.22 Indenture for 10 1/8% Senior Subordinated Notes due 2006,
dated October 1, 1996, by and among Iron Mountain, certain
of its subsidiaries and First National Association, as
trustee (incorporated by reference to Exhibit 10.3 to Iron
Mountain's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 0-27584)
10.23 Indenture of 8 3/4% Senior Subordinated Notes due 2009,
dated October 24, 1997, by and among Iron Mountain, certain
of its subsidiaries and The Bank of New York, as trustee
(incorporated by reference to Exhibit No. 4.1 to Iron
Mountain's Current Report on Form 8-K dated October 30,
1997, File No. 0-27584)
10.24 Indenture for 8 1/4% Senior Subordinated Notes due 2011,
dated April 26, 1999, by and among Iron Mountain, certain of
its subsidiaries and The Bank of New York, as trustee
(incorporated by reference to Exhibit 10.1 to Iron
Mountain's Current Report on Form 8-K dated May 11, 1999,
File No. 0-27584)
10.25 Iron Mountain Incorporated 1995 Stock Incentive Plan, as
amended (incorporated by reference to Exhibit 10.3 to Iron
Mountain's Current Report on Form 8-K dated April 16, 1999,
File No. 0-27584)
10.26 Iron Mountain/UAC 1995 Stock Option Plan (incorporated by
reference to Exhibit No. 10.1 to Iron Mountain's Current
Report on Form 8-K dated March 9, 1998, File No. 0-27584)
10.27 Iron Mountain Incorporated 1998 Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.8 to Amendment No.
1 to Iron Mountain's Registration Statement on Form S-4,
File No. 333-44187)
10.28 Record Center Storage Services Agreement between Iron
Mountain Records Management, Inc. and Resolution Trust
Corporation, dated July 31, 1992, as renewed by letter
agreement effective July 26, 1998 between Iron Mountain and
the Federal Deposit Insurance Corporation (incorporated by
reference to Exhibit No. 10.18 to Iron Mountain's
Registration Statement on Form S-1, File No. 33-99950)
10.29 Amended and Restated Registration Rights Agreement, dated as
of June 12, 1997, between Iron Mountain and certain
stockholders of Iron Mountain (incorporated by reference to
Exhibit 10.1 to Iron Mountain's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997, File No. 0-27584)
10.30 Joinder to Registration Rights Agreement, dated as of
October 31, 1997, by and between Iron Mountain and Kent P.
Dauten (incorporated by reference to Exhibit 10.12 to Iron
Mountain's Registration Statement on Form S-4, File No.
333-41045)
10.31 Stockholders' Agreement, dated September 17, 1997, by and
between Iron Mountain and Kent P. Dauten (incorporated by
reference to Exhibit 10.13 to Iron Mountain's Registration
Statement on Form S-4, File No. 333-44187)
10.32 Stockholders' Agreement, dated as of February 19, 1997, by
and between Iron Mountain and certain stockholders of
Safesite Records Management Corporation (incorporated by
reference to Exhibit 10.20 to Iron Mountain's Annual Report
on Form 10-K for the year ended December 31, 1996, File No.
0-27584)
10.33 Stockholders' Agreement, dated as of September 26, 1997, by
and among Iron Mountain and certain stockholders of the
Arcus Parties (incorporated by reference to Exhibit 10.16 to
Iron Mountain's Registration Statement on Form S-4, File No.
333-41045)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- --------------------- -------
<C> <S>
10.34 Lease Agreement, dated as of October 1, 1998, between Iron
Mountain Statutory Trust--1998 and Iron Mountain Records
Management, Inc. (incorporated by reference to
Exhibit 10.20 to Iron Mountain's Registration Statement on
Form S-4, File No. 333-67765)
10.35 Unconditional Guaranty, dated as of October 1, 1998, from
Iron Mountain to Iron Mountain Statutory Trust-- 1998
(incorporated by reference to Exhibit 10.21 to Iron
Mountain's Registration Statement on Form S-4, File No.
333-67765)
10.36 Amendment and Consent to Unconditional Guaranty, dated as of
July 1, 1999, between Iron Mountain and Iron Mountain
Statutory Trust--1998 and consented to by to by the lenders
listed therein (incorporated by reference to Exhibit 10.1 to
Iron Mountain's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, File No. 0-27584)
10.37 Amended and Restated Agency Agreement, dated October 1,
1998, by and between Iron Mountain Statutory Trust--1998 and
Iron Mountain Records Management, Inc. (incorporated by
reference to Exhibit No. 10.22 to Iron Mountain's
Registration Statement on Form S-4, File No. 333-67765)
10.38 Lease Agreement, dated as of July 1, 1999, by and between
Iron Mountain Statutory Trust--1999 and Iron Mountain
Records Management, Inc. (incorporated by reference to
Exhibit 10.2 to Iron Mountain's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999, File No.
1-14937)
10.39 Agency Agreement, dated as of July 1, 1999, by and between
Iron Mountain Statutory Trust--1999 and Iron Mountain
Records Management, Inc. (incorporated by reference to
Exhibit 10.1 to Iron Mountain's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999, File No.
1-14937)
10.40 Strategic Alliance Agreement, dated as of January 4, 1999,
by and among Iron Mountain, Iron Mountain (U.K.) Limited,
Britannia Data Management Limited and Mentmore Abbey plc
(incorporated by reference to Exhibit 10.2 to Iron
Mountain's Current Report on Form 8-K dated January 19,
1999, File No. 0-27584)
10.41 Unconditional Guaranty, dated as of July 1, 1999, from Iron
Mountain Incorporated to Iron Mountain Statutory Trust-1999
(incorporated by reference to Exhibit 10.3 to Iron
Mountain's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, File No. 1-14937)
21.1 Subsidiaries of Pierce Leahy (incorporated by reference to
Exhibit 21 to Pierce Leahy's Annual Report on Form 10-K for
the year ended December 31, 1997)
21.2 Subsidiaries of Iron Mountain*
23.1 Consent of Arthur Andersen LLP (Iron Mountain Incorporated)
23.2 Consent of Arthur Andersen LLP (Pierce Leahy Corp.)
23.3 Consent of Cozen and O'Connor (included in Exhibits 5 and
8.1)
23.4 Consent of Sullivan & Worcester LLP (included in
Exhibit 8.2)
23.5 Consent of Abbott, Stringham & Lynch (Records
Retention/Filesafe, L.P.)
23.6 Consent of Ernst & Young LLP (HIMSCORP, Inc. and
Subsidiaries)
23.7 Consent of Ernst & Young LLP (Arcus Technology Services,
Inc. and Arcus Group, Inc.)
23.8 Consent of Arthur Andersen LLP (Midwest Records Management,
Sloan Vaults, Inc., and Affiliate and InterMation, Inc.)
23.9 Consent of Carbis Walker & Associates, LLP (National
Underground Storage, Inc.)
23.10 Consent of RSM Robson Rhodes (Britannia Data Management
Limited)
23.11 Consent of Moss Adams LLP (Data Base, Inc. and Affiliate)
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- --------------------- -------
<C> <S>
23.12 Consent of Brach, Neal, Daney & Spence, LLP (First American
Records Management)
23.13 Consent of Barbier Frinault & Associes (MAP, S.A.)
23.14 Consent of Fernandez & Bravo (Central File, Inc.)
23.15 Consent of Arthur Andersen (Sistemas de Archivo)
23.16 Consent of Arthur Andersen (Stortext (Holdings) Limited
Group)
23.17 Consent of Arthur Andersen LLP (Midtown Professional Records
Centre, Inc.)
23.18 Consent of Friedman & Friedman, Chartered Accountants
(Archivex Inc.)
23.19 Consent of James N. Howard & Associates, P.C. (Kestrel
Holdings, Inc.)
24 Power of Attorney (included on signature page)
99.1 Opinion of First Union Securities, Inc. (included as Annex G
to the Proxy Statement/ Prospectus which forms a part of
this Registration Statement)
99.2 Opinion of Bear, Stearns & Co. Inc. (included as Annex F to
the Proxy Statement/Prospectus which forms a part of this
Registration Statement)
99.3 Form of Proxy Card of Pierce Leahy*
99.4 Form of Proxy Card of Iron Mountain*
99.5 Consent of C. Richard Reese to being named as a Director
nominee
99.6 Consent of David S. Wendell to being named as a Director
nominee
99.7 Consent of Clarke H. Bailey to being named as a Director
nominee
99.8 Consent of Constantin R. Boden to being named as a Director
nominee
99.9 Consent of Kent P. Dauten to being named as a Director
nominee
99.10 Consent of Eugene B. Doggett to being named as a Director
nominee
99.11 Consent of B. Thomas Golisano to being named as a Director
nominee
99.12 Consent of Arthur D. Little to being named as a Director
nominee
99.13 Consent of Howard D. Ross to being named as a Director
nominee
99.14 Consent of Vincent J. Ryan to being named as a Director
nominee
99.15 Consent of Bear, Stearns & Co. Inc
99.16 Consent of First Union Securities, Inc.
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-7
<PAGE>
(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) of 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(e) The undersigned Registrant hereby undertakes as follows:
(1) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(2) that every prospectus: (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as part of an amendment to the
Registration Statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in King of Prussia, Pennsylvania, on
November 23 , 1999:
<TABLE>
<S> <C> <C>
Pierce Leahy Corp.
BY: /s/ J. PETER PIERCE
-----------------------------------------
J. Peter Pierce
President and Chief Executive Officer
</TABLE>
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned hereby
constitutes and appoints J. Peter Pierce and Douglas B. Huntley, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign this Registration Statement (including all
pre-effective and post-effective amendments which incorporate this Registration
Statement by reference), and to file the same, with all exhibits thereto, and
any other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ LEO W. PIERCE, SR. Chairman of the Board of Directors November 23, 1999
- ----------------------------------
Leo W. Pierce, Sr.
/s/ J. PETER PIERCE President, Chief Executive Officer and November 23, 1999
- ---------------------------------- Director (Principal Executive
J. Peter Pierce Officer)
/s/ DOUGLAS B. HUNTLEY Vice President, Chief Financial Officer November 23, 1999
- ---------------------------------- and Director (Principal Financial
Douglas B. Huntley and Accounting Officer)
/s/ ALAN B. CAMPELL Director November 23, 1999
- ----------------------------------
Alan B. Campell
/s/ DELBERT S. CONNOR Director November 23, 1999
- ----------------------------------
Delbert S. Connor
/s/ THOMAS A. DECKER Director November 23, 1999
- ----------------------------------
Thomas A. Decker
/s/ J. ANTHONY HAYDEN Director November 23, 1999
- ----------------------------------
J. Anthony Hayden
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
EXHIBIT
NO.
- ---------------------
<C> <S>
2.1 Agreement and Plan of Merger by and between Iron Mountain
and Pierce Leahy dated as of October 20, 1999 (included as
Annex A to the joint proxy statement/prospectus which forms
a part of this Registration Statement)
2.2 Agreement and Plan of Merger, dated as of June 5, 1998, by
and among Iron Mountain Records Management, Inc., Iron
Mountain/NUS, Inc. and National Underground Storage, Inc.
(confidential treatment granted as to certain portions)
(incorporated by reference to Exhibit 2.1 to Iron Mountain's
Current Report on Form 8-K dated July 10, 1998, File No.
0-27584)
2.3 Stock Purchase Agreement, dated as of February 28, 1999, by
and among Iron Mountain, Data Base, Inc. and all of the
stockholders of Data Base, Inc. (confidential treatment
granted as to certain portions) (incorporated by reference
to Exhibit 2.10 to Iron Mountain's Annual Report on Form
10-K for the year ended December 31, 1998, File No. 0-27584)
2.4 Stock Purchase Agreement, dated as of April 1, 1999, by and
among Iron Mountain Records Management, Inc., First American
Records Management, Inc. and all of the stockholders of
First American Records Management, Inc. (confidential
treatment granted as to certain portions) (incorporated by
reference to Exhibit 2.2 to Iron Mountain's Current Report
on Form 8-K dated April 16, 1999, File No. 0-27584)
3.1 Articles of Incorporation of Pierce Leahy (incorporated by
reference to Exhibit 3.1 to Pierce Leahy's Registration
Statement on Form S-1, File No. 333-23121)
3.2 By-laws of Pierce Leahy (incorporated by reference to
Exhibit 3.2 to Pierce Leahy's Registration Statement on Form
S-1, File No. 333-23121)
3.3 Amended and Restated Articles of Incorporation of Pierce
Leahy (included as Annex D to the joint proxy
statement/prospectus which forms a part of this Registration
Statement)
3.4 Amended and Rested Bylaws of Pierce Leahy (included as Annex
E to the joint proxy statement/prospectus which forms a part
of this Registration Statement)
3.5 Designation, Rights and Preferences of the Series A
Redeemable Senior Pay-In-Kind Preferred Stock (incorporated
by reference to Exhibit 3.3 to Pierce Leahy's Annual Report
on Form 10-K for the year ended December 31, 1998)
5 Opinion of Cozen and O'Connor*
8.1 Tax Opinion of Cozen and O'Connor*
8.2 Tax Opinion of Sullivan & Worcester LLP*
9 Amended and Restated Voting Trust Agreement by and among
certain shareholders of Pierce Leahy (incorporated by
reference to Exhibit 9 to Pierce Leahy's Annual Report on
Form 10-K for the year ended December 31, 1997)
10.1 Pierce Leahy Shareholders' Agreement (included as Annex B to
the joint proxy statement/ prospectus which forms a part of
this Registration Statement)
10.2 Iron Mountain Voting Agreement (included as Annex C to the
joint proxy statement/ prospectus which forms a part of this
Registration Statement)
10.3 Form of employment agreement by and between Pierce Leahy and
J. Peter Pierce*
10.4 Pierce Leahy Non-Qualified Stock Option Plan (incorporated
by reference to Exhibit 10.3 to Pierce Leahy's Registration
Statement on Form S-4, File No. 333-9963)
10.5 Pierce Leahy 1997 Stock Option Plan (incorporated by
reference to Exhibit 10.2 to Pierce Leahy's Registration
Statement on Form S-1, File No. 333-23121)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
EXHIBIT
NO.
- ---------------------
<C> <S>
10.6(a) Second Amended and Restated Credit Agreement dated as of
February 24, 1999, among Pierce Leahy, Pierce Leahy Command
Company, the several lenders from time to time parties
thereto, Canadian Imperial Bank of Commerce, as Canadian
Administrative Agent, and Canadian Imperial Bank of
Commerce, New York Agency, as U.S. Administrative Agent
(incorporated by reference to Exhibit 10.3(a) to Pierce
Leahy's Annual Report on Form 10-K for the year ended
December 31, 1998)
10.6(b) Credit Agreement dated as of August 12, 1997, as amended,
among Pierce Leahy, Pierce Leahy Command Company, the
several lenders from time to time parties thereto, Canadian
Imperial Bank of Commerce, as Canadian Administrative Agent,
and Canadian Imperial Bank of Commerce, New York Agency, as
U.S. Administrative Agent, together with certain collateral
documents attached thereto, including the form of US$ Note,
the form of Canadian$ Note, and the form of the U.S. Global
Guarantee and Security Agreement made by Pierce Leahy,
certain of its affiliates and subsidiaries and its
shareholders in favor of the U.S. Administrative Agent
(incorporated by reference to Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1997)
10.7 Indenture dated as of July 15, 1996 among the Pierce Leahy
as issuer and United States Trust Company of New York as
trustee (incorporated by reference to Exhibit 4.4 to Pierce
Leahy's Registration Statement on Form S-4, File
No. 333-9963)
10.8 Indenture dated as of July 7, 1997 among Pierce Leahy as
issuer and The Bank of New York as trustee (incorporated by
reference to Exhibit 10.5 to Pierce Leahy's Annual Report on
Form 10-K for the year ended December 31, 1997)
10.9 Indenture dated as of April 7, 1998 by and among Pierce
Leahy Command Company as issuer, Pierce Leahy, and The Bank
of New York as trustee (incorporated by reference to
Exhibit 4.1(c) to Pierce Leahy's Registration Statement on
Form S-4, File No. 333-58569)
10.10 Tax Indemnification Agreement among Pierce Leahy and certain
of its shareholders (incorporated by reference to
Exhibit 10.9 to Pierce Leahy's Registration Statement on
Form S-1, File No. 333- 23121)
10.11 Pierce Leahy Profit Sharing/401(K) Plan, as amended, dated
December 29, 1998 (incorporated by reference to Exhibit 10
to Pierce Leahy's Registration Statement on Form S-8, File
No. 333-69859)
10.12 Asset Purchase Agreement dated February 4, 1998, and
Amending Agreement dated April 7, 1998, among Pierce Leahy
Command Company, Archivex Inc., the shareholders of
Archivex Inc., and certain parties related to Archivex Inc.
(incorporated by reference to Exhibits 10.1 and 10.2 to
Pierce Leahy's Current Report on Form 8-K dated April 7,
1998)
10.13 Stock Purchase Agreement dated May 21, 1998 among Pierce
Leahy and the shareholders of Kestrel Holdings, Inc.
(incorporated by reference to Exhibit 10.1 to Pierce Leahy's
Current Report on Form 8-K dated July 2, 1998)
10.14 Share Purchase Agreement dated February 26, 1999 among
Charles Greaves Stuart-Menteth and Others, Pierce Leahy
Europe Limited and Eagle Trustees Limited as the Sole
Trustees of the Stuart-Menteth Family Trust*
10.15 First Amendment to Stock Purchase Agreement, dated as of
April 8, 1999, by and among Iron Mountain, Data Base, Inc.
and all of the stockholders of Data Base, Inc. (incorporated
by reference to Exhibit 10.1 to Iron Mountain's Current
Report on Form 8-K dated April 16, 1999, File No. 0-27584)
10.16 Second Amended and Restated Credit Agreement, dated as of
September 26, 1997, among Iron Mountain, the lenders party
thereto and The Chase Manhattan Bank, as Administrative
Agent (incorporated by reference to Exhibit 10.1 to Iron
Mountain's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997, File No. 0-27584)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
EXHIBIT
NO.
- ---------------------
<C> <S>
10.17 Amendment No. 1 to the Second Amended and Restated Credit
Agreement, dated as of December 31, 1997, among Iron
Mountain, the lenders party thereto and The Chase Manhattan
Bank, as Administrative Agent (incorporated by reference to
Exhibit 10.2 to Amendment No. 1 to Iron Mountain's
Registration Statement on Form S-4, File No. 333-44187)
10.18 Amendment No. 2 to the Second Amended and Restated Credit
Agreement, dated as of November 9, 1998, among Iron
Mountain, the lenders party thereto and The Chase Manhattan
Bank, as Administrative Agent (incorporated by reference to
Exhibit 10.1 to Iron Mountain's Current Report on Form 8-K
dated January 19, 1999, File No. 0-27584)
10.19 Amendment No. 3 to the Second Amended and Restated Credit
Agreement, dated as of February 26, 1999, among Iron
Mountain, the lenders party thereto and The Chase Manhattan
Bank, as Administrative Agent (incorporated by reference to
Exhibit 10.1 to Iron Mountain's Current Report on Form 8-K
dated July 29, 1999, File No. 0-27584)
10.20 Amendment No. 4 to the Second Amended and Restated Credit
Agreement, dated as of April 6, 1999, among Iron Mountain,
the lenders party thereto and The Chase Manhattan Bank, as
Administrative Agent (incorporated by reference to
Exhibit 10.2 to Iron Mountain's Current Report on Form 8-K
dated July 29, 1999, File No. 0-27584)
10.21 Amendment No. 5 to the Second Amended and Restated Credit
Agreement, dated as of July 14, 1999, among Iron Mountain,
the lenders party thereto and The Chase Manhattan Bank, as
Administrative Agent (incorporated by reference to
Exhibit 10.3 to Iron Mountain's Current Report on Form 8-K
dated July 29, 1999, File No. 0-27584)
10.22 Indenture for 10 1/8% Senior Subordinated Notes due 2006,
dated October 1, 1996, by and among Iron Mountain, certain
of its subsidiaries and First National Association, as
trustee (incorporated by reference to Exhibit 10.3 to Iron
Mountain's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 0-27584)
10.23 Indenture of 8 3/4% Senior Subordinated Notes due 2009,
dated October 24, 1997, by and among Iron Mountain, certain
of its subsidiaries and The Bank of New York, as trustee
(incorporated by reference to Exhibit No. 4.1 to Iron
Mountain's Current Report on Form 8-K dated October 30,
1997, File No. 0-27584)
10.24 Indenture for 8 1/4% Senior Subordinated Notes due 2011,
dated April 26, 1999, by and among Iron Mountain, certain of
its subsidiaries and The Bank of New York, as trustee
(incorporated by reference to Exhibit 10.1 to Iron
Mountain's Current Report on Form 8-K dated May 11, 1999,
File No. 0-27584)
10.25 Iron Mountain Incorporated 1995 Stock Incentive Plan, as
amended (incorporated by reference to Exhibit 10.3 to Iron
Mountain's Current Report on Form 8-K dated April 16, 1999,
File No. 0-27584)
10.26 Iron Mountain/UAC 1995 Stock Option Plan (incorporated by
reference to Exhibit No. 10.1 to Iron Mountain's Current
Report on Form 8-K dated March 9, 1998, File No. 0-27584)
10.27 Iron Mountain Incorporated 1998 Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.8 to Amendment No.
1 to Iron Mountain's Registration Statement on Form S-4,
File No. 333-44187)
10.28 Record Center Storage Services Agreement between Iron
Mountain Records Management, Inc. and Resolution Trust
Corporation, dated July 31, 1992, as renewed by letter
agreement effective July 26, 1998 between Iron Mountain and
the Federal Deposit Insurance Corporation (incorporated by
reference to Exhibit No. 10.18 to Iron Mountain's
Registration Statement on Form S-1, File No. 33-99950)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
EXHIBIT
NO.
- ---------------------
<C> <S>
10.29 Amended and Restated Registration Rights Agreement, dated as
of June 12, 1997, between Iron Mountain and certain
stockholders of Iron Mountain (incorporated by reference to
Exhibit 10.1 to Iron Mountain's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997, File No. 0-27584)
10.30 Joinder to Registration Rights Agreement, dated as of
October 31, 1997, by and between Iron Mountain and Kent P.
Dauten (incorporated by reference to Exhibit 10.12 to Iron
Mountain's Registration Statement on Form S-4, File No.
333-41045)
10.31 Stockholders' Agreement, dated September 17, 1997, by and
between Iron Mountain and Kent P. Dauten (incorporated by
reference to Exhibit 10.13 to Iron Mountain's Registration
Statement on Form S-4, File No. 333-44187)
10.32 Stockholders' Agreement, dated as of February 19, 1997, by
and between Iron Mountain and certain stockholders of
Safesite Records Management Corporation (incorporated by
reference to Exhibit 10.20 to Iron Mountain's Annual Report
on Form 10-K for the year ended December 31, 1996, File No.
0-27584)
10.33 Stockholders' Agreement, dated as of September 26, 1997, by
and among Iron Mountain and certain stockholders of the
Arcus Parties (incorporated by reference to Exhibit 10.16 to
Iron Mountain's Registration Statement on Form S-4, File No.
333-41045)
10.34 Lease Agreement, dated as of October 1, 1998, between Iron
Mountain Statutory Trust--1998 and Iron Mountain Records
Management, Inc. (incorporated by reference to
Exhibit 10.20 to Iron Mountain's Registration Statement on
Form S-4, File No. 333-67765)
10.35 Unconditional Guaranty, dated as of October 1, 1998, from
Iron Mountain to Iron Mountain Statutory Trust-- 1998
(incorporated by reference to Exhibit 10.21 to Iron
Mountain's Registration Statement on Form S-4, File No.
333-67765)
10.36 Amendment and Consent to Unconditional Guaranty, dated as of
July 1, 1999, between Iron Mountain and Iron Mountain
Statutory Trust--1998 and consented to by to by the lenders
listed therein (incorporated by reference to Exhibit 10.1 to
Iron Mountain's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, File No. 0-27584)
10.37 Amended and Restated Agency Agreement, dated October 1,
1998, by and between Iron Mountain Statutory Trust--1998 and
Iron Mountain Records Management, Inc. (incorporated by
reference to Exhibit No. 10.22 to Iron Mountain's
Registration Statement on Form S-4, File No. 333-67765)
10.38 Lease Agreement, dated as of July 1, 1999, by and between
Iron Mountain Statutory Trust--1999 and Iron Mountain
Records Management, Inc. (incorporated by reference to
Exhibit 10.2 to Iron Mountain's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999, File No.
1-14937)
10.39 Agency Agreement, dated as of July 1, 1999, by and between
Iron Mountain Statutory Trust--1999 and Iron Mountain
Records Management, Inc. (incorporated by reference to
Exhibit 10.1 to Iron Mountain's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999, File No.
1-14937)
10.40 Strategic Alliance Agreement, dated as of January 4, 1999,
by and among Iron Mountain, Iron Mountain (U.K.) Limited,
Britannia Data Management Limited and Mentmore Abbey plc
(incorporated by reference to Exhibit 10.2 to Iron
Mountain's Current Report on Form 8-K dated January 19,
1999, File No. 0-27584)
10.41 Unconditional Guaranty, dated as of July 1, 1999, from Iron
Mountain Incorporated to Iron Mountain Statutory Trust-1999
(incorporated by reference to Exhibit 10.3 to Iron
Mountain's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, File No. 1-14937)
21.1 Subsidiaries of Pierce Leahy (incorporated by reference to
Exhibit 21 to Pierce Leahy's Annual Report on Form 10-K for
the year ended December 31, 1997)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
EXHIBIT
NO.
- ---------------------
<C> <S>
21.2 Subsidiaries of Iron Mountain*
23.1 Consent of Arthur Andersen LLP (Iron Mountain Incorporated)
23.2 Consent of Arthur Andersen LLP (Pierce Leahy Corp.)
23.3 Consent of Cozen and O'Connor (included in Exhibits 5 and
8.1)
23.4 Consent of Sullivan & Worcester LLP (included in
Exhibit 8.2)
23.5 Consent of Abbott, Stringham & Lynch (Records
Retention/Filesafe, L.P.)
23.6 Consent of Ernst & Young LLP (HIMSCORP, Inc. and
Subsidiaries)
23.7 Consent of Ernst & Young LLP (Arcus Technology Services,
Inc. and Arcus Group, Inc.)
23.8 Consent of Arthur Andersen LLP (Midwest Records Management,
Sloan Vaults, Inc., and Affiliate and InterMation, Inc.)
23.9 Consent of Carbis Walker & Associates, LLP (National
Underground Storage, Inc.)
23.10 Consent of RSM Robson Rhodes (Britannia Data Management
Limited)
23.11 Consent of Moss Adams LLP (Data Base, Inc. and Affiliate)
23.12 Consent of Brach, Neal, Daney & Spence, LLP (First American
Records Management)
23.13 Consent of Barbier Frinault & Associes (MAP, S.A.)
23.14 Consent of Fernandez & Bravo (Central File, Inc.)
23.15 Consent of Arthur Andersen (Sistemas de Archivo)
23.16 Consent of Arthur Andersen (Stortext (Holdings) Limited
Group)
23.17 Consent of Arthur Andersen LLP (Midtown Professional Records
Centre, Inc.)
23.18 Consent of Friedman & Friedman, Chartered Accountants
(Archivex Inc.)
23.19 Consent of James N. Howard & Associates, P.C. (Kestrel
Holdings, Inc.)
24 Power of Attorney (included on signature page)
99.1 Opinion of First Union Securities, Inc. (included as Annex G
to the Proxy Statement/ Prospectus which forms a part of
this Registration Statement)
99.2 Opinion of Bear, Stearns & Co. Inc. (included as Annex F to
the Proxy Statement/Prospectus which forms a part of this
Registration Statement)
99.3 Form of Proxy Card of Pierce Leahy*
99.4 Form of Proxy Card of Iron Mountain*
99.5 Consent of C. Richard Reese to being named as a Director
nominee
99.6 Consent of David S. Wendell to being named as a Director
nominee
99.7 Consent of Clarke H. Bailey to being named as a Director
nominee
99.8 Consent of Constantin R. Boden to being named as a Director
nominee
99.9 Consent of Kent P. Dauten to being named as a Director
nominee
99.10 Consent of Eugene B. Doggett to being named as a Director
nominee
99.11 Consent of B. Thomas Golisano to being named as a Director
nominee
99.12 Consent of Arthur D. Little to being named as a Director
nominee
99.13 Consent of Howard D. Ross to being named as a Director
nominee
99.14 Consent of Vincent J. Ryan to being named as a Director
nominee
99.15 Consent of Bear, Stearns & Co. Inc
99.16 Consent of First Union Securities, Inc.
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
included in this registration statement and to the incorporation by reference
in this registration statement on Form S-4 of our report dated July 2, 1999
included in Iron Mountain Incorporated's Current Report on Form 8-K for the year
ended December 31, 1998, filed with the Securities and Exchange Commission on
July 9, 1999, as well as our report dated February 19, 1999 on the supplemental
schedule, Valuation and Qualifying Accounts, included in its Form 10-K for the
year ended December 31, 1998, filed with the Securities and Exchange Commission
on March 31, 1999 and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
Boston, Massachusetts
November 18, 1999
<PAGE>
Exhibit 23.2
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
included in this registration statement and to the incorporation by reference
in this registration statement of our report dated February 26, 1999 included
in Pierce Leahy Corp.'s Form 10-K for the year ended December 31, 1998 and to
all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Philadelphia, Pa.,
November 18, 1999
<PAGE>
Exhibit 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated August
7, 1997 on Records Retention/Filesafe LP's financial statements, included in
Iron Mountain Incorporated's Current Report Form 8-K filed with the Securities
and Exchange Commission on November 25, 1997 and to all references to our Firm
included in this registration statement.
/s/ Abbott, Stringham & Lynch
Campbell, California
November 18, 1999
<PAGE>
Exhibit 23.6
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and the
incorporation by reference in the Registration Statement on Form S-4 of Pierce
Leahy Corp. of our report dated February 21, 1997, with respect to the
consolidated financial statements of HIMSCORP, Inc. and Subsidiaries as of
December 31, 1995 and 1996 and for the period from February 1, 1995
(commencement of operations) to December 31, 1995 and for the year ended
December 31, 1996 included in the Current Reports on Form 8-K dated October 30,
1997 and November 25, 1997 filed by Iron Mountain Incorporated with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Chicago, Illinois
November 18, 1999
<PAGE>
Exhibit 23.7
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
registration statement on Form S-4 of Pierce Leahy Corp. filed on or
about November 22, 1999 and to the incorporation by reference therein of our
reports (a) dated February 23, 1998, with respect to the consolidated financial
statements of Arcus Technology Services, Inc. for each of the two years in the
period ended December 31, 1997 and the five-month period ended December 31, 1995
and the consolidated financial statements of Arcus, Inc. (Predecessor Company)
for the seven-month period ended July 31, 1995, included in Iron Mountain
Incorporated's Current Report on Form 8-K dated March 9, 1998 filed with the
Securities and Exchange Commission, and (b) dated April 30, 1997 (except Note
15, as to which the date is September 26, 1997), with respect to the
consolidated financial statements of Arcus Group, Inc. for each of the two years
in the period ended December 31, 1996, included in Iron Mountain Incorporated's
Current Reports on Form 8-K dated October 30, 1997 and November 25, 1997, both
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Dallas, Texas
November 18, 1999
<PAGE>
Exhibit 23.8
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our reports dated
March 13, 1998, February 25, 1998 and August 21, 1998 for Midwest Records
Management, Sloan Vaults, Inc. and Affiliate, and InterMation, Inc.,
respectively, included in Iron Mountain Incorporated's Current Report on Form
8-K filed with the Securities and Exchange Commission on September 18, 1998,
and to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Omaha, Nebraska
San Diego, California
Seattle, Washington
November 18, 1999
<PAGE>
Exhibit 23.9
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated July
30, 1998, on National Underground Storage, Inc.'s financial statements, included
in Iron Mountain Incorporated's Current Report on Form 8-K/A filed with the
Securities and Exchange Commission on August 7, 1998, and to all references to
our Firm included in this registration statement.
/s/ Carbis Walker & Associates, LLP
Pittsburgh, Pennsylvania
November 18, 1999
<PAGE>
Exhibit 23.10
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated
February 9, 1999 on Britannia Data Management Limited's financial statements,
included in Iron Mountain Incorporated's Form 8-K/A filed with the Securities
and Exchange Commission on March 22, 1999 and to all references to our Firm
included in this registration statement.
/s/ RSM Robson Rhodes
Chartered Accountants
Birmingham, England
November 18, 1999
<PAGE>
Exhibit 23.11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated April
8, 1999 on the financial statements of Data Base, Inc. and Affiliate for the
periods ended December 31, 1996, 1997 and 1998, included in Iron Mountain
Incorporated's Current Report on Form 8-K filed with the Securities and Exchange
Commission on April 16, 1999 and to the reference to us under the heading
"Experts" in this included registration statement.
/s/ Moss Adams LLP
Seattle, Washington
November 18, 1999
<PAGE>
Exhibit 23.12
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated April
1, 1999 on First American Records Management's financial statements, included in
Iron Mountain Incorporated's Current Report on Form 8-K filed with the
Securities and Exchange Commission on July 9, 1999 and to all references to our
Firm included in this registration statement.
/s/ Brach, Neal, Daney & Spence, LLP
San Jose, California
November 18, 1999
<PAGE>
Exhibit 23.13
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated May 7,
1999 on MAP, S.A.'s financial statements, included in Iron Mountain
Incorporated's Current Report on Form 8-K filed with the Securities and Exchange
Commission on July 9, 1999 and to all references to our Firm included in this
registration statement.
/s/ Barbier Frinault & Associes
Arthur Andersen
Paris, France
November 18, 1999
<PAGE>
Exhibit 23.14
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated
February 9, 1999 on Central File, Inc.'s financial statements as of December 31,
1998, and for the year then ended, included in Iron Mountain Incorporated's Form
8-K filed with the Securities and Exchange Commission on November 24, 1999, and
to all references to our Firm included in this registration statement.
/s/ Fernandez & Bravo
San Juan, Puerto Rico
November 18, 1999
<PAGE>
Exhibit 23.15
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated October
15, 1999 on the combined financial statements of Sistemas de Archivo, S.A. de
C.V. and Sistemas de Archivo Mexico, S.A. de C.V. (collectively Sistemas de
Archivo), included in Iron Mountain Incorporated's Form 8-K filed with the
Securities and Exchange Commission on November 24, 1999, and to all references
to our Firm included in this registration statement.
/s/ Arthur Andersen
Mexico City, Mexico, D.F.
November 18, 1999
<PAGE>
Exhibit 23.16
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated
November 15, 1999 on Stortext (Holdings) Limited Group's financial
statements, included in Iron Mountain Incorporated's Form 8-K filed with the
Securities and Exchange Commission on November 24, 1999, and to all
references to our Firm included in this registration statement.
/s/ Arthur Andersen
Edinburgh, Scotland
November 18, 1999
<PAGE>
Exhibit 23.17
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated October
29, 1999, on Midtown Professional Records Centre, Inc.'s financial statements,
included in Iron Mountain Incorporated's Form 8-K filed with the Securities and
Exchange Commission on November 24, 1999, and to all references to our Firm
included in this registration statement.
/s/ Arthur Andersen LLP
Cleveland, Ohio
November 18, 1999
<PAGE>
Exhibit 23.18
[FRIEDMAN & FRIEDMAN LETTERHEAD]
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement
(Form S-4) 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. on the consolidated balance sheets as at November 30, 1997 and
1996 and for the consolidated statements of earnings, retained earnings and
cash flows for each of the years ended November 30, 1997, 1996 and 1995
appearing in the Current Reports on Form 8-K of Pierce Leahy Corp. dated
April 7, 1998 and July 2, 1998 and to all references to our Firm in this
Registration Statement.
/s/ Friedman & Friedman
Chartered Accountants
Montreal, Quebec
November 22, 1999
<PAGE>
Exhibit 23.19
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated
December 5, 1997 on the financial statements of Kestrel Holdings, Inc. as of
and for the year ended September 30, 1997, included in Pierce Leahy Corp.'s
Form 8-K dated July 2, 1998 and to all references to our Firm included in
this registration statement.
James N. Howard and Associates, P.C.
Dallas, Texas
November 18, 1999
<PAGE>
Exhibit 99.5
CONSENT OF DIRECTOR NOMINEE
I hereby consent to the use in the "Election of Directors of New Iron
Mountain" section of the Prospectus constituting part of the Registration
Statement on Form S-4 of Pierce Leahy Corp., as amended, of my name as a nominee
to be a director of Pierce Leahy Corp. effective upon the closing of the merger
described in such Prospectus.
/s/ C. Richard Reese
--------------------
C. Richard Reese
November 18, 1999
<PAGE>
Exhibit 99.6
CONSENT OF DIRECTOR NOMINEE
I hereby consent to the use in the "Election of Directors of New Iron
Mountain" section of the Prospectus constituting part of the Registration
Statement on Form S-4 of Pierce Leahy Corp., as amended, of my name as a nominee
to be a director of Pierce Leahy Corp. effective upon the closing of the merger
described in such Prospectus.
/s/ David S. Wendell
--------------------
David S. Wendell
November 18, 1999
<PAGE>
Exhibit 99.7
CONSENT OF DIRECTOR NOMINEE
I hereby consent to the use in the "Election of Directors of New Iron
Mountain" section of the Prospectus constituting part of the Registration
Statement on Form S-4 of Pierce Leahy Corp., as amended, of my name as a nominee
to be a director of Pierce Leahy Corp. effective upon the closing of the merger
described in such Prospectus.
/s/ Clarke H. Bailey
--------------------
Clarke H. Bailey
November 18, 1999
<PAGE>
Exhibit 99.8
CONSENT OF DIRECTOR NOMINEE
I hereby consent to the use in the "Election of Directors of New Iron
Mountain" section of the Prospectus constituting part of the Registration
Statement on Form S-4 of Pierce Leahy Corp., as amended, of my name as a nominee
to be a director of Pierce Leahy Corp. effective upon the closing of the merger
described in such Prospectus.
/s/ Constantin R. Boden
-----------------------
Constantin R. Boden
November 18, 1999
<PAGE>
Exhibit 99.9
CONSENT OF DIRECTOR NOMINEE
I hereby consent to the use in the "Election of Directors of New Iron
Mountain" section of the Prospectus constituting part of the Registration
Statement on Form S-4 of Pierce Leahy Corp., as amended, of my name as a nominee
to be a director of Pierce Leahy Corp. effective upon the closing of the merger
described in such Prospectus.
/s/ Kent P. Dauten
-----------------
Kent P. Dauten
November 18, 1999
<PAGE>
Exhibit 99.10
CONSENT OF DIRECTOR NOMINEE
I hereby consent to the use in the "Election of Directors of New Iron
Mountain" section of the Prospectus constituting part of the Registration
Statement on Form S-4 of Pierce Leahy Corp., as amended, of my name as a nominee
to be a director of Pierce Leahy Corp. effective upon the closing of the merger
described in such Prospectus.
/s/ Eugene B. Doggett
-----------------------
Eugene B. Doggett
November 18, 1999
<PAGE>
Exhibit 99.11
CONSENT OF DIRECTOR NOMINEE
I hereby consent to the use in the "Election of Directors of New Iron
Mountain" section of the Prospectus constituting part of the Registration
Statement on Form S-4 of Pierce Leahy Corp., as amended, of my name as a nominee
to be a director of Pierce Leahy Corp. effective upon the closing of the merger
described in such Prospectus.
/s/ B. Thomas Golisano
-------------------------
B. Thomas Golisano
November 18, 1999
<PAGE>
Exhibit 99.12
CONSENT OF DIRECTOR NOMINEE
I hereby consent to the use in the "Election of Directors of New Iron
Mountain" section of the Prospectus constituting part of the Registration
Statement on Form S-4 of Pierce Leahy Corp., as amended, of my name as a nominee
to be a director of Pierce Leahy Corp. effective upon the closing of the merger
described in such Prospectus.
/s/ Arthur D. Little
--------------------
Arthur D. Little
November 18, 1999
<PAGE>
Exhibit 99.B
CONSENT OF DIRECTOR NOMINEE
I hereby consent to the use in the "Election of Directors of New Iron
Mountain" section of the joint proxy statement/prospectus, constituting part of
the registration statement on Form S-4 of Pierce Leahy Corp., as it may be
amended from time to time, of my name as a nominee to be a director of Pierce
Leahy Corp. effective upon the closing of the merger described in such joint
proxy statement/prospectus.
/s/ Howard D. Ross
---------------------
Howard D. Ross
November 19, 1999
<PAGE>
Exhibit 99.14
CONSENT OF DIRECTOR NOMINEE
I hereby consent to the use in the "Election of Directors of New Iron
Mountain" section of the Prospectus constituting part of the Registration
Statement on Form S-4 of Pierce Leahy Corp., as amended, of my name as a nominee
to be a director of Pierce Leahy Corp. effective upon the closing of the merger
described in such Prospectus.
/s/ Vincent J. Ryan
---------------------
Vincent J. Ryan
November 18, 1999
<PAGE>
Exhibit 99.15
CONSENT OF BEAR, STEARNS & CO. INC.
We hereby consent to the use of our opinion letter dated October 20,
1999 to the Board of Directors of Iron Mountain Incorporated attached as
Annex F to the Joint Proxy Statement/Prospectus which forms a part of the
Registration Statement on Form S-4 of Pierce Leahy Corp. (the "Prospectus")
and to the references to our firm in the Prospectus under the headings
"Summary--The Merger--Bear Stearns Says the Exchange Ratio of 1.1 to 1.0 Is
Fair to Iron Mountain Stockholders," "The Merger--Background of the Merger,"
"--Iron Mountain's Reasons for the Merger; Recommendation of the Iron
Mountain Board" and "--Opinion of Iron Mountain's Financial Advisor." In
giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder and we do not thereby admit that we are experts with
respect to any part of the Registration Statement under the meaning of the
term "expert" as used in the Securities Act.
BEAR, STEARNS & CO. INC.
By: /s/ J. Robert Burton
-------------------------------
Name: J. Robert Burton
Title: Senior Managing Director
<PAGE>
Exhibit 99.16
CONSENT OF FIRST UNION SECURITIES, INC.
We hereby consent to the use of our opinion letter dated October 20, 1999 to
the Board of Directors of Pierce Leahy Corp. attached as Annex G to the Joint
Proxy Statement/Prospectus which forms a part of the Registration Statement
on Form S-4 of Pierce Leahy Corp. (the "Prospectus") and to the references to
our firm in the Prospectus under the headings "Summary--The Merger--First
Union Securities, Inc. Says the Consideration to be Received by Pierce Leahy
Shareholders Is Fair," "The Merger--Background of the Merger," "--Pierce
Leahy's Reasons for the Merger; Recommendations of the Pierce Leahy Board"
and "--Opinion of Pierce Leahy's Financial Advisor." In giving such consent,
we do not admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Securities and Exchange Commission thereunder and we do
not thereby admit that we are experts with respect to any part of the
Registration Statement under the meaning of the term "expert" as used in the
Securities Act.
FIRST UNION SECURITIES, INC.
By: /s/ Wellford L. Sanders, Jr.
------------------------------
Name: WELLFORD L. SANDERS, JR.
Title: MANAGING DIRECTOR
