-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ULxKoYln5JJ3tWxD0QmMeTshgGExUUHrMkhgYeziWQqzHCD7uX/CD4Ezttp0Q8+m ZvpetvIKvYKyK+aQtlBgMA== 0000950146-96-001686.txt : 19960927 0000950146-96-001686.hdr.sgml : 19960927 ACCESSION NUMBER: 0000950146-96-001686 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19960925 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IRON MOUNTAIN INC /DE CENTRAL INDEX KEY: 0001004317 STANDARD INDUSTRIAL CLASSIFICATION: PUBLIC WAREHOUSING & STORAGE [4220] IRS NUMBER: 043107342 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359 FILM NUMBER: 96634533 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6173576966 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVENUE STREET 2: 7TH FLOOR CITY: BOSTON STATE: MA ZIP: 02111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATA STORAGE SYSTEMS INC CENTRAL INDEX KEY: 0000855197 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 770154612 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359-01 FILM NUMBER: 96634534 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 617-357-4455 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IRON MOUNTAIN RECORDS MANAGEMENT INC CENTRAL INDEX KEY: 0001020882 STANDARD INDUSTRIAL CLASSIFICATION: PUBLIC WAREHOUSING & STORAGE [4220] IRS NUMBER: 043038590 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359-02 FILM NUMBER: 96634535 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 617-357-4455 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METRO BUSINESS ARCHIVES INC CENTRAL INDEX KEY: 0001020883 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 132687436 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359-03 FILM NUMBER: 96634536 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 617-357-4455 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRITERION ATLANTIC PROPERTY INC CENTRAL INDEX KEY: 0001020884 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043102768 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359-04 FILM NUMBER: 96634537 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 617-357-4455 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRITERION PROPERTY INC CENTRAL INDEX KEY: 0001020885 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 061270033 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359-05 FILM NUMBER: 96634538 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 617-357-4455 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOLLYWOOD PROPERTY INC CENTRAL INDEX KEY: 0001020886 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 954284487 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359-06 FILM NUMBER: 96634539 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 617-357-4455 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IM SAN DIEGO INC CENTRAL INDEX KEY: 0001020887 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 954453815 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359-07 FILM NUMBER: 96634540 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 617-357-44 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IRON MOUNTAIN INFORMATION PARTNERS INC CENTRAL INDEX KEY: 0001020888 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043241466 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359-08 FILM NUMBER: 96634541 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 617-357-44 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IRON MOUNTAIN RECORDS MANAGEMENT OF MARYLAND INC CENTRAL INDEX KEY: 0001020889 STANDARD INDUSTRIAL CLASSIFICATION: PUBLIC WAREHOUSING & STORAGE [4220] IRS NUMBER: 521911465 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359-09 FILM NUMBER: 96634542 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 617-357-44 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IRON MOUNTAIN RECORDS MANAGEMENT OF OHIO INC CENTRAL INDEX KEY: 0001020890 STANDARD INDUSTRIAL CLASSIFICATION: PUBLIC WAREHOUSING & STORAGE [4220] IRS NUMBER: 311419399 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359-10 FILM NUMBER: 96634543 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 617-357-44 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IRON MOUNTAIN WILMINGTON INC CENTRAL INDEX KEY: 0001020891 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 510370149 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359-11 FILM NUMBER: 96634544 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 617-357-44 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IRON MOUNTAIN RECORDS MANAGEMENT OF BOSTON INC CENTRAL INDEX KEY: 0001020892 STANDARD INDUSTRIAL CLASSIFICATION: PUBLIC WAREHOUSING & STORAGE [4220] IRS NUMBER: 043321756 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359-12 FILM NUMBER: 96634545 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 617-357-4455 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IRON MOUNTAIN DATA PROTECTION SERVICES INC CENTRAL INDEX KEY: 0001020893 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 061402551 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359-13 FILM NUMBER: 96634546 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 617-357-4455 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IRON MOUNTAIN RECORDS MANAGEMENT OF MISSOURI LLC CENTRAL INDEX KEY: 0001020894 STANDARD INDUSTRIAL CLASSIFICATION: PUBLIC WAREHOUSING & STORAGE [4220] IRS NUMBER: 431743847 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359-14 FILM NUMBER: 96634547 BUSINESS ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 617-357-4455 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATA ARCHIVES SERVICES INC CENTRAL INDEX KEY: 0001021093 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 592320120 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10359-15 FILM NUMBER: 96634548 BUSINESS ADDRESS: STREET 1: 745 ATLANTA AVENUE CITY: BOSTON STATE: MA ZIP: 02111-2735 BUSINESS PHONE: 6173574455 MAIL ADDRESS: STREET 1: 745 ATLANTIC AVENUE CITY: BOSTON STATE: MA ZIP: 02111-2735 S-1/A 1 IRON MOUNTAIN FORM S-1/A As filed with the Securities and Exchange Commission on September 25, 1996 Registration No. 333-10359 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ AMENDMENT NO. 2 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------ IRON MOUNTAIN INCORPORATED (Exact name of registrant as specified in its charter)
DELAWARE 4226 (State of incorporation) (Primary Standard Industrial 04-3107342 Classification Code Number) (IRS Employer Identification No.)
745 ATLANTIC AVENUE, BOSTON, MA 02111 (617) 357-4455 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ------------------ C. RICHARD REESE CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER IRON MOUNTAIN INCORPORATED 745 Atlantic Avenue Boston, MA 02111 (617) 357-4455 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------ Copies to: WILLIAM J. CURRY ROBERT A. ZUCCARO SULLIVAN & WORCESTER LLP JONES, DAY, REAVIS & POGUE One Post Office Square 599 Lexington Avenue Boston, MA 02109 New York, NY 10022 (617) 338-2800 (212) 326-3939 ------------------ Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, 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, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------ The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants 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 the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ================================================================================ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED SEPTEMBER 25, 1996 PROSPECTUS , 1996 $150,000,000 [IRON MOUNTAIN LOGO] IRON MOUNTAIN INCORPORATED % Senior Subordinated Notes due 2006 The % Senior Subordinated Notes due 2006 (the "Notes") are being offered (the "Offering") by Iron Mountain Incorporated (the "Company" or "Iron Mountain"). The net proceeds of the Offering will be used to repay outstanding bank debt and certain other indebtedness and to fund a portion of the purchase price of the Pending Acquisition. Interest on the Notes is payable on and , commencing , 1997. Except as described below, the Notes are not redeemable by the Company prior to , 2001. Thereafter, the Notes are redeemable at the option of the Company, in whole or in part, at any time and from time to time, at the redemption prices set forth herein plus accrued and unpaid interest to, but excluding, the date of redemption. In addition, during the first 36 months after the date of issuance of the Notes, the Company, at its option, may redeem up to 35% of the initial principal amount of the Notes with the net proceeds of one or more Qualified Equity Offerings at a redemption price equal to %, plus accrued and unpaid interest to, but excluding, the date of redemption; provided that at least 65% of the initial principal amount of the Notes remains outstanding after each such redemption. Except as set forth herein, the Company is not required to make sinking fund or redemption payments with respect to the Notes at any time prior to maturity. Upon the occurrence of a Change of Control, each Holder of Notes may require the Company to repurchase such Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to, but excluding, the date of repurchase. The Notes will be general unsecured senior subordinated obligations of the Company ranking junior to all existing and future Senior Debt of the Company. The Notes will be fully and unconditionally guaranteed on an unsecured senior subordinated and joint and several basis (the "Subsidiary Guarantees") by substantially all of the Company's present and future Restricted Subsidiaries (collectively, the "Guarantors"). The Subsidiary Guarantees will rank junior to all existing and future Senior Debt of the Guarantors. As of June 30, 1996, on a pro forma basis after giving effect to the Transactions, the aggregate outstanding principal amount of Senior Debt of the Company and the Guarantors would have been $24.5 million. The Notes will not be listed on any securities exchange or included in the National Association of Securities Dealers Automated Quotation System, and there can be no assurance that there will be a secondary market therefor. SEE "RISK FACTORS" COMMENCING ON PAGE 10 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES OFFERED HEREBY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - ------------------------------------------------------------------------------- Price to Discounts and Proceeds to the the Public(1) Commissions(2) Company(1)(3) - ------------------------------------------------------------------------------- Per Note % % % Total $ $ $ - ------------------------------------------------------------------------------- (1)Plus accrued interest, if any, on the Notes from the date of issuance. (2)The Company and the Guarantors have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (3)Before deduction of expenses payable by the Company estimated to be $800,000. The Notes are offered by Donaldson, Lufkin & Jenrette Securities Corporation, Bear, Stearns & Co. Inc. and Prudential Securities Incorporated (collectively, the "Underwriters") subject to prior sale, when, as and if delivered to and accepted by the Underwriters, and subject to certain prior conditions, including the right of the Underwriters to reject any order in whole or in part. It is expected that delivery of the Notes will be made in New York, New York through the facilities of the Depository Trust Company on or about , 1996, against payment therefor in immediately available funds. Donaldson, Lufkin & Jenrette Securities Corporation Bear, Stearns & Co. Inc. Prudential Securities Incorporated IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 2 PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this Prospectus. References to "Iron Mountain" and the "Company" include Iron Mountain Incorporated (including predecessor entities) and its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY Iron Mountain is the largest records management company in the United States, as measured by revenues. The Company is a full-service provider of records management and related services, enabling customers to outsource records management functions. Pro forma for the Acquisitions (as defined herein), as of June 30, 1996, the Company managed approximately 29.6 million Cartons* in 103 records centers in 33 markets nationwide. The Company has a diversified base of over 19,000 customer accounts, which includes more than half of the Fortune 500 and numerous legal, banking, healthcare, accounting, insurance, entertainment and government organizations. The Company provides storage and related services for all major media, including paper (which is the dominant form of records retention and which has accounted for approximately 85% of the Company's revenues since 1992), computer disks and tapes, microfilm and microfiche, master audio and video tapes, film and optical disks, X-rays and blueprints. The Company's principal services include filing, retrieval and destruction of records, courier pick-up and delivery, database management and customized reporting. The Company also sells storage materials and provides consulting and other records-related services. The Company continues to capitalize on its leading position in the records management industry and the industry trends of increased records retention, outsourcing of records management and vendor consolidation. As a result, the Company has achieved significant increases in revenues and EBITDA (as defined herein). From 1991 to 1995, Iron Mountain's total revenues increased from $62.8 million to $104.4 million primarily from internal growth, representing a compound annual growth rate ("CAGR") of 13.5%. During the same period, storage revenues grew at a 12.9% CAGR while service and storage material sales revenues grew at a 14.6% CAGR. From 1991 to 1995, the Company's EBITDA grew from $15.0 million to $26.1 million, representing a 14.9% CAGR. Revenues and EBITDA for the six months ended June 30, 1996 increased 27.3% (10.2% from internal growth and 17.1% from acquisitions) and 24.8%, respectively, over the same period in 1995. For a discussion of the significance of EBITDA and other measures of the Company's performance determined in accordance with generally accepted accounting principles ("GAAP") and the Company's sources and applications of cash flow, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview" and "--Liquidity and Capital Resources." Industry Overview According to industry sources, organizations in the United States generate an estimated four trillion documents each year, many of which must be retained and remain available for reference for many years. These records may be generally divided into two categories: active and inactive. Inactive records, which are the principal focus of the records management industry, consist of records that are not needed for immediate access but which must be retained for legal or regulatory reasons or for occasional reference to support ongoing business operations. Based on industry studies, the Company believes that inactive records make up approximately 80% of all records. The Company believes that the volume of inactive records is increasing for a number of reasons, including: (i) the rapid growth of inexpensive document producing technologies such as facsimile, desktop printing and computer networking; (ii) increased regulatory requirements; (iii) concerns over possible future litigation and the resulting increases in volume and holding periods of documentation; (iv) the high cost of reviewing records and deciding whether to retain or destroy them; and (v) the failure of many entities to adopt or follow policies on records destruction. Despite the growth of new "paperless" technologies, such as the Internet and e-mail, management believes that stored information remains predominantly paper-based and that such technologies have promoted the creation of hard copies of such electronic information. - ------------- * The term "Carton" is defined as a measurement of volume equal to a single standard storage carton, approximately 1.2 cubic feet. The number of Cartons stored does not include storage volumes in the Company's vital records services and data protection services, which are described under "Business." 3 The Company believes that it benefits from several industry fundamentals, including: (i) the historically non- cyclical nature of the records management industry; (ii) the continued trend towards corporate outsourcing of records management functions; (iii) the ability of larger records management companies to achieve economies of scale with respect to labor, real estate costs and the utilization of management information systems; and (iv) the ongoing consolidation of the records management industry. The Company believes that it is one of only four records management providers with a national operating presence, the balance being regional or, in most instances, single-city operators. According to the Association of Commercial Records Centers (the "ACRC"), a trade group of approximately 500 members, as of January 1994 (the latest date for which such information is available), approximately 2,600 firms offered records storage and management services in the United States. The Company believes that there is a trend toward consolidation in the records management industry and that such trend will continue to accelerate primarily because of: (i) the opportunities to achieve economies of scale; (ii) the industry's capital requirements for growth; (iii) customer demands for more sophisticated technology-based solutions; and (iv) the preference of certain large, national customers to outsource a significant portion of their records management functions to one vendor with a national presence, such as Iron Mountain. Financial Characteristics of Iron Mountain's Business Iron Mountain's records management business has the following financial characteristics: (bullet)Recurring Revenues. Iron Mountain derives a majority of its revenues from fixed periodic (usually monthly) fees charged to customers for storage of records. Storage revenues have grown for 30 consecutive quarters and have represented approximately 60% of the Company's total revenues in each of the last five years. Once a customer places a record in storage with the Company and until that record is destroyed or permanently removed (for which the Company typically receives a service fee), the Company receives recurring payments of fixed periodic fees without incurring additional labor or marketing expenses or significant capital costs. The stable and growing storage base also provides the foundation for increases in revenues and EBITDA from service activities and sales of storage materials. (bullet)Historically Non-Cyclical Business. Iron Mountain has not experienced a reduction of its business as a result of past general economic downturns, although there can be no assurance that this would be the case in the future. Management believes that the outsourcing of records management may accelerate during economic downturns as companies focus on reducing costs through outsourcing non-core operating functions. In addition, management believes that companies that have outsourced records management are less likely during economic downturns to incur the move-out costs and other expenses associated with switching vendors or moving records management in-house. (bullet)Inherent Growth from Existing Customers. The Company's customers have on average generated additional Cartons at a faster rate than stored Cartons have been destroyed or permanently removed. From 1992 to 1995, net Cartons from existing customers grew at an average annual rate of 6.7%. The Company believes the consistent growth of its storage revenues is the result of a number of additional factors, including: (i) the trend toward increased records retention; (ii) customer satisfaction with the Company's services; and (iii) the costs and inconvenience of moving storage operations in-house or to another provider of records management services. (bullet)Diversified and Stable Customer Base. The Company has over 19,000 customer accounts in a variety of industries. The Company currently provides services to more than half of the Fortune 500 and numerous legal, banking, healthcare, accounting, insurance, entertainment and government organizations. Only one of the Company's customers accounted for more than 3% of revenues in 1993, 1994 or 1995. From 1992 to 1995, average annual permanent removals of Cartons represented only approximately 4% of total Cartons stored. (bullet)Capital Expenditures Related Primarily to Growth. The Company's business requires limited annual maintenance capital expenditures. Maintenance capital expenditures were $1.8 million, $1.2 million and $0.9 million in 1993, 1994 and 1995, respectively. From 1992 to 1995, over 90% of the Company's aggregate capital expenditures were growth-related investments, primarily in racking systems, new 4 buildings and leasehold improvements, equipment for new facilities, management information systems and facilities restructuring. These growth-related capital expenditures are primarily discretionary and create additional capacity for increases in revenues and EBITDA. Business Strategy Iron Mountain's business strategy is to increase revenues and EBITDA while maintaining a low-cost operating structure and providing premium service. The Company intends to generate growth by increasing its storage and service revenues from existing customers, adding new customers and making acquisitions. The Company's strategy is based on the following elements: (bullet)Provide Superior Customer Service. The Company believes it has a reputation for providing reliable, quality service based on its more than 45 years of operations, its commitment to providing premium customer service and the continuity and depth of its management team. The Company has successfully implemented a decentralized management structure that enables the Company to respond quickly and flexibly to local customer needs. Iron Mountain's proprietary Safekeeper(R) system enables it to quickly provide customized records management solutions to its customers, enhancing the quality of its services. In addition, Iron Mountain's national operating presence allows it to better service large organizations that require records management functions at multiple, geographically diverse facilities. (bullet)Capitalize on Operating Efficiencies. Iron Mountain pursues a low-cost operating strategy based primarily on achieving economies of scale in the areas of storage, labor and transportation, general and administrative functions and management information systems. Because occupancy costs are a major component of the Company's cost of sales, its real estate management staff aggressively seeks to minimize per Carton storage costs by designing racking systems and operating space to maximize facility storage efficiency, negotiating favorable facility leases, contracting for facilities to be built to its custom specifications, and leasing larger facilities in order to reduce operating costs per Carton. The Company seeks to increase labor efficiency by offering incentive compensation to all full-time employees based upon achieving specific operating targets. Certain operating costs, such as the maintenance of local delivery fleets, general and administrative costs and management information systems, offer economies of scale, providing the Company with operating leverage and the ability to increase its efficiency through further growth. (bullet)Pursue Acquisition Opportunities. The Company believes that it is well positioned to participate in the further consolidation of the records management industry. Iron Mountain's management team has successfully completed 18 acquisitions since the Company embarked on a proactive acquisition strategy in mid-1994, and one additional acquisition is currently pending. The Company intends to continue to make fold-in acquisitions to augment its operations in existing markets and to make strategic acquisitions in new geographic markets, with an emphasis on the 50 largest markets in the United States and potentially in certain markets outside the United States. Following an acquisition in a new market, the Company seeks to increase its business with the acquired customer base and to supplement that growth both with new customers and through appropriate fold-in acquisitions. In addition, the Company has successfully reduced the cost structure of its acquired operations by implementing its efficient operating strategies and leveraging its centralized administrative resources and management information systems. (bullet)Leverage Proprietary Safekeeper System. The Company pioneered the application of advanced information technology to the records management industry. Iron Mountain's proprietary Safekeeper system provides advanced inventory control and information access, enabling the Company to provide faster, higher quality and more flexible solutions to its customers and to lower the costs of its operations. Safekeeper has been designed to easily and effectively integrate newly acquired records management companies and offer improved levels of customer service and records management capabilities to customers acquired through acquisitions. Iron Mountain's Safekeeper system exploits bar-code technology to provide a comprehensive, standardized approach to tracking, accessing and retrieving records. Safekeeper offers state-of-the-art records management capabilities and ease of access to customers while featuring security functions to protect customer information from unauthorized access. Since 1992, the Company has invested $12.5 million to develop and refine its management information systems, including Safekeeper. 5 THE OFFERING
Securities Offered $150,000,000 principal amount of % Senior Subordinated Notes due 2006 (the "Notes"). Maturity Date , 2006 Interest Payment Dates and of each year, commencing , 1997. Guarantees The Notes will be fully and unconditionally guaranteed on an unsecured senior subordinated and joint and several basis (the "Subsidiary Guarantees") by substantially all of the Company's present and future Restricted Subsidiaries (collectively, the "Guarantors"). Each of the Guarantors has also guaranteed unconditionally the indebtedness outstanding under the Company's existing bank credit facility (the "Credit Agreement") and will guarantee unconditionally the indebtedness outstanding under the new bank credit facility the Company intends to enter into with its lenders (the "New Credit Facility"). See "Description of the Notes--Subsidiary Guarantees." Subordination The Notes will be general unsecured senior subordinated obligations of the Company ranking junior to all existing and future Senior Debt of the Company, including any indebtedness that may be incurred under the Credit Agreement or the New Credit Facility. The Subsidiary Guarantees will rank junior to all existing and future Senior Debt of the Guarantors. As of June 30, 1996, on a pro forma basis after giving effect to the Transactions, the aggregate outstanding principal amount of Senior Debt of the Company and the Guarantors would have been $24.5 million. See "Description of the Notes--Subordination." Optional Redemption Except as described below, the Notes are not redeemable by the Company prior to , 2001. Thereafter, the Notes are redeemable at the option of the Company, in whole or in part, at any time and from time to time, at the redemption prices set forth herein plus accrued and unpaid interest to, but excluding, the date of redemption. In addition, during the first 36 months after the date of issuance of the Notes, the Company, at its option, may redeem up to 35% of the initial principal amount of the Notes with the net proceeds of one or more Qualified Equity Offerings at a redemption price equal to %, plus accrued and unpaid interest to, but excluding, the date of redemption; provided that at least 65% of the initial principal amount of the Notes remains outstanding after each such redemption. See "Description of the Notes--Optional Redemption." Mandatory Redemption Except with respect to required repurchases upon the occurrence of a Change of Control or in the event of certain Asset Sales, the Company is not required to make sinking fund or redemption payments with respect to the Notes at any time prior to maturity. See "Description of the Notes-- Mandatory Redemption." 6 Change of Control Upon the occurrence of a Change of Control, each Holder of Notes may require the Company to repurchase such Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to, but excluding, the date of repurchase. See "Description of the Notes--Repurchase at the Option of Holders--Change of Control." Certain Covenants The Indenture governing the Notes (the "Indenture") will contain covenants restricting or limiting the ability of the Company and its Restricted Subsidiaries to, among other things: (i) incur additional indebtedness, including indebtedness ranking senior to the Notes and junior to any Senior Debt; (ii) pay dividends or make other restricted payments; (iii) make asset dispositions; (iv) permit liens; (v) enter into sale and leaseback transactions; (vi) enter into certain mergers; (vii) make certain investments; and (viii) enter into transactions with related persons. See "Description of the Notes--Certain Covenants." Use of Proceeds The net proceeds of the Offering will be used to repay outstanding bank debt and certain other indebtedness and to fund a portion of the purchase price of the Pending Acquisition.
RISK FACTORS For a discussion of certain material factors that should be considered in connection with an investment in the Notes offered hereby, see "Risk Factors" on pages 10 to 14. 7 SUMMARY HISTORICAL AND PRO FORMA INFORMATION (Dollars in thousands) The following summary historical consolidated statements of operations and balance sheet data of the Company as of and for each of the years ended December 31, 1991, 1992, 1993, 1994 and 1995 have been derived from the Company's audited consolidated financial statements. The summary historical consolidated statements of operations and balance sheet data of the Company for the six months ended June 30, 1995 and 1996 have been derived from the Company's unaudited condensed consolidated financial statements. The Company's unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, that the Company considers necessary for a fair presentation of the financial position and the results of operations for those periods. Operating results for the six months ended June 30, 1996 are not necessarily indicative of the results for the entire year ending December 31, 1996. The summary historical and pro forma financial data set forth below should be read in conjunction with "Pro Forma Condensed Consolidated Financial Information" and the Notes thereto, with "Selected Financial and Operating Information" and the Notes thereto, with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and with Iron Mountain's Consolidated Financial Statements and the Notes thereto included elsewhere in this Prospectus.
Year Ended December 31, -------------------------------------------------------------- Historical -------------------------------------------------- Pro Forma 1991 1992 1993 1994 1995 1995(1) ------- ------- ------- --------- ------ --------- Consolidated Statements of Operations Data: Revenues: Storage $39,510 $44,077 $48,892 $54,098 $ 64,165 $86,469 Service and Storage Material Sales 23,330 26,596 32,781 33,520 40,271 54,431 ------- ------- ------- ------- -------- ------- Total Revenues 62,840 70,673 81,673 87,618 104,436 140,900 Operating Expenses: Cost of Sales (Excluding Depreciation) 31,375 35,169 43,054 45,880 52,277 69,804 Selling, General and Administrative 16,471 17,630 19,971 20,853 26,035 35,087 Depreciation and Amortization 7,674 5,780 6,789 8,690 12,341 18,182 ------- ------- ------- ------- -------- ------- Total Operating Expenses 55,520 58,579 69,814 75,423 90,653 123,073 ------- ------- ------- ------- -------- ------- Operating Income $ 7,320 $12,094 $11,859 $12,195 $ 13,783 $17,827 ======= ======= ======= ======= ======== ======= Other Data: EBITDA (2) $14,994 $17,874 $18,648 $20,885 $ 26,124 $36,009 EBITDA as a Percentage of Total Revenues 23.9% 25.3% 22.8% 23.8% 25.0% 25.6% Capital Expenditures: Growth (3) -- $11,226 $13,605 $15,829(4) $ 14,395 -- Maintenance -- 818 1,846 1,151 858 -- ------- ------- ------- ------- -------- Total Capital Expenditures $ 8,163 $12,044 $15,451 $16,980(4) $ 15,253 -- Approximate Cartons in Storage at End of Period (in millions) (5) 10.8 12.6 15.5 17.7 23.3 -- Adjusted EBITDA and Credit Ratios: Adjusted EBITDA (6) Cash Interest Expense (7) Ratio of Adjusted EBITDA to Cash Interest Expense Ratio of Net Debt to Adjusted EBITDA (8)
Six Months Ended June 30, ------------------------------------ Historical ------------------ Pro Forma 1995 1996 1996 (1) ------- ------- --------------- Consolidated Statements of Operations Data: Revenues: Storage $30,748 $39,363 $ 46,224 Service and Storage Material Sales 19,476 24,587 29,127 ------- ------- -------- Total Revenues 50,224 63,950 75,351 Operating Expenses: Cost of Sales (Excluding Depreciation) 25,112 32,383 37,572 Selling, General and Administrative 12,697 16,067 19,339 Depreciation and Amortization 5,428 7,530 9,099 ------- ------- -------- Total Operating Expenses 43,237 55,980 66,010 ------- ------- -------- Operating Income $ 6,987 $ 7,970 $ 9,341 ======= ======= ======== Other Data: EBITDA (2) $12,415 $15,500 $ 18,440 EBITDA as a Percentage of Total Revenues 24.7% 24.2% 24.5% Capital Expenditures: Growth (3) $ 6,730 $10,702 -- Maintenance 592 460 -- ------- ------- Total Capital Expenditures $ 7,322 $11,162 -- Approximate Cartons in Storage at End of Period (in millions) (5) 20.3 26.4 29.6 Adjusted EBITDA and Credit Ratios: As of June 30, 1996 ------------- Adjusted EBITDA (6) .............................. $ 39,018 Cash Interest Expense (7) ....................... 17,952 Ratio of Adjusted EBITDA to Cash Interest Expense .......................................... 2.2x Ratio of Net Debt to Adjusted EBITDA (8) ..... 4.4x
As of June 30, 1996 ----------------------- Historical Pro Forma(9) ---------- ------------ Balance Sheet Data: Cash and Cash Equivalents $ 2,232 $ 2,232 Total Assets 212,630 268,705 Total Debt 118,894 174,518 Stockholders' Equity 54,729 52,501
(Footnotes on the following page) 8 - ------------- (Footnotes from the preceding page) (1) Gives effect to: (i) the Completed Acquisitions (as defined herein); (ii) the Pending Acquisition (as defined herein); (iii) the consummation of the Company's initial public offering of its Common Stock, par value $0.01 per share (the "Common Stock"), which closed on February 6, 1996 (the "Initial Public Offering") and the application of the net proceeds therefrom; (iv) the closing under the New Credit Facility; and (v) the application of the estimated net proceeds from the Offering, as if each had occurred as of January 1, 1995. The Company will record, in the quarter in which the Offering is consummated, an extraordinary loss on retirement of debt, net of related tax benefit. As of June 30, 1996, the amount of such loss would have been approximately $2.2 million. The pro forma statements of operations data do not give effect to such loss. See "The Transactions," "Use of Proceeds" and "Pro Forma Condensed Consolidated Financial Information." (2) Earnings before interest, taxes, depreciation, amortization and extraordinary charges ("EBITDA"). Based on its experience in the records management industry, the Company believes that EBITDA is an important tool for measuring the performance of records management companies (including potential acquisition targets) in several areas, such as liquidity, operating performance and leverage. In addition, lenders use EBITDA as a criterion in evaluating records management companies, and substantially all of the Company's financing agreements contain covenants in which EBITDA is used as a measure of financial performance. However, EBITDA should not be considered an alternative to operating or net income (as determined in accordance with GAAP) as an indicator of the Company's performance or to cash flow from operations (as determined in accordance with GAAP) as a measure of liquidity. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview" and "--Liquidity and Capital Resources" for discussions of other measures of performance determined in accordance with GAAP and the Company's sources and applications of cash flow. (3) Growth capital expenditures include investments in racking systems, new buildings and leasehold improvements, equipment for new facilities, management information systems and facilities restructuring. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources--Capital Investments." (4) Includes $2,901 related to the cost of constructing a records management facility which was sold in a sale and leaseback transaction in the fourth quarter of 1994. (5) The term "Carton" is defined as a measurement of the volume equal to a single standard storage carton, approximately 1.2 cubic feet. The number of Cartons stored does not include storage volumes in the Company's vital records services and data protection services which are described under "Business." Pro forma Carton information for 1995 is not available. (6) Gives effect to (i) the Completed Acquisitions completed after June 30, 1996 and (ii) the Pending Acquisition. Adjusted EBITDA, as defined in the Indenture, equals the sum of (i) EBITDA of the Company and the Restricted Subsidiaries for the most recent fiscal quarter for which internal financial statements are available, multiplied by four, plus (ii) Acquisition EBITDA of each business that has been acquired by the Company since the beginning of such quarter (including any such acquisition which is occurring on the date of the calculation), multiplied by a fraction, (a) the numerator of which is three minus the number of months (and/or any portion thereof) in such quarter for which the financial results of such acquired business are included in the EBITDA of the Company and its Restricted Subsidiaries under clause (i) above, and (b) the denominator of which is three. In addition, the effects of unusual or non-recurring items occurring in any relevant period shall be excluded in the calculation of Adjusted EBITDA. With respect to any such acquired business, Acquisition EBITDA equals the sum of (i) EBITDA of such acquired business for its last fiscal quarter for which financial statements are available, multiplied by four (or if such quarterly statements are not available, EBITDA for the last fiscal year for which financial statements are available), plus (ii) projected quantifiable improvements in operating results (on an annualized basis) due to cost reductions calculated in good faith by the Company or one of its Restricted Subsidiaries, as certified by an Officers' Certificate filed with the Trustee, without giving effect to any operating losses of the acquired business. Such projected quantifiable savings may differ from the cost savings used to calculate the Pro Forma Condensed Consolidated Statement of Operations. Adjusted EBITDA is merely a calculation utilized for purposes of debt incurrence under the Indenture and should not be viewed as indicative of actual or future results. (7) Cash interest expense represents total interest expense less amortization of deferred financing costs and other non-cash interest charges for the twelve months ended June 30, 1996 on a pro forma basis giving effect to the Transactions (as defined herein) as if each had occurred on July 1, 1995. The calculation of cash interest expense assumes an interest rate of 10-1/2% on the Notes. (8) Net debt represents total debt less cash and cash equivalents and was calculated based on the pro forma net debt as of June 30, 1996 of $172.3 million. (9) Gives effect to: (i) the Completed Acquisitions consummated after June 30, 1996; (ii) the Pending Acquisition; (iii) the closing under the New Credit Facility; and (iv) the application of the net proceeds from the Offering, as if each had occurred as of June 30, 1996. See "The Transactions," "Use of Proceeds" and "Pro Forma Condensed Consolidated Financial Information." 9 RISK FACTORS Prospective investors should carefully consider the following risk factors, in addition to the other information contained in this Prospectus, in connection with an investment in the Notes offered hereby. Certain statements contained under "Management's Discussion and Analysis of Financial Condition and Results of Operations," such as those regarding the goals, beliefs or current expectations of the Company and its management with respect to, among other things, revenue growth and future capital needs, and other statements contained in this Prospectus regarding matters that are not historical facts are forward-looking statements (as such term is defined in the rules promulgated pursuant to the Securities Act of 1933, as amended). Because such forward-looking statements include risks and uncertainties, actual results may differ materially from those expressed in or implied by such forward- looking statements. Factors that could cause actual results to differ materially include, but are not limited to, those discussed herein under "Risk Factors." The Company undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Financial Leverage; Debt Service Requirements. The Company is highly leveraged due to the substantial indebtedness it has incurred primarily to finance acquisitions and expand its operations. As of June 30, 1996, on a pro forma basis, after giving effect to the Transactions, the Company would have had $174.5 million in total indebtedness and $52.5 million in stockholders' equity. The Company expects to continue to borrow under the New Credit Facility and possible future credit arrangements in order to finance possible future acquisitions and for general corporate purposes. The ability of the Company to repay the Notes and its other indebtedness will depend upon future operating performance, which is subject to the success of the Company's business strategy, prevailing economic conditions, levels of interest rates and financial, business and other factors, many of which are beyond the Company's control. The debt service obligations of the Company could have important consequences, including the following: (i) the ability of the Company to obtain additional financing for future working capital needs or for possible future acquisitions or other purposes may be limited; (ii) a substantial portion of the Company's cash flow from operations will be dedicated to the payment of principal and interest on its indebtedness, thereby reducing funds available for other purposes; (iii) the Company may be more vulnerable to adverse economic conditions than some of its competitors and thus may be limited in its ability to withstand competitive pressures; and (iv) the Company may be more highly leveraged than certain of its competitors, which may place it at a competitive disadvantage. A substantial portion of the Company's cash flow from operations is required for debt service. Management believes that cash flow from operations in conjunction with borrowings from existing and possible future credit facilities will be sufficient for the foreseeable future to meet debt service requirements and to make possible future acquisitions and capital expenditures. However, there can be no assurance in this regard, and the Company's leverage could make it vulnerable to a downturn in the operating performance of its subsidiaries, a downturn in economic conditions or, because borrowings under the New Credit Facility will bear interest at rates which fluctuate, increases in interest rates on borrowings under the New Credit Facility. If such cash flow were not sufficient to meet such debt service requirements or payments of principal, the Company could be required to sell additional equity securities, refinance its obligations or dispose of assets in order to make such scheduled payments. There can be no assurance that the Company would be able to effect any of such transactions or do so on favorable terms. Subordination; Guarantees. The Notes will be unsecured senior subordinated obligations of the Company and will be subordinated in right of payment to the prior payment in full of all existing and future Senior Debt of the Company. At June 30, 1996, the Company had $103.6 million of indebtedness outstanding that would have constituted Senior Debt. On a pro forma basis, after giving effect to the Transactions, the Company would have had $24.5 million of Senior Debt outstanding. The Company intends to actively pursue additional acquisitions which would likely be financed through the incurrence of additional indebtedness. Such additional indebtedness may constitute Senior Debt. The Indenture allows the Company to incur Senior Debt from time to time under the New Credit Facility or otherwise, subject to certain limitations. Upon any acceleration of the maturity of the Notes or upon any payment or distribution of assets of the Company to creditors upon any liquidation, dissolution, winding- up, reorganization, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency or similar proceedings of the Company, the holders of all Senior Debt will be first entitled to receive payment in full of all amounts due or to become due thereon before the Holders of Notes will be entitled to receive any payment in respect of the principal of or premium, if any, or interest on the Notes. In addition, upon the occurrence of a 10 payment default or certain other defaults in respect of outstanding Senior Debt, Holders of Notes may be prevented from receiving payments with respect to the Notes for an extended period. See "Description of the Notes-- Subordination." Iron Mountain's subsidiaries have guaranteed on a senior subordinated basis its obligations under the Credit Agreement and will guarantee its obligations under the New Credit Facility. Iron Mountain's obligations under the Credit Agreement are secured by a first priority security interest in substantially all of its assets (including the stock of its subsidiaries). Iron Mountain's obligations under the New Credit Facility will be secured by a pledge of the stock of its subsidiaries. If Iron Mountain becomes insolvent or is liquidated or if the indebtedness under the Credit Agreement or the New Credit Facility is accelerated, the lenders under the Credit Agreement or the New Credit Facility would be entitled to exercise the remedies available to a secured lender. Accordingly, such lenders will have a prior claim on such assets of Iron Mountain and its subsidiaries. In such event, it is possible that there would be no assets remaining from which claims of the Holders of Notes could be satisfied or, if any assets remained, such assets might be insufficient to fully satisfy such claims. The Company may incur additional secured indebtedness in the future. See "Description of the Notes--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" and "--Liens." Iron Mountain is a holding company, substantially all of the assets of which are the stock of its subsidiaries. Substantially all of the operations of the Company are currently conducted by Iron Mountain's direct and indirect wholly owned subsidiaries, all of which will be Guarantors, subject to the terms of the Indenture. Management of the Company believes that separate financial statements of such subsidiaries are not meaningful or material to investors and therefore such statements have not been included in this Prospectus. The Company does not currently expect that it will be required to prepare separate financial statements for any of its subsidiaries in the foreseeable future and does not expect to do so. Unenforceability and Release of Guarantees. Iron Mountain's obligations under the Notes will be guaranteed, jointly and severally, on a senior subordinated basis by the Guarantors. To the extent that a court were to find that (i) a Subsidiary Guarantee was incurred by a Guarantor with intent to hinder, delay or defraud any present or future creditor or the Guarantor contemplated insolvency with a design to prefer one or more creditors to the exclusion in whole or in part of others, or (ii) such Guarantor did not receive fair consideration or reasonably equivalent value for issuing its Subsidiary Guarantee and such Guarantor (a) was insolvent; (b) was rendered insolvent by reason of the issuance of such Subsidiary Guarantee; (c) was engaged or about to engage in a business or transaction for which the remaining assets of such Guarantor constituted unreasonably small capital to carry on its business; (d) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature; or (e) was a defendant in an action for money damages or had a judgment for money damages docketed against it (if, in either case, after final judgment, the judgment is unsatisfied), then in each such case, a court could avoid or subordinate such Subsidiary Guarantee in favor of the Guarantor's other creditors. The measure of insolvency for purposes of the foregoing will vary depending upon the law of the jurisdiction which is being applied. Generally, however, a company will be considered insolvent for purposes of the foregoing if, at the time it incurs any given obligation, the sum of the company's debts (including unliquidated or contingent debt) is greater than all the company's property at a fair valuation, or if the present fair salable value of the company's assets is less than the amount that will be required to pay its probable liability on its existing debts (including unliquidated or contingent debt) as they become absolute and matured. To the extent any Subsidiary Guarantee were to be avoided as a fraudulent conveyance or held unenforceable for any other reason, Holders of Notes would cease to have any claim in respect of such Guarantor and would be creditors solely of the Company and any Guarantor whose Subsidiary Guarantee was not avoided or held unenforceable. In such event, the claims of the Holders of Notes against the issuer of an invalid Subsidiary Guarantee would be subject to the prior payment of all liabilities of such Guarantor, including without limitation, to the extent valid and enforceable, such Guarantor's guarantee of indebtedness of Iron Mountain under the Credit Agreement or the New Credit Facility, as the case may be, and any other Senior Debt of Iron Mountain guaranteed by such Guarantor. There can be no assurance that, after providing for all prior claims, there would be sufficient assets to satisfy the claims of the Holders of Notes relating to any voided Subsidiary Guarantee. See "Description of the Notes--Subordination." Based upon financial and other information currently available to it, the Company believes that the Notes and the Subsidiary Guarantees are being incurred for proper purposes and in good faith, and that the Company and each Guarantor 11 are solvent and will continue to be solvent after issuing the Notes or the Subsidiary Guarantees, as the case may be, will have sufficient capital for carrying on their businesses after such issuance and will be able to pay their debts as they mature. There can be no assurance, however, that a court would reach the same conclusion. Any Guarantor may be released from its Subsidiary Guarantee at any time upon any sale, exchange or transfer in compliance with the provisions of the Indenture by the Company of the capital stock of such Guarantor or substantially all of the assets of such Guarantor and, in certain other circumstances, a Guarantor may be released from its Subsidiary Guarantee in connection with the Company's designation of such Guarantor as an Unrestricted Subsidiary. See "Description of the Notes--Certain Covenants--Additional Subsidiary Guarantees." Restrictions Imposed by Terms of Indebtedness. The Indenture will contain covenants restricting or limiting the ability of the Company and its Restricted Subsidiaries to, among other things: (i) incur additional indebtedness, including indebtedness ranking senior to the Notes and junior to any Senior Debt; (ii) pay dividends or make other restricted payments; (iii) make asset dispositions; (iv) permit liens; (v) enter into sale and leaseback transactions; (vi) enter into certain mergers; (vii) make certain investments; and (viii) enter into transactions with related persons. In addition, the Credit Agreement contains, and the New Credit Facility will contain, certain other and more restrictive covenants than those contained in the Indenture. See "Description of New Credit Facility." This may adversely affect the Company's ability to pursue its acquisition strategy. The Credit Agreement also requires, and the New Credit Facility will require, the Company to maintain specific financial ratios and to satisfy certain financial condition tests. The Company's ability to meet those financial ratios and financial condition tests can be affected by events beyond its control, and there can be no assurance that the Company will meet those tests. The breach of any of those covenants could result in a default under the New Credit Facility, the Indenture or both. In the event of a default under the New Credit Facility or the Indenture, the lenders could seek to declare all amounts outstanding under the New Credit Facility, together with accrued and unpaid interest, if any, to be immediately due and payable. If the Company were unable to repay those amounts, the lenders under the New Credit Facility could proceed against the collateral granted to them to secure that indebtedness. If the indebtedness under the New Credit Facility or the Notes were to be accelerated, there can be no assurance that the assets of the Company would be sufficient to repay in full that indebtedness and the other indebtedness of the Company. The Notes are subordinated to all existing and future Senior Debt of the Company, including indebtedness under the Credit Agreement or the New Credit Facility, as the case may be, and the Guarantees are subordinated to all existing and future Senior Debt of the Guarantors, including guarantees by the Guarantors of the indebtedness outstanding under the Credit Agreement or the New Credit Facility, as the case may be. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." Holding Company Structure; Dependence Upon Operations of Subsidiaries. Substantially all of the tangible assets of the Company are held by, and substantially all of the Company's operating revenues are derived from operations of, the Company's subsidiaries. Therefore, the Company's ability to pay interest and principal when due to Holders of Notes will be dependent upon the receipt of sufficient funds from such subsidiaries. However, the Company's obligations under the Notes will be guaranteed, jointly and severally, on a senior subordinated basis, by substantially all of the Company's present and future Restricted Subsidiaries. Risk of Inability to Finance Change of Control Offer. In the event of a Change of Control, the Company will be required to offer to purchase all Notes then outstanding at a purchase price, in cash, equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. There can be no assurance that the Company would be able to obtain such funds through a refinancing of the Notes to be purchased or otherwise, or that the purchase would be permitted under the Credit Agreement, the New Credit Facility or the terms of other financing instruments, as the case may be. Also, the requirement that the Company offer to purchase all Notes then outstanding in the event of a Change of Control may have the effect of deterring a third party from effecting a transaction that would constitute a Change of Control. See "Description of the Notes--Repurchase at the Option of Holders--Change of Control." Absence of Public Market for the Notes. There is no public market for the Notes. The Notes will not be listed on any securities exchange or included in the National Association of Securities Dealers Automated Quotation System. The Company has been advised by the Underwriters that, following the completion of the Offering, the Underwriters presently intend to make a market in the Notes; however, they are under no obligation to do so and may discontinue any market-making activities at any time without notice. No assurance can be given as to the liquidity of the trading market for the Notes or that an active public market will develop or, if developed, will 12 continue. If an active public market does not develop or is not maintained, the market price and liquidity of the Notes may be adversely affected. See "Underwriting." Risks Associated with Acquisition Strategy. The Company has pursued and intends to continue to pursue acquisitions of records management businesses as a key component of its growth strategy. Since mid-1994, the Company has acquired or entered into agreements to acquire 19 companies (of which 18 have been completed and one is pending) engaged in the records management and related businesses for estimated cash purchase prices aggregating $103.2 million (not including contingent payments of up to $4.6 million based upon the achievement of certain revenue targets from 1996 through 1998). See "The Transactions" and "Recent and Pending Acquisitions." Possible future acquisitions may be for purchase prices significantly larger than those paid for acquisitions consummated since mid-1994. Certain risks are inherent in an acquisition strategy, such as increasing leverage and debt service requirements and combining disparate company cultures and facilities, which could adversely affect the Company's operating results. The success of any completed acquisition will depend in part on Iron Mountain's ability to integrate effectively the acquired records management business into the Company. The process of integrating such acquired businesses may involve unforeseen difficulties and may require a disproportionate amount of management's attention and the Company's financial and other resources. No assurance can be given that the Pending Acquisition will be completed, that additional suitable acquisition candidates will be identified, financed and purchased on acceptable terms, or that recent acquisitions or future acquisitions, if completed, will be successful. See "Business--Growth Strategy--Growth through Acquisitions." Acquisitions by the Company in excess of $25 million individually and $50 million in the aggregate per year will require the approval of the majority lenders under the Credit Agreement, and the New Credit Facility will contain similar or other restrictions on acquisitions. No assurance can be given that the lenders will consent to any acquisitions that the Company proposes to make in excess of such limits. The size, timing and integration of possible future acquisitions may cause substantial fluctuations in operating results from quarter to quarter. As a result, operating results for any quarter may not be indicative of the results that may be achieved for any subsequent fiscal quarter or for a full fiscal year. Competition; Alternative Technologies. The Company faces competition from one or more competitors in all geographic areas where it operates. The Company believes that competition for customers is based on price, reputation for reliability, quality of service and scope and scale of technology, and believes that it generally competes effectively based on these factors. As a result of this competition, the records management industry has for the past several years experienced downward pricing pressures. While Iron Mountain believes that this pricing climate is stabilizing, there can be no assurance that prices will not decline further, as competitors seek to gain or preserve market share. Should a further downward trend in pricing occur or continue for an extended period of time, it could have a material adverse effect on the Company's results of operations. The Company also competes for acquisition candidates. Some of the Company's competitors may possess greater financial and other resources than the Company. If any such competitor were to devote additional resources to the records management business and such acquisition candidates or to focus its strategy on the Company's markets, the Company's results of operations could be adversely affected. In addition, the Company faces competition from the internal document handling capability of its current and potential customers. There can be no assurance that these organizations will outsource more of their document management needs or that they will not bring in-house some or all of the functions they currently outsource. See "Business--The Records Management Industry" and "Business--Competition." The substantial majority of the Company's revenues have been derived from the storage of paper documents and from related services. Such storage requires significant physical space. Alternative technologies for generating, capturing, managing, transmitting and storing information have been developed, many of which require significantly less space than paper. Such technologies include computer media, microforms, audio/video tape, film, CD-ROM and optical disk. None of these technologies has replaced paper as the principal means for storing information. However, there can be no assurance that one or more non-paper-based technologies (whether now existing or developed in the future) may not in the future reduce or supplant the use of paper as a preferred medium, which could in turn adversely affect the Company's business. Casualty. The Company currently maintains and intends to continue to maintain, to the extent such insurance is available on commercially reasonable terms, comprehensive liability, fire, flood and earthquake (where appropriate) and extended coverage insurance with respect to the properties that it now owns or leases or that it 13 may in the future own or lease, with customary limits and deductibles. Certain types of loss, however, may not be fully insurable on a cost-effective basis, such as losses from earthquakes, or may be altogether uninsurable, such as losses from riots. In addition, as of June 30, 1996, 24 of the Company's 89 records management facilities were located in California and the Company derived approximately 30% of its revenues for the six months ended June 30, 1996 from its operations in California. The Company has in the past suffered damages and losses from an earthquake and a riot in California, which damages and losses were substantially covered by insurance. In the future, should uninsured losses or damages occur, the Company could lose both its investment in and anticipated profits and cash flow from the affected property and may continue to be obligated on any leasehold obligations, mortgage indebtedness or other obligations related to such property. As a result, any such loss could materially adversely affect the Company. See "Business--Insurance." Environmental Matters. As of June 30, 1996, the Company owned or leased approximately 6.3 million square feet of facilities. Under various federal, state and local environmental laws, ordinances and regulations ("environmental laws"), an owner of real estate or a lessee conducting operations thereon may become liable for the costs of investigation, removal or remediation of soil and groundwater contaminated by certain hazardous substances or wastes or petroleum products. Certain such laws impose cleanup responsibility and liability without regard to whether the owner or operator of the real estate or operations thereon knew of or was responsible for the contamination, and whether or not operations at the property have been discontinued or title to the property has been transferred. In addition, the presence of such substances, or the failure to properly remediate such property, may adversely affect the current property owner's or operator's ability to sell or rent such property or to borrow using such property as collateral. The owner or operator of contaminated real estate also may be subject to common law claims by third parties based on damages and costs resulting from off-site migration of the contamination. Certain environmental laws govern the removal, encapsulation or disturbance of asbestos-containing materials ("ACMs"). Such laws may impose liability for release of ACMs and may enable third parties to seek recovery from owners or operators of real estate for personal injury associated with exposure to such substances. Certain facilities operated by the Company contain or may contain ACMs. In addition, certain of the properties formerly or currently owned or operated by the Company were previously used for industrial or other purposes that involved the use or storage of hazardous substances or petroleum products or the generation and disposal of hazardous wastes, and in some instances, included the operation of underground storage tanks ("USTs"). In connection with its former and current ownership or operation of certain properties, the Company may be potentially liable for environmental costs such as those discussed above and as more specifically described under "Business--Environmental Matters." The Company has from time to time conducted certain environmental investigations and remedial activities at certain of its former and current facilities, but an in-depth environmental review of the properties has not been conducted by or on behalf of the Company. The Company believes it is in substantial compliance with all applicable material environmental laws. The Company has not received any written notice from any governmental authority or third party asserting, and is not otherwise aware of, any material environmental noncompliance, liability or claim relating to hazardous substances or wastes, petroleum products or material environmental laws applicable to Company operations in connection with any of its present or former properties other than as described under "Business--Environmental Matters." However, no assurance can be given that there are, or as a result of possible future acquisitions there will be, no environmental conditions for which the Company might be liable in the future or that future regulatory action, as well as compliance with future environmental laws, will not require the Company to incur costs for or at its properties that could have a material adverse effect on the Company's financial condition and results of operations. Reliance on Executive Officers. The Company's success is partially dependent upon the performance and continued availability of its current executive officers. The Company does not have employment contracts with any of its current executive officers. There can be no assurance that the Company will be able to retain such officers, the loss of whom could have a material adverse effect upon the Company. See "Management." Recent Publicity. On September 3, 1996, The Boston Globe, a regional daily newspaper, published a business news article regarding the Company. The article contained numerous statements about the Company and quotations from the Company's Chief Executive Officer. The article did not set forth material information or cautionary statements relevant to an evaluation of the statements and quotations regarding the Company in the article. Prospective investors in the Notes should not rely on such article and should only rely upon the information and cautionary statements contained in this Prospectus, including "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." 14 THE COMPANY Iron Mountain is the largest records management company in the United States, as measured by revenues. The Company is a full-service provider of records management and related services, enabling customers to outsource data and records management functions. Pro forma for the Acquisitions, as of June 30, 1996, the Company managed approximately 29.6 million Cartons in 103 records centers in 33 markets nationwide. The Company has a diversified base of over 19,000 customer accounts, which includes more than half of the Fortune 500 and numerous legal, banking, healthcare, accounting, insurance, entertainment and government organizations. The Company provides storage and related services for all major media, including paper (which is the dominant form of records retention and which has accounted for approximately 85% of the Company's revenues since 1992), computer disks and tapes, microfilm and microfiche, master audio and video tapes, film and optical disks, X-rays and blueprints. The Company's principal services include filing, retrieval and destruction of records, courier pick-up and delivery, database management and customized reporting. The Company also sells storage materials and provides consulting and other records-related services. Iron Mountain's operations date to 1951, when a corporate predecessor commenced storage operations in a network of underground vaults in a former iron ore mine, focusing on the maximum-security storage of corporate vital records in the Northeast. That company was acquired by Schooner Capital Corporation ("Schooner") in 1975, after which its focus shifted to more general records management. In 1988, a corporate affiliate of Schooner acquired the Bell & Howell Records Management Company and its subsidiaries ("BHRM") for approximately $75 million. At that time, BHRM conducted storage operations in various states, with significant operations in California. The current Iron Mountain was incorporated in 1990 as part of a recapitalization that consolidated the former BHRM operations with the predecessor's Northeast operations. The principal executive offices of the Company are located at 745 Atlantic Avenue, Boston, Massachusetts 02111. Its telephone number is (617) 357-4455. THE TRANSACTIONS In connection with the Offering, the Company intends to: (i) repay all indebtedness outstanding under the Credit Agreement; (ii) repay its 13.42% Senior Subordinated Notes due December 14, 2000 (the "Chrysler Notes"); (iii) repay certain indebtedness incurred by the Company in connection with a 1990 acquisition and represented by two junior subordinated notes (collectively, the "FDS Notes"), one of which is held by Schooner; (iv) fund the purchase price of the Pending Acquisition described below under "Recent and Pending Acquisitions;" and (v) enter into the New Credit Facility (the foregoing, together with the Offering and the application of the net proceeds therefrom and the Completed Acquisitions consummated after June 30, 1996, are referred to collectively as the "Transactions"). Sources and Uses of Funds The estimated sources and uses of funds in connection with the Transactions are set forth below (in millions): Sources of Funds: New Credit Facility $ 13.7 Senior Subordinated Notes due 2006 150.0 ------ Total Sources $163.7 ====== Uses of Funds: Repay Credit Agreement (1) $ 92.9 Repay Chrysler Notes (1) 14.8 Repay FDS Notes (1) 0.4 Purchase Price of Pending Acquisition and Acquisitions Completed after June 30, 1996 (2) 47.5 Estimated Fees and Expenses (3) 8.1 ------ Total Uses $163.7 ====== (Footnotes on the following page) 15 - ----------- (Footnotes from the preceding page) (1) Balances are as of June 30, 1996. (2) Acquisitions completed after June 30, 1996 were initially financed by borrowings under the Credit Agreement and a portion of the net proceeds of the Offering will be used to repay such indebtedness. (3) Consists of estimated fees and expenses related to the Offering, the repayment of the Credit Agreement, the Chryster Notes and the FDS Notes and the closing of the New Credit Facility. Repayment of Credit Agreement Indebtedness. The Company is party to the Amended and Restated Credit Agreement dated as of January 31, 1995, as amended (as so amended, the "Credit Agreement") among the Company, the lenders party thereto and The Chase Manhattan Bank (National Association), as agent for such lenders. Borrowings by the Company under the Credit Agreement during the most recent twelve months were used to finance acquisitions and for working capital. The Credit Agreement has a final maturity date of July 31, 2002. The weighted average interest rate on September 3, 1996 on the indebtedness outstanding under the Credit Agreement was 8.5%. Repayment of Chrysler Notes. Pursuant to a Note Purchase Agreement dated as of December 14, 1990, as amended, the Company issued the Chrysler Notes in an aggregate principal amount of $15.0 million to Chrysler Capital Corporation. The Company will repay the Chrysler Notes in full with a portion of the net proceeds of the Offering; the amount shown under "Uses of Funds" above does not include related fees and expenses. Repayment of FDS Notes. In connection with a 1990 acquisition, the Company issued to First Document Storage Corporation of America $450,000 in principal amount of the FDS Notes, which mature in March 2000 and bear interest at the rate of 8% per annum. In 1991, Schooner acquired $382,500 in principal amount of the FDS Notes as an investment. The Company intends to use a portion of the net proceeds from the Offering to repay the FDS Notes in their entirety. Pending Acquisition. A portion of the net proceeds from the Offering, together with borrowings under the New Credit Facility, will be used to fund the Pending Acquisition described under "Recent and Pending Acquisitions" below. New Credit Facility. The Company intends to replace the Credit Agreement with the New Credit Facility. The New Credit Facility will provide the Company with revolving credit availability of up to $100 million for the Pending Acquisition and possible future acquisitions, working capital and other corporate purposes, and will terminate on September 30, 2001. As was the case with the Credit Agreement, the Company's obligations under the New Credit Facility will be guaranteed by substantially all of the Company's subsidiaries; however, unlike the Credit Agreement, the New Credit Facility will be secured only by the pledge of the stock of such subsidiaries. See "Description of New Credit Facility" for a description of the anticipated terms of the New Credit Facility. No assurance can be given that the Company will enter into the New Credit Facility on these or any other terms. The Offering is not conditioned on the closing of the New Credit Facility. 16 RECENT AND PENDING ACQUISITIONS As part of its growth strategy, since mid-1994 the Company has acquired or entered into agreements to acquire 19 records management businesses. Since January 1, 1995, the Company has purchased for cash 15 such businesses (the "Completed Acquisitions") and has entered into a definitive agreement to acquire one additional records management business (the "Pending Acquisition" and, together with the Completed Acquisitions, the "Acquisitions"). The total purchase price of the Completed Acquisitions was approximately $80.1 million (not including contingent payments of up to $0.6 million based upon the achievement of certain revenue targets during 1996 and 1997), and the purchase price of the Pending Acquisition is approximately $20.2 million (not including contingent payments of up to $4.0 million based upon the achievement of certain revenue targets during 1997 and 1998). The Completed Acquisitions represent in the aggregate total annual revenues of approximately $32.0 million, and the Pending Acquisition represents total annual revenues of approximately $8.8 million (calculated in each case by reference to the revenues of each such acquired business during the twelve months ended December 31, 1995, which calculation includes an estimate of total revenues for the portion of 1995, if any, during which any such acquired business was included in the Company's results of operations). See "Pro Forma Condensed Consolidated Financial Information." The following table presents certain information for each acquisition completed since 1994 and for the Pending Acquisition.
Principal State(s) of Acquisition Operation Completion Date - ----------- -------------- ---------------------- 1994 Acquisitions Data protection service business of Media Management Group, Inc. Connecticut June 1994 Data protection service business of Digital Equipment Corporation Massachusetts July 1994 Storage and Retrieval Concepts, Inc. Ohio October 1994 1995 Acquisitions National Business Archives, Inc. Maryland March 1995 DataFile Services, Inc. Texas October 1995 Brooks Records Center, Inc. Delaware December 1995 Data Management Business Records Storage, Inc. Georgia December 1995 1996 Acquisitions Nashville Vault Company, Ltd. Tennessee January 1996 Florida Data Bank, Inc. Florida January 1996 DataVault Corporation Massachusetts February 1996 Data Storage Systems, Inc. California March 1996 Brambles CRC, Inc. Ohio and April 1996 Kentucky Records management business of Output Technologies Central Region, Inc. Missouri May 1996 Records management business of The Fortress Corporation Massachusetts July 1996 and Florida Data Archive Services, Inc. and Data Archive Services of Miami, Inc. Florida August 1996 DKA Industries, Inc. (d/b/a Systems Record Storage) Florida August 1996 International Record Storage and Retrieval Service, Inc. New Jersey September 1996 Security Archives Corporation California September 1996 Pending Acquisition Status ---------------------- Mohawk Business Record Storage, Inc. Definitive Minnesota Agreement
The closing of the Pending Acquisition is subject to various conditions and no assurance can be given that the Pending Acquisition will be completed. See "Risk Factors--Risks Associated with Acquisition Strategy." The Offering is not conditioned upon the completion of the Pending Acquisition, and the Pending Acquisition is not conditioned upon completion of the Offering. 17 USE OF PROCEEDS The gross proceeds from the Offering will be used: (i) to repay indebtedness under the Credit Agreement, the Chrysler Notes and the FDS Notes; (ii) to fund a portion of the purchase price of the Pending Acquisition; and (iii) to pay certain fees and expenses related to the Offering. See "The Transactions" and "Recent and Pending Acquisitions." The net proceeds to the Company from the Offering are estimated to be approximately $144.7 million, after deducting underwriting discounts and commissions and estimated Offering expenses. In the event the Pending Acquisition is not consummated, the available net proceeds from the Offering will be used for possible future acquisitions and for general corporate purposes. Prior to funding the Pending Acquisition or to such other use, the net proceeds from the Offering will be invested in short-term, dividend-paying or interest-bearing investment grade securities. CAPITALIZATION (Dollars in thousands, except per share data) The following table sets forth the capitalization of the Company at June 30, 1996 and pro forma to give effect to the Transactions as if they had occurred on June 30, 1996.
As of June 30, 1996 --------------------- Actual Pro Forma ------- ---------- Cash and Cash Equivalents $ 2,232 $ 2,232 ======== ======== Long-term Debt (Including Current Maturities): Credit Agreement $ 92,850 $ -- New Credit Facility -- 13,731 Real Estate Mortgages 10,761 10,761 Senior Subordinated Notes due 2006 -- 150,000 Chrysler Notes 14,807 -- FDS Notes and Other 476 26 -------- -------- Total Long-term Debt 118,894 174,518 Stockholders' Equity: Common Stock, $0.01 par value; 13,000,000 Shares Authorized, 9,627,141 Issued and Outstanding 96 96 Non-voting Common Stock, $0.01 par value; 1,000,000 Shares Authorized, 500,000 Issued and Outstanding 5 5 Additional Paid-in Capital 62,014 62,014 Accumulated Deficit (7,386) (9,614) -------- -------- Total Stockholders' Equity 54,729 52,501 -------- -------- Total Capitalization $173,623 $227,019 ======== ========
18 PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION The following unaudited Pro Forma Condensed Consolidated Balance Sheet has been prepared based upon the unaudited historical condensed consolidated balance sheet of Iron Mountain as of June 30, 1996 and the balance sheets as of June 30, 1996 of the Completed Acquisitions consummated after June 30, 1996 and the Pending Acquisition, and gives effect to: (i) such Completed Acquisitions and the Pending Acquisition; (ii) the closing under the New Credit Facility; and (iii) the application of the estimated net proceeds from the Offering (after deducting underwriting discounts and commissions and estimated expenses of the Offering), as if each had occurred as of June 30, 1996. The following unaudited Pro Forma Condensed Consolidated Statements of Operations for the six months ended June 30, 1996 and for the year ended December 31, 1995 give effect to each of the above transactions and to (i) the Completed Acquisitions which occurred before June 30, 1996 and (ii) the Initial Public Offering and the application of the net proceeds therefrom, as if each had occurred as of January 1, 1995. Pro forma adjustments are described in the accompanying notes. The following unaudited Pro Forma Condensed Consolidated Statements of Operations are not necessarily indicative of the actual results of operations that would have been reported if the events described above had occurred as of January 1, 1995, nor do they purport to indicate the results of the Company's 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 Acquisitions. In the opinion of management, all adjustments necessary to present fairly such pro forma financial statements have been made. The pro forma condensed consolidated financial information should be read in conjunction with "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and with the Financial Statements and the Notes thereto included elsewhere in this Prospectus. 19 IRON MOUNTAIN INCORPORATED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996 (In thousands)
Pending and Pro Forma Iron Completed Iron Mountain Acquisitions (1) Adjustments Mountain --------- ------------------- ----------- -------- Assets Current Assets $ 25,865 $ 3,302 $ 941 (A) $ 30,108 Property, Plant and Equipment, net 103,004 6,940 4,324 (A) 114,268 Goodwill, net 72,213 20 36,037 (A) 108,270 Other Long-term Assets 11,548 480 4,031 (A) 16,059 -------- ------- ------- -------- Total Assets $212,630 $10,742 $45,333 $268,705 ======== ======= ======= ======== Liabilities and Stockholders' Equity Current Liabilities $ 23,129 $ 7,337 $(8,182)(B) $ 22,284 Long-term Debt, net of current portion 115,700 388 58,236 (B) 174,324 Other Long-term Liabilities 6,769 1,281 (1,219)(B) 6,831 Deferred Rent 7,897 242 220 (B) 8,359 Deferred Income Taxes 4,406 -- -- 4,406 Stockholders' Equity 54,729 1,494 (3,722)(B) 52,501 -------- ------- ------- -------- Total Liabilities and Stockholders' Equity $212,630 $10,742 $45,333 $268,705 ======== ======= ======= =======
- ----------- (1) See Schedule A for detail of the Pending and Completed Acquisitions. The accompanying Notes are an integral part of these pro forma financial statements. 20 IRON MOUNTAIN INCORPORATED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 (In thousands, except per share data)
Pending and Pro Forma Iron Completed Iron Mountain Acquisitions (1) Adjustments Mountain -------- ---------------- ----------- -------- Revenues: Storage $39,363 $ 6,861 $ -- $46,224 Service and Storage Material Sales 24,587 4,540 -- 29,127 ------- ------- ------ ------- Total Revenues 63,950 11,401 -- 75,351 Operating Expenses: Cost of Sales (Excluding Depreciation) 32,383 5,518 (329)(D) 37,572 Selling, General and Administrative 16,067 4,454 (1,182)(E) 19,339 Depreciation and Amortization 7,530 750 819 (F) 9,099 ------- ------- ------ ------- Total Operating Expenses 55,980 10,722 (692) 66,010 ------- ------- ------ ------- Operating Income 7,970 679 692 9,341 Interest Expense 6,385 334 2,980 (G) 9,699 ------- ------- ------ ------- Income (Loss) before Provision (Benefit) for Income Taxes 1,585 345 (2,288) (358) Provision (Benefit) for Income Taxes 888 (30) (705)(H) 153 ------- ------- ------ ------- Net Income (Loss) 697 375 (1,583) (511) Accretion of Redeemable Put Warrant 280 -- (280)(I) -- ------- ------- ------ ------- Net Income (Loss) Applicable to Common Stockholders $ 417 $ 375 $(1,303) $ (511) ======= ======= ======= ======= Net Income (Loss) per Common and Common Equivalent Share $ 0.04 $ (0.05) Weighted Average Common and Common Equivalent Shares Outstanding 9,899 400 (J) 10,299 Other Data: EBITDA $15,500 $ 1,429 $ 1,511 $18,440
- ------------ (1) See Schedule B for detail of the Pending and Completed Acquisitions. The accompanying Notes are an integral part of these pro forma financial statements. 21 IRON MOUNTAIN INCORPORATED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 (In thousands, except per share data)
Pending and Pro Forma Iron Completed Iron Mountain Acquisitions (1) Adjustments Mountain -------- ---------------- ----------- -------- Revenues: Storage $ 64,165 $22,304 $ -- $ 86,469 Service and Storage Material Sales 40,271 14,897 (737)(C) 54,431 -------- ------- ------ ------- Total Revenues 104,436 37,201 (737) 140,900 Operating Expenses: Cost of Sales (Excluding Depreciation) 52,277 18,581 (1,054)(D) 69,804 Selling, General and Administrative 26,035 11,604 (2,552)(E) 35,087 Depreciation and Amortization 12,341 2,962 2,879 (F) 18,182 -------- ------- ------ ------- Total Operating Expenses 90,653 33,147 (727) 123,073 -------- ------- ------ ------- Operating Income 13,783 4,054 (10) 17,827 Interest Expense 11,838 1,814 5,751 (G) 19,403 -------- ------- ------ ------- Income (Loss) before Provision for Income Taxes 1,945 2,240 (5,761) (1,576) Provision for Income Taxes 1,697 102 (1,427)(H) 372 -------- ------- ------ ------- Net Income (Loss) 248 2,138 (4,334) (1,948) Accretion of Redeemable Put Warrant 2,107 -- (2,107)(I) -- -------- ------- ------ ------- Net Income (Loss) Applicable to Common Stockholders $ (1,859) $ 2,138 $(2,227) $(1,948) ======== ======= ====== ======= Net (Loss) per Common and Common Equivalent Share $ (0.24) $ (0.19) Weighted Average Common and Common Equivalent Shares Outstanding 7,784 2,350 (J) 10,134 Other Data: EBITDA $ 26,124 $ 7,016 $ 2,869 $36,009
- ------------ (1) See Schedule C for detail of the Pending and Completed Acquisitions. The accompanying Notes are an integral part of these pro forma financial statements. 22 SCHEDULE A IRON MOUNTAIN INCORPORATED SCHEDULE OF PENDING AND COMPLETED ACQUISITIONS AS OF JUNE 30, 1996 (In thousands) (Unaudited)
Acquisitions Completed Pending after Pending and June 30, Acquisition Completed 1996 (Mohawk) Acquisitions ---------- ------------ ------------- Assets Current Assets $1,814 $1,488 $ 3,302 Property, Plant and Equipment, net 3,135 3,805 6,940 Goodwill, net 20 -- 20 Other Long-term Assets 249 231 480 ------ ------ ------- Total Assets $5,218 $5,524 $10,742 ====== ====== ======= Liabilities and Stockholders' Equity (Deficit) Current Liabilities $3,367 $3,970 $ 7,337 Long-term Debt, net of current portion 388 -- 388 Other Long-term Liabilities 1,281 -- 1,281 Deferred Rent 242 -- 242 Stockholders' Equity (Deficit) (60) 1,554 1,494 ------ ------ ------- Total Liabilities and Stockholders' Equity $5,218 $5,524 $10,742 ====== ====== =======
The accompanying Notes are an integral part of these pro forma financial statements. 23 SCHEDULE B IRON MOUNTAIN INCORPORATED SCHEDULE OF PENDING AND COMPLETED ACQUISITIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 (In thousands) (Unaudited)
Pending Pending and Completed Acquisition Completed Acquisitions(1) (Mohawk) Acquisitions --------------- ----------- ------------ Revenues: Storage $4,210 $2,651 $ 6,861 Service and Storage Material Sales 2,454 2,086 4,540 ------ ------ ------- Total Revenues 6,664 4,737 11,401 Operating Expenses: Cost of Sales (Excluding Depreciation) 3,161 2,357 5,518 Selling, General and Administrative 2,840 1,614 4,454 Depreciation and Amortization 391 359 750 ------ ------ ------- Total Operating Expenses 6,392 4,330 10,722 ------ ------ ------- Operating Income (Loss) 272 407 679 Interest Expense 209 125 334 ------ ------ ------- Income before (Benefit) for Income Taxes 63 282 345 (Benefit) for Income Taxes (30) -- (30) ------ ------ ------- Net Income $ 93 $ 282 $ 375 ====== ====== ======= Other Data: EBITDA $ 663 $ 766 $ 1,429
- ----------- (1) Represents historical results of operations for each Completed Acquisition consummated in 1996 for the period in 1996 prior to acquisition by the Company. See "Overview" in the accompanying Notes. The accompanying Notes are an integral part of these pro forma financial statements. 24 SCHEDULE C IRON MOUNTAIN INCORPORATED SCHEDULE OF PENDING AND COMPLETED ACQUISITIONS FOR THE YEAR ENDED DECEMBER 31, 1995 (In thousands) (Unaudited)
Completed Acquisitions (1) ---------------------------------------------------------- Pending National Total Pending and Business Data Nashville Completed Acquisition Completed Archives Management Vault Other Acquisitions (Mohawk) Acquisitions -------- ---------- --------- ----- ------------ ----------- ------------ Revenues: Storage $ 758 $2,912 $ 636 $13,293 $17,599 $4,705 $22,304 Service and Storage Material Sales 471 2,308 739 7,284 10,802 4,095 14,897 ----- ------ ------ ------- ------- ------ ------- Total Revenues 1,229 5,220 1,375 20,577 28,401 8,800 37,201 Operating Expenses: Cost of Sales (Excluding Depreciation) 712 2,543 499 10,183 13,937 4,644 18,581 Selling, General and Administrative 89 1,418 327 6,936 8,770 2,834 11,604 Depreciation and Amortization 55 506 122 1,621 2,304 658 2,962 ----- ------ ------ ------- ------- ------ ------- Total Operating Expenses 856 4,467 948 18,740 25,011 8,136 33,147 ----- ------ ------ ------- ------- ------ ------- Operating Income 373 753 427 1,837 3,390 664 4,054 Interest Expense 14 494 61 976 1,545 269 1,814 ----- ------ ------ ------- ------- ------ ------- Income before Provision for Income Taxes 359 259 366 861 1,845 395 2,240 Provision for Income Taxes -- 87 -- 15 102 -- 102 ----- ------ ------ ------- ------- ------ ------- Net Income $ 359 $ 172 $ 366 $ 846 $ 1,743 $ 395 $ 2,138 ===== ====== ====== ======= ======= ====== ======= Other Data: EBITDA $ 428 $1,259 $ 549 $ 3,458 $ 5,694 $1,322 $ 7,016
- ------------ (1) Represents historical results of operations for each Completed Acquisition for the period in 1995 prior to acquisition by the Company. See "Overview" in the accompanying Notes. The accompanying Notes are an integral part of these pro forma financial statements. 25 IRON MOUNTAIN INCORPORATED NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Overview In March 1995, the Company acquired National Business Archives, Inc. ("NBA") for $15.7 million. In October 1995, the Company acquired DataFile Services, Inc. In December 1995, the Company acquired Data Management Business Records Storage, Inc. ("Data Management") for $14.5 million. In December 1995, the Company also acquired Brooks Records Center, Inc. In January 1996, the Company acquired Nashville Vault Company, Ltd. ("Nashville Vault") for $3.5 million. In January 1996, the Company also acquired Florida Data Bank, Inc. ("FDB"). In February 1996, the Company acquired DataVault Corporation. In March 1996, the Company acquired Data Storage Systems, Inc. In April 1996, the Company acquired Brambles CRC, Inc. ("CRC"). In May 1996, the Company acquired the records management business of Output Technologies Central Region, Inc. In July 1996, the Company acquired the records management business of The Fortress Corporation. In August 1996, the Company acquired Data Archive Services, Inc. and Data Archive Services of Miami, Inc. (collectively, "DAS") and DKA Industries, Inc. In September 1996, the Company acquired International Record Storage and Retrieval Service, Inc. and Security Archives Corporation. The results of operations of the Acquisitions which were consummated prior to June 30, 1996 are included in the results of operations of the Company from their respective dates of acquisition. The historical balance sheet of the Company at June 30, 1996 includes the acquisitions consummated prior to June 30, 1996. The aggregate purchase price of the foregoing acquisitions, excluding NBA, Data Management and Nashville Vault, was $46.4 million (not including contingent payments of up to $0.6 million based upon the achievement of certain revenue targets during 1996 and 1997). During September 1996, the Company entered into a definitive agreement to purchase Mohawk Business Record Storage, Inc. ("Mohawk") for $20.2 million (not including contingent payments of up to $4.0 million based upon the achievement of certain revenue targets during 1997 and 1998). The closing of the Pending Acquisition is subject to various conditions, and no assurance can be given that such acquisition will be completed. All of the Completed Acquisitions have been, and the Pending Acquisition, if consummated, will be, accounted for as purchases. The accompanying unaudited pro forma condensed consolidated financial statements reflect the following as though each had occurred on January 1, 1995: (i) the Initial Public Offering and the application of the net proceeds therefrom; (ii) the Offering and the application of the net proceeds therefrom; (iii) the closing of the New Credit Facility; and (iv) the Acquisitions. The Company will record, in the quarter in which the Offering is consummated, an extraordinary loss on retirement of debt, net of related tax benefit. As of June 30, 1996, the amount of such loss would have been approximately $2.2 million. While the extraordinary charge has been reflected in the accompanying pro forma balance sheet, the pro forma statements of operations do not give effect to such loss. Such loss consists of the write-off of deferred financing costs, original issue discount, prepayment penalty and loss on termination of interest rate protection agreements. Balance Sheet The aggregate consideration paid or to be paid for the Acquisitions is approximately $100.3 million in cash (not including up to $4.6 million of contingent payments based upon the achievement of certain revenue targets from 1996 through 1998). The excess of the purchase price over the book value of the net assets acquired for each of the Acquisitions has been allocated to tangible and intangible assets, based on the Company's estimate of the fair value of the net assets acquired. The allocations of the purchase price as illustrated below may change upon final appraisal of the fair value of the net assets acquired. 26
(In millions) Acquisitions Completed Prior to June 30, 1996: Book value of net assets acquired $11.6 Allocation of purchase price in excess of acquired assets: Property, Plant and Equipment (Fair Value Adjustment) 5.4 Other Long-term Assets (Covenants not to Compete) 2.8 Current Liabilities (Relocation and Other Reserves) (1.8) Deferred Rent (Unfavorable Lease Liability) (5.3) Goodwill 40.1 -- Purchase Price of Acquisitions Completed Prior to June 30, 1996 $ 52.8 Acquisitions Completed after June 30, 1996 and the Pending Acquisition: Book value of net assets acquired $ 9.2 Allocation of purchase price in excess of acquired assets: Property, Plant and Equipment (Fair Value Adjustment) 4.8 Other Long-term Assets (Covenants not to Compete) 0.2 Current Liabilities (Relocation and Other Reserves) (2.3) Deferred Rent (Unfavorable Lease Liability) (0.4) Goodwill 36.0 -- Purchase Price of Acquisitions Pending as of June 30, 1996 47.5 ------ Total Purchase Price of Acquisitions $100.3 ======
The Acquisitions completed prior to June 30, 1996 were financed with long-term debt and proceeds from the Initial Public Offering. The Acquisitions completed after June 30, 1996 and the Pending Acquisition are assumed to be financed with long-term debt. The Company will fund the purchase price of the Pending Acquisition with a portion of the net proceeds from the Offering and the New Credit Facility. See "Recent and Pending Acquisitions," "The Transactions" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The accompanying pro forma condensed consolidated balance sheet as of June 30, 1996 has been prepared as if the Transactions had all been completed as of June 30, 1996 and reflects the following adjustments: (A) The pro forma adjustments to Assets consist of the following:
Property, Other Current Plant and Long-term Assets Equipment Goodwill Assets ------- --------- -------- --------- (In millions) Acquisition Entries: Reverse assets of acquired companies not purchased $(0.6) $(0.2) $ -- $(0.5) Record estimated fair value of assets of acquired companies -- 4.5 -- -- Record increase in intangible assets equal to the excess of purchase price over fair value of net assets acquired -- -- 36.0 0.2 ----- ----- ----- ----- Total Acquisition Entries (0.6) 4.3 36.0 (0.3) ----- ----- ----- ----- Use of Proceeds Entries: Record deferred financing fees associated with the Notes and the New Credit Facility -- -- -- 6.3 Write-off of pre-existing deferred financing costs -- -- -- (2.0) Tax benefit associated with extraordinary charge related to early retirement of pre-existing debt 1.5 -- -- -- ----- ----- ----- ----- Total Use of Proceeds Entries 1.5 -- -- 4.3 ----- ----- ----- ----- Total Adjustments $ 0.9 $ 4.3 $36.0 $ 4.0 ===== ===== ===== =====
27 (B) The pro forma adjustments to Liabilities and Stockholders' Equity consist of the following:
Other Current Long-term Long-term Deferred Stockholders' Liabilities Debt Liabilities Rent Equity ----------- --------- ------------ --------- ------------- (In millions) Acquisition Entries: Reverse liabilities and equity not assumed in connection with Acquisitions closing after June 30, 1996 $(5.2) $ (0.4) $(1.2) $(0.2) $(1.5) Record unfavorable lease obligation -- -- -- 0.4 -- Record additional debt to finance Acquisitions closing after June 30, 1996 47.5 ----- ------ ----- ----- ----- Total Acquisition Entries (5.2) 47.1 (1.2) 0.2 (1.5) ----- ------ ----- ----- ----- Use of Proceeds Entries: Issuance of the Notes -- 150.0 -- -- -- Borrowings under New Credit Facility -- 13.7 -- -- -- Prepayment of Credit Agreement, Chrysler Notes and FDS Notes (3.0) (105.1) -- -- -- Use of proceeds to repay debt issued to finance Acquisitions closing after June 30, 1996 -- (47.5) -- -- -- Extraordinary charge, net of tax benefit, related to early retirement of pre-existing debt -- -- -- -- (2.2) ----- ------ ----- ----- ----- Total Use of Proceeds Entries (3.0) 11.1 -- -- (2.2) ----- ------ ----- ----- ----- Total Adjustments $(8.2) $ 58.2 $(1.2) $ 0.2 $(3.7) ===== ====== ===== ===== =====
Statements of Operations All of the Acquisitions, except Data Management, FDB, CRC and DAS, have a December 31 fiscal year end. Data Management's and CRC's fiscal year end is June 30, DAS's fiscal year end is May 31 and FDB's fiscal year end is August 31. Accordingly, Data Management's, CRC's, DAS's and FDB's results of operations were calendarized to the twelve months ended December 31, 1995 and the six months ended June 30, 1996. The accompanying pro forma condensed consolidated statements of operations for the year ended December 31, 1995 and for the six months ended June 30, 1996 have been prepared as if the Transactions and the Initial Public Offering had occurred on January 1, 1995 and reflect the following adjustments: (C) A pro forma adjustment has been made to eliminate a $0.7 million non-recurring gain on the sale of property and equipment by Data Management in the year ended December 31, 1995. (D) Pro forma adjustments for the six months ended June 30, 1996 and for the year ended December 31, 1995 have been made to reduce cost of sales by $0.3 million and $1.1 million, respectively, to eliminate specific expenses that would not have been incurred had the Acquisitions occurred at the beginning of 1995. Such cost savings relate to (i) the termination of certain employees due to the integration and consolidation of certain Acquisitions and (ii) a reduction in warehouse rent expense related to facilities the Company will vacate upon completion of certain Acquisitions. (E) Pro forma adjustments for the six months ended June 30, 1996 and for the year ended December 31, 1995 have been made to reduce selling, general and administrative expenses by $1.2 million and $2.6 million, respectively, to eliminate specific expenses that would not have been incurred had the Acquisitions occurred as of January 1, 1995. Such cost savings relate to (i) the termination of certain employees due to the integration and consolidation of certain Acquisitions and (ii) the elimination of related party expenses and management fees in excess of amounts that would have been incurred by the Company for the services rendered. Additional cost savings 28 that the Company expects to realize through integration of the Acquisitions into the Company's operations have not been reflected herein. (F) A pro forma adjustment has been made to reflect additional depreciation and amortization expense on the fair value of the assets acquired and goodwill. Property and equipment are depreciated over three to 50 years, goodwill is amortized over 25 years and covenants not-to-compete are amortized over two to five years on a straight-line basis. Such depreciation and amortization may change upon final appraisal of the fair market value of the net assets acquired. (G) The pro forma adjustments to interest expense consist of the following:
June 30, December 31, 1996 1995 ---------- ------------ (In millions) Acquisition Entries: Reverse interest expense on debt not assumed in connection with Acquisitions $(0.3) $ (1.8) Record interest expense due to assumption of unfavorable lease liabilities in connection with the NBA and Mohawk acquisitions 0.1 0.1 Use of Proceeds Entries: Reverse interest expense on pre-existing debt of the Company retired with proceeds of the Offering (5.7) (10.3) Record interest expense from issuance of the Notes at an assumed interest rate of 10-1/2%, plus amortization of deferred financing costs 8.1 16.2 Record interest expense at an assumed interest rate of 7.85%, plus amortization of deferred financing fees associated with the New Credit Facility 0.8 1.6 ----- ------ Total Adjustments $ 3.0 $ 5.8 ===== ======
A 1/4% increase (or decrease) in the assumed 10-1/2% interest rate with respect to the Notes would increase (or decrease) annual interest expense with respect to the Notes by $375,000. A 1/8% increase (decrease) in the interest rate with respect to the New Credit Facility would increase (decrease) annual interest expense with respect to the assumed borrowings under the New Credit Facility by approximately $17,000. (H) A pro forma adjustment has been made to adjust the provision for income taxes to a 40% rate on pro forma income before nondeductible goodwill amortization and other nondeductible expenses. (I) Pro forma adjustments of $0.3 million and $2.1 million for the periods ended June 30, 1996 and December 31, 1995, respectively, have been made to eliminate the accretion of a redeemable put warrant. (J) A pro forma adjustment has been made to adjust the pro forma weighted average common and common equivalent shares outstanding as if the Initial Public Offering had occurred on January 1, 1995. 29 SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION (In thousands, except per share amounts and Carton data) The following selected consolidated statements of operations and balance sheet data of the Company as of and for each of the years ended December 31, 1991, 1992, 1993, 1994 and 1995 have been derived from the Company's audited consolidated financial statements. The selected consolidated statements of operations and balance sheet data of the Company for the six months ended June 30, 1995 and 1996 have been derived from the Company's unaudited condensed consolidated financial statements. The Company's unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, that the Company considers necessary for a fair presentation of the financial position and the results of operations for those periods. Operating results for the six months ended June 30, 1996 are not necessarily indicative of the results for the entire year ending December 31, 1996. The selected consolidated financial and operating information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and with Iron Mountain's Consolidated Financial Statements and the Notes thereto included elsewhere in this Prospectus.
Six Months Ended Year Ended December 31, June 30, --------------------------------------------------- ------------------ 1991 1992 1993 1994 1995 1995 1996 ------- ------ ------ --------- ------- ------ -------- Consolidated Statements of Operations Data: Revenues: Storage $39,510 $44,077 $48,892 $54,098 $ 64,165 $30,748 $39,363 Service and Storage Material Sales 23,330 26,596 32,781 33,520 40,271 19,476 24,587 ------ ----- ----- --------- ------ ----- ------- Total Revenues 62,840 70,673 81,673 87,618 104,436 50,224 63,950 Operating Expenses: Cost of Sales (Excluding Depreciation) 31,375 35,169 43,054 45,880 52,277 25,112 32,383 Selling, General and Administrative 16,471 17,630 19,971 20,853 26,035 12,697 16,067 Depreciation and Amortization 7,674 5,780 6,789 8,690 12,341 5,428 7,530 ------ ----- ----- --------- ------ ----- ------- Total Operating Expenses 55,520 58,579 69,814 75,423 90,653 43,237 55,980 ------ ----- ----- --------- ------ ----- ------- Operating Income 7,320 12,094 11,859 12,195 13,783 6,987 7,970 Interest Expense 8,612 8,412 8,203 8,954 11,838 5,936 6,385 Income (Loss) before Provision for Income Taxes (1,292) 3,682 3,656 3,241 1,945 1,051 1,585 Provision for Income Taxes 105 2,095 2,088 1,957 1,697 631 888 ------ ----- ----- --------- ------ ----- ------- Net Income (Loss) (1,397) 1,587 1,568 1,284 248 420 697 Accretion of Redeemable Put Warrant 417 626 940 1,412 2,107 953 280 ------ ----- ----- --------- ------ ----- ------- Net Income (Loss) Applicable to Common Stockholders $(1,814) $ 961 $ 628 $ (128) $ (1,859) $ (533) $ 417 ====== ===== ===== ========= ====== ===== ======= Net Income (Loss) per Common and Common Equivalent Share $ (0.23) $ 0.12 $ 0.08 $ (0.02) $ (0.24) $ (0.07) $ 0.04 Weighted Average Common and Common Equivalent Shares Outstanding 8,038 8,052 8,067 7,984 7,784 7,790 9,899 Other Data: EBITDA (1) $14,994 $17,874 $18,648 $20,885 $ 26,124 $12,415 $15,500 EBITDA as a Percentage of Total Revenues 23.9% 25.3% 22.8% 23.8% 25.0% 24.7% 24.2% Capital Expenditures: Growth (2) -- $11,226 $13,605 $15,829(3) $ 14,395 $ 6,730 $10,702 Maintenance -- 818 1,846 1,151 858 592 460 ------ ----- ----- --------- ------ ----- ------- Total Capital Expenditures $ 8,163 $12,044 $15,451 $16,980(3) $ 15,253 $ 7,322 $11,162 Additions to Customer Acquisition Costs $ -- $ 1,268 $ 922 $ 1,366 $ 1,379 $ 418 $ 717 Approximate Cartons in Storage at End of Period (in millions) (4) 10.8 12.6 15.5 17.7 23.3 20.3 26.4 Ratio of Earnings to Fixed Charges (5) 0.9x 1.3x 1.3x 1.2x 1.1x 1.1x 1.2x
(Footnotes on the following page) 30
As of December 31, ---------------------------------------------- As of June 30, 1991 1992 1993 1994 1995 1996 ------ ------ ------ ------ ------ -------- Balance Sheet Data: Cash and Cash Equivalents $ 407 $ 498 $ 591 $ 1,303 $ 1,585 $ 2,232 Total Assets 107,874 115,429 125,288 136,859 186,881 212,630 Total Debt 68,229 73,304 78,460 86,258 121,874 118,894 Stockholders' Equity 22,291 23,419 24,047 22,869 21,011 54,729
- -------------- (Footnotes from the preceding page) (1) Earnings before interest, taxes, depreciation, amortization and extraordinary charges ("EBITDA"). Based on its experience in the records management industry, the Company believes that EBITDA is an important tool for measuring the performance of records management companies (including potential acquisition targets) in several areas, such as liquidity, operating performance and leverage. In addition, lenders use EBITDA as a criterion in evaluating records management companies, and substantially all of the Company's financing agreements contain covenants in which EBITDA is used as a measure of financial performance. However, EBITDA should not be considered an alternative to operating or net income (as determined in accordance with GAAP) as an indicator of the Company's performance or to cash flow from operations (as determined in accordance with GAAP) as a measure of liquidity. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview" and "--Liquidity and Capital Resources" for discussions of other measures of performance determined in accordance with GAAP and the Company's sources and applications of cash flow. (2) Growth capital expenditures include investment in racking systems, new buildings and leasehold improvements, equipment for new facilities, management information systems and facilities restructuring. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources--Capital Investments." (3) Includes $2,901 related to the cost of constructing a records management facility which was sold in a sale and leaseback transaction in the fourth quarter of 1994. (4) The term "Carton" is defined as a measurement of the volume equal to a single standard storage carton, approximately 1.2 cubic feet. The number of Cartons stored does not include storage volumes in the Company's vital records services and data protection services which are described under "Business." (5) The pro forma ratio of earnings to fixed charges, giving effect to the Transactions as if each had occurred as of January 1, 1995, would have been 0.9x for the year ended December 31, 1995 and 0.9x for the six months ended June 30, 1996. For the year ended December 31, 1995 and the six months ended June 30, 1996, the Company would have needed to generate additional income from continuing operations, before provision for income taxes, of $1,576 and $358 to cover its pro forma fixed charges of $26,162 and $13,272, respectively. The ratio of earnings to fixed charges was 0.9x for the fiscal year ended December 31, 1991. For such period, the Company would have needed to generate additional income from continuing operations, before provision for income taxes, of $1,292 to cover its fixed charges of $11,689. 31 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Selected Consolidated Financial and Operating Information and Iron Mountain's Consolidated Financial Statements and the Notes thereto and the other financial and operating information included elsewhere in this Prospectus. This Prospectus contains, in addition to historical information, forward-looking statements that include risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include those discussed below, as well as those discussed elsewhere in this Prospectus. The Company undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Overview The Company's primary financial objective is to increase its EBITDA, which is a source of funds to service indebtedness and for investment in continued internal growth and growth through acquisitions. The Company has benefited from growth in EBITDA, which has increased from $17.9 million in 1992 to $26.1 million in 1995 (a CAGR of 13.5%), but other measures of the Company's financial performance, such as net income and net income applicable to common stockholders, have been negatively affected by this objective. In 1994 and 1995, the Company experienced net losses applicable to common stockholders. Such net losses are attributable in part to significant increases in non-cash charges associated with the Company's pursuit of its growth strategy, namely, (i) increases in depreciation and amortization expenses associated with expansion of the Company's storage capacity and the acquisition of certain large volume accounts and (ii) increases in goodwill amortization associated with acquisitions accounted for under the purchase method. In addition, net income available to common stockholders has been negatively affected by a non-cash charge for accretion of a redeemable put warrant, which was redeemed upon completion of the Company's Initial Public Offering. See Note 5 of Notes to the Company's Audited Consolidated Financial Statements. Iron Mountain's revenues consist of storage revenues and service and storage material sales revenues. Storage revenues are derived from charges for storing records (either on a per unit or a per cubic foot of records basis), and have accounted for approximately 60% of total revenues in each of the last three years and for the six months ended June 30, 1996. Service and storage material sales revenues are derived primarily from the Company's courier operations (consisting primarily of the pickup and delivery of records upon customer request), additions of new Cartons, temporary removal of records from storage, refiling of removed records, destructions of records, permanent withdrawals from storage and sales of specially designed storage containers and related supplies. Customers are generally billed on a monthly basis on contractually agreed-upon terms. While the Company's total revenues have increased from $70.7 million in 1992 to $104.4 million in 1995, average revenue on a per Carton basis has declined over this period. The year-over-year declines in average revenue per Carton for 1993, 1994 and 1995 were approximately 8%, 7% and 2%, respectively. Such declines were attributable to: (i) increases in sales to large volume accounts, which typically generate lower revenue per Carton (in particular the Resolution Trust Corporation (the "RTC") account, which incorporated substantial volume discounts, although such discounts were offset by revenues from special service projects during 1993 and 1994); (ii) a facilities management arrangement with a large volume account under which, prior to July 1996, the Company managed the customer's records management facility and, therefore, the charges to the customer prior to July 1996 did not include a rent component; and (iii) industry-wide pricing pressures. Despite this decline, the Company has been able to maintain its EBITDA margins through increased overall operating efficiencies and economies of scale as well as specific efficiencies realized in the servicing of large volume accounts. For 1992, 1993, 1994, 1995 and the six months ended June 30, 1996, EBITDA margins were 25.3%, 22.8%, 23.8%, 25.0% and 24.2%, respectively. Pursuant to its 1992 contract with the RTC, the Company participated in the consolidation and centralization of a large number of records on behalf of the RTC. This activity, which entailed extensive services and the Company's start-up of operations in two new markets, resulted in a significant increase in service and storage material sales revenues in 1993. After the labor-intensive process of assembling and inventorying the records was substantially completed in 1994, the revenue from RTC service and storage material sales began to decrease, which decrease was partially offset by increases in storage revenues due to an increase in Cartons stored. The contract 32 has been renewed effective July 27, 1996 for a one-year term by the Federal Deposit Insurance Corporation (the "FDIC"), as successor in interest to the RTC, and may be renewed at the option of the FDIC for three further terms of one year each. Although the substantial costs of removing its records from the Company's facilities may act as a disincentive to the FDIC to select another vendor, there can be no assurance that this contract will be further renewed or that the terms of any such renewal will be as favorable to Iron Mountain as the terms of the current contract. Cost of sales consists primarily of wages and benefits, facility occupancy costs, vehicle and other equipment costs and supplies. Of these, the most significant are wages and benefits and facility occupancy costs. Over the past several years, Iron Mountain has been able to reduce per Carton storage costs by: (i) designing racking systems and operating space to maximize facility storage efficiency; (ii) negotiating favorable facility leases and having facilities built to its custom specifications; and (iii) leasing larger facilities, which, when filled, are less expensive per Carton to operate. Selling, general and administrative expenses consist primarily of management, administrative, sales and marketing wages and benefits, and also include travel, communications, professional fees, bad debts, training, office equipment and supplies expenses. The Company's depreciation and amortization charges result primarily from the capital-intensive nature of the records management industry and the acquisitions the Company has completed. The principal components of depreciation relate to racking systems and related equipment, new buildings and leasehold improvements, equipment for new facilities and computer system software and hardware. Amortization primarily relates to goodwill and noncompetition agreements arising from acquisitions and customer acquisition costs. The Company has accounted for all of its acquisitions under the purchase method. Since the purchase price for records management companies is usually substantially in excess of the book values of their assets, these purchases have given rise to significant goodwill and, accordingly, significant levels of amortization. Although amortization is a non-cash charge, it does decrease reported net income. Accordingly, the faster the Company expands by making such acquisitions, the more likely it will be to incur amortization charges, reducing net income. In February 1996, the Company received net proceeds of $33.3 million from its Initial Public Offering. The Company used $6.6 million of such net proceeds to repurchase a warrant to acquire 444,385 shares of Common Stock (the "Warrant"). For financial reporting purposes, the Company was required to record a non-cash charge (based on the estimated redemption value calculated using the effective interest rate method), resulting in substantial charges to net income applicable to common stockholders over the period the Warrant was outstanding. See Note 5 of Notes to the Company's Audited Consolidated Financial Statements. The remaining net proceeds were used by the Company to fund acquisitions (including Completed Acquisitions consummated after the closing of the Initial Public Offering), to repay indebtedness used to fund acquisitions and for working capital. In December 1995, the Company decided to consolidate its corporate accounting activities by transferring to Boston, Massachusetts those accounting activities previously performed in Los Angeles, California. As a result of such transfer, the Company recorded charges of $0.5 million and $0.3 million in the fourth quarter of 1995 and the first six months of 1996, respectively. Forward-Looking Statements Regarding Revenues One of the Company's goals is to achieve revenue growth of five to 10 percent per year from its existing business through the end of 1997. In addition, over the same period, the Company's goal is to achieve revenue growth of between 10 to 15 percent per year as a result of acquisitions. There can be no assurance that the Company will be able to meet these goals. See "Risk Factors." 33 Results of Operations The following table sets forth, for the periods indicated, information derived from the Company's consolidated statements of operations, expressed as a percentage of revenue. There can be no assurance that the trends in revenue growth or operating results shown below will continue in the future.
Six Months Year Ended December 31, Ended June 30, ----------------------- -------------- 1993 1994 1995 1995 1996 ----- ----- ----- ---- ------ Revenues: Storage 59.9% 61.7% 61.4% 61.2% 61.6% Service and Storage Material Sales 40.1 38.3 38.6 38.8 38.4 ----- ----- ----- ----- ----- Total Revenues 100.0 100.0 100.0 100.0 100.0 ----- ----- ----- ----- ----- Operating Expenses: Cost of Sales (Excluding Depreciation) 52.7 52.4 50.1 50.0 50.6 Selling, General and Administrative 24.5 23.8 24.9 25.3 25.1 Depreciation and Amortization 8.3 9.9 11.8 10.8 11.8 ----- ----- ----- ----- ----- Total Operating Expenses 85.5 86.1 86.8 86.1 87.5 ----- ----- ----- ----- ----- Operating Income 14.5 13.9 13.2 13.9 12.5 Interest Expense 10.0 10.2 11.3 11.8 10.0 ----- ----- ----- ----- ----- Income before Provision for Income Taxes 4.5 3.7 1.9 2.1 2.5 Provision for Income Taxes 2.6 2.2 1.7 1.3 1.4 ----- ----- ----- ----- ----- Net Income 1.9% 1.5% 0.2% 0.8% 1.1% ===== ===== ===== ===== ===== EBITDA 22.8% 23.8% 25.0% 24.7% 24.2%
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995 Storage revenues increased from $30.7 million for the first six months of 1995 to $39.4 million for the first six months of 1996, an increase of $8.7 million or 28.0%. Ten acquisitions completed by the Company in 1995 and the first six months of 1996 accounted for $5.5 million or 63.7% of such increase. The balance of the storage revenues growth resulted primarily from net increases in Cartons stored by existing customers and from sales to new customers. Service and storage material sales revenues increased from $19.5 million for the first six months of 1995 to $24.6 million for the first six months of 1996, an increase of $5.1 million or 26.2%. Acquisitions accounted for $3.4 million or 66.2% of such increase. The balance of such increase resulted from increases in service and storage material sales to existing customers and the addition of new customer accounts. For the reasons discussed above, total revenues increased from $50.2 million for the first six months of 1995 to $64.0 million for the first six months of 1996, an increase of $13.8 million or 27.3%. Of such increase, $8.9 million or 64.6% was attributable to acquisitions completed by the Company in 1995 and the first six months of 1996. Cost of sales (excluding depreciation) increased from $25.1 million for the first six months of 1995 to $32.4 million for the first six months of 1996, an increase of $7.3 million or 29.0%, and increased as a percentage of revenues from 50.0% for the first six months of 1995 to 50.6% for the first six months of 1996. The increase was primarily attributable to the increase in Cartons stored, increased expenses related to the severe winter weather on the Atlantic coast during the first quarter of 1996 and expenses related to certain facility relocations. Selling, general and administrative expenses increased from $12.7 million for the first six months of 1995 to $16.1 million for the first six months of 1996, an increase of $3.4 million or 26.5%, and decreased as a percentage of revenues from 25.3% for the first six months of 1995 to 25.1% for the first six months of 1996. The $3.4 million increase was primarily attributable to the costs associated with becoming a public company, with accelerated acquisition activity, including certain redundant transitional expenses as new acquisitions were integrated into the Company, and the addition of personnel needed to support the Company's growth. Additionally, the selling, general 34 and administrative expenses of acquired companies tend to be higher than Iron Mountain's, and cost reductions and other possible synergies are not realized immediately. Depreciation and amortization expense increased from $5.4 million for the first six months of 1995 to $7.5 million for the first six months of 1996, an increase of $2.1 million or 38.7%, and increased as a percentage of revenues from 10.8% for the first six months of 1995 to 11.8% for the first six months of 1996. The increase was primarily attributable to the additional depreciation and amortization expense related to the aforementioned acquisitions, capital expenditures, including racking systems, information systems and improvements to existing facilities, and additions to customer acquisition costs. As a result of the foregoing factors, operating income increased from $7.0 million for the first six months of 1995 to $8.0 million for the first six months of 1996, an increase of $1.0 million or 14.1%. As a percentage of revenues, operating income decreased from 13.9% for the first six months of 1995 to 12.5% for the first six months of 1996. Interest expense increased from $5.9 million for the first six months of 1995 to $6.4 million for the first six months of 1996, an increase of $0.5 million or 7.6%. The increase was primarily attributable to increased indebtedness to finance acquisitions and capital expenditures. The decrease in interest expense as a percentage of revenues was primarily attributable to a net decrease in interest rates. As a result of the foregoing factors, income before provision for income taxes increased from $1.1 million (2.1% of revenues) for the first six months of 1995 to $1.6 million (2.5% of revenues) in the first six months of 1996, an increase of $0.5 million or 50.8%. Provision for income taxes increased from $0.6 million (1.3% of revenues) for the first six months of 1995 to $0.9 million (1.4% of revenues) for the first six months of 1996. The Company's effective tax rate is higher than statutory rates primarily due to the amortization of the nondeductible portion of goodwill associated with acquisitions made prior to the change in tax laws which now generally permit deduction of such expenses. Net income increased from $0.4 million (0.8% of revenues) for the first six months of 1995 to $0.7 million (1.1% of revenues) for the first six months of 1996, an increase of $0.3 million, or 66.0%. Net income (loss) applicable to common stockholders was a $0.5 million net loss (1.1% of revenues), after accretion of $0.9 million related to the Warrant, for the first six months of 1995 compared to net income of $0.4 million (0.7% of revenues), after accretion of $0.3 million related to the Warrant, for the first six months of 1996. The Warrant was redeemed in full in February 1996, with a portion of the proceeds from the Initial Public Offering. As a result of such redemption, there will be no future charges for such accretion. As a result of the foregoing factors, EBITDA increased from $12.4 million for the first six months of 1995 to $15.5 million for the first six months of 1996, an increase of $3.1 million, or 24.8%. As a percentage of revenues, EBITDA decreased from 24.7% for the first six months of 1995 to 24.2% for the first six months of 1996. Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 Storage revenues increased from $54.1 million in 1994 to $64.2 million in 1995, an increase of $10.1 million or 18.6%. Seven acquisitions completed between June 1994 and December 1995 accounted for $5.7 million or 56.7% of such increase. The balance of the storage revenues growth resulted primarily from net increases in Cartons stored by existing customers and from sales to new customers. Service and storage material sales revenues increased from $33.5 million in 1994 to $40.3 million in 1995, an increase of $6.8 million or 20.1%. This increase was accomplished despite a decrease of approximately $0.8 million in such revenues received from the RTC, which decrease was primarily due to a reduction in revenues from special service projects. Acquisitions accounted for $4.3 million or approximately 63.5% of such increase. The balance of such increase resulted from increases in service and storage material sales to existing customers and the addition of new customer accounts. For the reasons discussed above, total revenues increased from $87.6 million in 1994 to $104.4 million in 1995, an increase of $16.8 million or 19.2%. Of such increase, $10.0 million or 59.4% was attributable to acquisitions made by the Company between June 1994 and December 1995. The monthly average Cartons stored increased approximately 22% in 1995 as compared to 1994, from approximately 16.7 million Cartons to approximately 20.4 million Cartons. The percentage increase was greater than that of total revenues primarily for the reason described in the third paragraph under "Overview" above. 35 Cost of sales (excluding depreciation) increased from $45.9 million in 1994 to $52.3 million in 1995, an increase of $6.4 million or 13.9%, and decreased as a percentage of revenues from 52.4% in 1994 to 50.1% in 1995. The $6.4 million increase resulted primarily from an increase in Cartons stored. The decrease as a percentage of revenues was due primarily to increased storage efficiencies resulting from relocations to, or additions of, newer, higher density facilities as well as increased utilization of storage capacity. Selling, general and administrative expenses increased from $20.9 million in 1994 to $26.0 million in 1995, an increase of $5.1 million or 24.9%, and increased as a percentage of revenues from 23.8% in 1994 to 24.9% in 1995. The $5.1 million increase was due primarily to increases in field management and administrative staffing, including increases due to acquisitions. Of the 1.1% increase as a percentage of revenues, $0.6 million (0.6% of revenues) resulted from a provision for a judgment in a lawsuit relating to a 1992 incident and a $0.5 million (0.5% of revenues) charge for the relocation of the corporate accounting function from Los Angeles to Boston. Depreciation and amortization expenses increased from $8.7 million in 1994 to $12.3 million in 1995, an increase of $3.6 million or 42.0%, and increased as a percentage of revenues from 9.9% in 1994 to 11.8% in 1995. Depreciation and amortization expenses, both in absolute dollars and as a percentage of revenues, continued to increase, primarily as a result of the Company's acquisitions and growth-related capital investments for racking systems, improvements to records management facilities, information systems and customer acquisition costs. Amortization during 1995 included a one-time charge of $0.9 million (0.9% of revenues) in connection with the write-down of the goodwill of a subsidiary due to the Company's decision to sell such subsidiary at an estimated price which is $0.9 million less than such subsidiary's book value and related goodwill. The Company subsequently decided not to sell such subsidiary. As a result of the foregoing factors, operating income increased from $12.2 million in 1994 to $13.8 million in 1995, an increase of $1.6 million or 13.0%, and decreased as a percentage of revenues from 13.9% to 13.2%. Interest expense increased from $9.0 million in 1994 to $11.8 million in 1995. This increase was due primarily to increased levels of indebtedness primarily to finance acquisitions, as well as higher interest rates and higher deferred financing charges. As a result of the foregoing factors, income before provision for income taxes decreased from $3.2 million (3.7% of revenues) in 1994 to $1.9 million (1.9% of revenues) in 1995, a decrease of $1.3 million or 40.0%. Provision for income taxes decreased from $2.0 million (2.2% of revenues) to $1.7 million (1.7% of revenues). The Company's effective tax rates for 1994 and 1995 were higher than statutory rates primarily due to $1.5 million and $2.5 million, respectively, of amortization of nondeductible goodwill. Net income decreased $1.1 million from $1.3 million (1.5% of revenues) in 1994 to $0.2 million (0.2% of revenues) in 1995 as a result of the factors outlined above. As a result of the foregoing factors, EBITDA increased from $20.9 million in 1994 to $26.1 million in 1995, an increase of $5.2 million or 25.1%, and increased as a percentage of revenues from 23.8% to 25.0%. These increases reflect continuing economies of scale and increased operating efficiencies, which were partially offset by the $0.6 million (0.6% of revenues) reserve relating to the judgment in the lawsuit referred to above and by the $0.5 million (0.5% of revenues) charge for the relocation of the corporate accounting function from Los Angeles to Boston. Year Ended December 31, 1994 Compared to Year Ended December 31, 1993 Storage revenues increased from $48.9 million in 1993 to $54.1 million in 1994, an increase of $5.2 million or 10.6%. The substantial majority of the storage revenues growth resulted from sales to new customers and increases in Cartons stored from existing customers. Three acquisitions completed between June and October 1994 accounted for only $0.8 million of the increase. Service and storage material sales revenues increased from $32.8 million in 1993 to $33.5 million in 1994, an increase of $0.7 million or 2.3%. This increase was due primarily to an increase in services provided to existing and new customers, which was partially offset by a $0.9 million decrease in such revenues received from the RTC primarily due to a reduction in revenues from special service projects. For the reasons discussed above, total revenues increased from $81.7 million in 1993 to $87.6 million in 1994, an increase of $5.9 million or 7.3%. The monthly average Cartons stored increased from approximately 14.5 million 36 in 1993 to approximately 16.7 million in 1994, an increase of approximately 15%. The percentage increase in Cartons stored was greater than that of total revenues for the reasons discussed in the third paragraph under "Overview" above. Cost of sales (excluding depreciation) increased from $43.1 million in 1993 to $45.9 million in 1994, an increase of $2.8 million or 6.6%, and decreased as a percentage of revenues from 52.7% in 1993 to 52.4% in 1994. The $2.8 million increase was due primarily to increases in storage capacity. The decrease as a percentage of revenues was due primarily to increased storage efficiencies. Selling, general and administrative expenses increased from $20.0 million in 1993 to $20.9 million in 1994, an increase of $0.9 million or 4.4%, and decreased as a percentage of revenues from 24.5% in 1993 to 23.8% in 1994. The increase in such expenses was due primarily to inflationary increases in wages and benefits, partially offset by a $0.2 million decrease in bad debt expense. The decrease as a percentage of revenues was due to operating efficiencies and the decrease of 0.3% in bad debt expense. Depreciation and amortization expenses increased from $6.8 million in 1993 to $8.7 million in 1994, an increase of $1.9 million or 28.0%, and increased as a percentage of revenues from 8.3% in 1993 to 9.9% in 1994. This increase, both in dollars and as a percentage of revenues, was due primarily to an increase in depreciation charges resulting from capital expenditures for racking systems and improvements to records management facilities and information systems. As a result of the foregoing factors, operating income increased from $11.9 million in 1993 to $12.2 million in 1994, an increase of $0.3 million or 2.8%, and decreased from 14.5% of revenues to 13.9% of revenues. Interest expense increased from $8.2 million in 1993 to $9.0 million in 1994, an increase of $0.8 million or 9.2%, due primarily to increased levels of indebtedness. As a result of the foregoing factors, income before provision for income taxes decreased from $3.7 million in 1993 (4.5% of revenues) to $3.2 million in 1994 (3.7% of revenues), a decrease of $0.5 million or 11.4%. Provision for income taxes decreased from $2.1 million in 1993 (2.6% of revenues) to $2.0 million in 1994 (2.2% of revenues). The Company's effective tax rates for financial reporting purposes for 1994 and 1993 exceeded statutory tax rates primarily because of $1.5 million of amortization of nondeductible goodwill in each year. Net income decreased from $1.6 million (1.9% of revenues) to $1.3 million (1.5% of revenues) as a result of the factors outlined above. As a result of the foregoing factors, EBITDA increased from $18.6 million in 1993 to $20.9 million in 1994, an increase of $2.3 million or 12.0%, and increased as a percentage of revenues from 22.8% to 23.8%. The increase as a percentage of revenues reflected economies of scale and increased operating efficiencies. 37 Recent Quarterly Financial Data The following table sets forth certain consolidated statements of operations data of the Company for the quarterly periods shown. The unaudited quarterly information has been prepared on the same basis as the annual financial information and, in management's opinion, includes all adjustments (consisting of normal recurring accruals) necessary to present fairly the information for the quarters presented. The operating results for any quarter are not necessarily indicative of results for the year or for any future period.
Three Months Ended ----------------------------------------------------------------------------------------- 1994 1995 ------------------------------------------ ------------------------------------------- Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 ------- ------- -------- ------- ------- ------- -------- ------- (In thousands) Revenues: Storage $12,863 $13,220 $13,855 $14,160 $14,882 $15,866 $16,246 $17,171 Service and Storage Material Sales 8,452 8,489 8,171 8,408 9,456 10,020 10,324 10,471 ------- ------- ------- ------- ------- ------- ------- ------- Total Revenues 21,315 21,709 22,026 22,568 24,338 25,886 26,570 27,642 Operating Expenses: Cost of Sales (Excluding Depreciation) 11,429 11,325 11,509 11,617 12,224 12,888 12,888 14,277 Selling, General and Administrative 5,146 5,113 5,329 5,265 5,849 6,848(2) 6,358 6,980(4) Depreciation and Amortization 1,845 1,936 2,526(1) 2,383 2,752 2,676 3,775(3) 3,138 ------- ------- ------- ------- ------- ------- ------- ------- Total Operating Expenses 18,420 18,374 19,364 19,265 20,825 22,412 23,021 24,395 ------- ------- ------- ------- ------- ------- ------- ------- Operating Income $ 2,895 $ 3,335 $ 2,662 $ 3,303 $ 3,513 $ 3,474 $ 3,549 $ 3,247 ======= ======= ======= ======= ======= ======= ======= ======= EBITDA $ 4,740 $ 5,271 $ 5,188 $ 5,686 $ 6,265 $ 6,150(2) $ 7,324 $ 6,385(4)
1996 ----------------------- Mar. 31 June 30 -------- ------- Revenues: Storage $19,154 $20,209 Service and Storage Material Sales 11,874 12,713 ------- ------- Total Revenues 31,028 32,922 Operating Expenses: Cost of Sales (Excluding Depreciation) 15,668 16,715 Selling, General and Administrative 7,807 8,260(5) Depreciation and Amortization 3,608 3,922 ------- ------- Total Operating Expenses 27,083 28,897 ------- ------- Operating Income $ 3,945 $ 4,025 ======= ======= EBITDA $ 7,553 $ 7,947(5)
- ------------ (1) Includes a $277 write-down relating to the closing of two facilities. (2) Includes a $600 reserve for litigation. (3) Includes a $900 write-down of the goodwill of a subsidiary as described in "Results of Operations." (4) Includes a charge of $500 relating to the relocation of the Company's corporate accounting function. (5) Includes a charge of $321 relating to the relocation of the Company's corporate accounting function. Liquidity and Capital Resources In February 1996, the Company raised $33.3 million, net of underwriters' discounts and commissions and associated costs, in the Initial Public Offering. The net proceeds from the Initial Public Offering were used to retire the Warrant, to fund acquisitions, to repay debt that had been incurred to make acquisitions and for working capital. As the Company has sought to increase its EBITDA, it has made significant capital investments, consisting primarily of acquisitions; growth-related capital expenditures, including racking systems, information systems and improvements to existing facilities; and customer acquisition costs. Cash paid for these investments during the first six months of 1996 amounted to $19.2 million, $11.2 million and $0.7 million, respectively. These investments have been primarily funded through a portion of the net proceeds of the Initial Public Offering, cash flows from operations and borrowings under the Credit Agreement. Stockholders' equity has been negatively affected primarily by the accretion of the Warrant, interest expense, depreciation and amortization expenses associated with expansion of the Company's storage capacity and the acquisition of certain large volume accounts, and amortization of goodwill. In part as a result of the Initial Public Offering, the Company's ratio of total debt to stockholders' equity decreased from 3.1-to-1 at December 31, 1992 to 2.2-to-1 at June 30, 1996. On a pro forma basis (after giving effect to the Transactions), the ratio of total debt to stockholders' equity at June 30, 1996 would have been 3.3-to-1. The Company currently intends to apply a portion of the net proceeds from the Offering to the prepayment of the Credit Agreement, the Chrysler Notes and the FDS Notes. The Company will record, in the quarter in which 38 the Offering is consummated, an extraordinary loss on retirement of debt, net of related tax benefit. Assuming the Transactions were to be consummated on September 30, 1996, the amount of such loss would be approximately $2.0 million. Such loss will consist of the write-down of deferred financing costs, original issue discount, prepayment penalty and loss on possible termination of certain interest rate protection agreements. Capital Investments For 1994, 1995 and the six months ended June 30, 1996, the Company's growth-related capital expenditures were $15.8 million, $14.4 million and $10.7 million, respectively. Included in capital expenditures for 1994 is $2.9 million for the construction of a records management facility which was sold in a sale and leaseback transaction. Growth-related capital expenditures consist primarily of investment in racking systems, new building and leasehold improvements, equipment for new facilities, management information systems and facilities restructuring. For 1994, 1995 and the six months ended June 30, 1996, the Company's maintenance capital expenditures were $1.2 million, $0.9 million and $0.5 million, respectively. In addition, the Company incurs costs (net of revenues received for the initial transfer of records) related to the acquisition of large volume accounts (typically over 10,000 Cartons). For 1994, 1995 and the six months ended June 30, 1996, the Company's additions to customer acquisition costs were $1.4 million, $1.4 million and $0.7 million, respectively. The Company currently expects that its capital expenditures (other than capital expenditures related to future acquisitions, which cannot be presently estimated) for the second half of 1996 will be between $9 million and $10 million, and for 1997 will be between $18 million and $21 million. The Company expects to fund these expenditures and costs from cash flows from operations and by borrowings under the New Credit Facility. Recent and Pending Acquisitions The Company's liquidity and capital resources have been significantly impacted by acquisitions and, given the Company's acquisition strategy, may be significantly impacted for the foreseeable future. In order to capitalize on industry consolidation, the Company in mid-1994 adopted a more active acquisition strategy. Since mid-1994, the Company has acquired or entered into agreements to acquire 19 records management businesses, 18 of which have been completed and one of which is pending, for a total purchase price of $103.2 million (not including contingent payments of up to $4.6 million based upon the achievement of certain revenue targets during 1996 through 1998). The Company has historically financed its acquisitions with borrowings under the Credit Agreement in conjunction with cash flows provided by operations and, more recently, from a portion of the proceeds of the Initial Public Offering. Net borrowings for acquisitions during 1994, 1995 and the first six months of 1996 totaled $2.1 million, $32.3 million and $19.0 million, respectively. In addition, subsequent to June 30, 1996, the Company has incurred an additional $28.3 million under the Credit Agreement to fund the Completed Acquisitions consummated after such date. The Company intends to use a portion of the net proceeds from the Offering, together with borrowings under the New Credit Facility, to fund the Pending Acquisition. The Company's future interest expense may increase significantly as a result of the additional indebtedness the Company may incur to finance possible future acquisitions. To the extent that future acquisitions are financed by additional borrowings under the New Credit Facility or other credit facilities, the resulting increase in debt and interest expense could have a negative effect on such measures of liquidity as debt to equity, EBITDA to debt and EBITDA to interest expense. Sources of Funds During the six months ended June 30, 1996, the Company generated $8.1 million in cash flows from operations as compared to $8.2 million for the same period of the prior year. Such change in cash flows from operations resulted from a $3.1 million increase in EBITDA and an increase in accounts payable, which were partially offset by an increase in accounts receivable and other changes in working capital accounts. During the years ended December 31, 1994 and 1995, the Company generated cash flows from operations of $11.6 million and $15.7 million, respectively. At December 31, 1995, the Company had estimated net operating loss carryforwards of approximately $7.3 million for federal income tax purposes. As a result of such loss carryforwards, cash paid for income taxes has historically been substantially lower than the provision for income taxes. 39 Net cash flows provided by financing activities were $6.7 million and $34.1 million in 1994 and 1995, respectively, substantially all of which was provided under the Credit Agreement, and $23.7 million for the six months ended June 30, 1996, substantially all of which was provided by the net proceeds of the Initial Public Offering and under the Credit Agreement. Credit Arrangements of the Company The Credit Agreement provides for total borrowings not to exceed $130 million and consists of the following facilities: (i) a $15 million revolving working capital facility; (ii) a $10 million term loan; (iii) a $55 million revolving acquisition credit facility; and (iv) a $50 million term loan. At June 30, 1996, all borrowings under the Credit Agreement bore interest at a weighted average annual rate of 8.5%. The obligations under the Credit Agreement are secured by substantially all of the Company's assets, including the stock of its operating subsidiaries. The Company also has the Chrysler Notes outstanding. These facilities require the Company to meet certain financial covenants and ratios. See Note 3 of Notes to the Company's Audited Consolidated Financial Statements. The Company intends to apply a portion of the net proceeds from the Offering to prepay in its entirety all indebtedness outstanding under the Credit Agreement and the Chrysler Notes. See "The Transactions" and "Use of Proceeds." In addition, the Company intends to terminate the Credit Agreement and to enter into the New Credit Facility as a replacement bank credit facility. The New Credit Facility will provide the Company with revolving credit availability of $100 million for acquisitions, working capital and other corporate purposes. See "Description of the New Credit Facility" for a more detailed description of the anticipated terms of the New Credit Facility. No assurance can be given that the Company will enter into the New Credit Facility on these or any other terms. The Offering is not conditioned on the closing of the New Credit Facility. The annual maturities of Iron Mountain's indebtedness for the second half of 1996 and for 1997, 1998, 1999 and 2000 are $1.6 million, $3.4 million, $8.3 million, $8.4 million and $32.5 million, respectively. Giving pro forma effect to the Transactions, the annual maturities of Iron Mountain's indebtedness for the second half of 1996 and for 1997, 1998, 1999 and 2000 would be $0.1 million, $0.4 million, $0.4 million, $0.4 million and $7.8 million, respectively. As of June 30, 1996, the Company had available under the Credit Agreement $6.2 million under the working capital facility and $24.7 million under the acquisition credit facility. Subsequent to June 30, 1996, the Company borrowed $28.3 million under the acquisition credit facility to finance acquisitions, and amended the Credit Agreement to increase the acquisition credit facility by $5.0 million. As of June 30, 1996, on a pro forma basis, after giving effect to the Transactions (see "The Transactions" and "Use of Proceeds"), the Company would have had $174.5 million in total indebtedness and an aggregate of approximately $86.3 million available under the New Credit Facility. Under the Credit Agreement, Iron Mountain is required to use, and may in the future use, interest rate protection products to reduce its exposure to increases in interest rates. Under the New Credit Facility, Iron Mountain will also be required to use such interest rate protection products. As of June 30, 1996, the Company had $118.9 million of total debt, of which $26.0 million had fixed interest rates and $92.9 million had variable interest rates, $30.0 million of which was covered by interest rate protection products, certain of which may be terminated in connection with the repayment of the Credit Agreement. See Note 3 of Notes to the Company's Audited Consolidated Financial Statements. Future Capital Needs Iron Mountain's ability to generate cash adequate to fund its needs depends generally on the results of its operations and the availability of financing. Management believes that cash flow from operations in conjunction with borrowings from existing and possible future credit facilities will be sufficient for the foreseeable future to meet debt service requirements and to make possible future acquisitions and capital expenditures. Depending on the pace of the Company's acquisitions, the Company may elect to seek additional financing during the next two years. The Company anticipates that any such financing will be debt financing, including the issuance of debt securities. However, depending on market conditions and the preferences of acquisition candidates, the Company would consider issuing equity securities. However, there can be no assurance in this regard or that the terms available for any future financing, if required, would be favorable to Iron Mountain. 40 Seasonality Historically, the Company's business has not been subject to seasonality in any material respect. Inflation Certain of the Company's expenses, such as wages and benefits, occupancy costs and equipment repair and replacement, are subject to normal inflationary pressures. Although the Company to date has been able to offset inflationary cost increases through increased operating efficiencies, there can be no assurance that the Company will be able to offset any future inflationary cost increases through similar efficiencies or increased storage or service charges. 41 BUSINESS Introduction Iron Mountain is the largest records management company in the United States, as measured by revenues. The Company is a full-service provider of records management and related services, enabling customers to outsource data and records management functions. Pro forma for the Transactions, as of June 30, 1996, the Company managed approximately 29.6 million Cartons in 103 records centers in 33 markets nationwide. The Company has a diversified base of over 19,000 customer accounts, which includes more than half of the Fortune 500 and numerous legal, banking, healthcare, accounting, insurance, entertainment and government organizations. The Company provides storage and related services for all major media, including paper (which is the dominant form of records retention and which has accounted for approximately 85% of the Company's revenues since 1992), computer disks and tapes, microfilm and microfiche, master audio and video tapes, film and optical disks, X-rays and blueprints. The Company's principal services include filing, retrieval and destruction of records, courier pick-up and delivery, database management and customized reporting. The Company also sells storage materials and provides consulting and other records-related services. The Records Management Industry Overview Based on publicly available information, organizations in the United States generate an estimated four trillion documents each year. Many of these documents must be retained and available for reference for many years. These records may be generally divided into two categories: active and inactive. Active records relate to ongoing and recently completed activities or contain information that is frequently referenced. Active records are usually stored and managed on-site by the organization which originated them to ensure ready availability. Inactive records are the principal focus of the records management industry. Inactive records consist of those records which are not needed for immediate access but which must be retained for legal reasons or regulatory compliance or for occasional reference in support of ongoing business operations. Based on industry studies, the Company believes that inactive records make up approximately 80% of all records. [TRIANGLE GRAPHIC] ACTIVE 20% INACTIVE 80% Growth of Market; Outsourcing The Company believes that the volume of inactive records is increasing for a number of reasons, including: (i) the rapid growth of inexpensive document-producing technologies such as facsimile, desktop printing and computer networking; (ii) increased regulatory requirements; (iii) concerns over possible future litigation and the resulting increases in volume and holding periods of documentation; (iv) the high cost of reviewing records and deciding whether to retain or destroy them; and (v) the failure of many entities to adopt or follow policies on records destruction. Despite the growth of new "paperless" technologies, such as the Internet and e-mail, management believes that stored information remains predominantly paper-based and that such technologies have promoted the creation of hard copies of such electronic information. The Company believes that the records management industry will gain a growing share of this increased volume as more large organizations make the strategic decision to outsource their records management as part of 42 a growing trend to outsource a wide variety of functions that can be performed more cost-effectively by third parties, though there can be no assurance in this regard. Records management companies can offer occupancy and labor cost reductions while at the same time providing greater levels of service than are typically available in-house. Highly Fragmented Industry Most records management companies serve a single local market, and are often either owner-operated or ancillary to another business, such as a moving company. According to the ACRC, as of January 1994 (the latest date for which such information is available), approximately 2,600 firms offered records storage and management services in the United States. The Company believes that there are only four national providers in the industry (including the Company) and that the rest are regional or, in most instances, single-city operators. Increasing Industry Consolidation The Company believes that there is a trend towards consolidation in the records management industry and that it will continue and accelerate because of the industry's capital requirements for growth, customer demands for more sophisticated technology solutions, a trend for certain large customers to contract with one vendor in multiple cities and opportunities to achieve economies of scale. The records management business requires significant up-front capital investment for real estate, racking systems and management information technology. Economies of scale available in these areas can reward larger initial capital investments by reducing per unit storage costs. However, such economies of scale are only realized once a facility begins storage operations and fills available capacity. Thus, larger companies with both access to capital and the ability to quickly fill a new facility enjoy a competitive cost advantage, thereby putting pressures on smaller competitors. Financial Characteristics of Iron Mountain's Business Iron Mountain's records management business has the following financial characteristics: (bullet)Recurring Revenues. Iron Mountain derives a majority of its revenues from fixed periodic (usually monthly) fees charged to customers for storage of records. Storage revenues have grown for 30 consecutive quarters and have represented approximately 60% of the Company's total revenues in each of the last five years. Once a customer places a record in storage with the Company and until that record is destroyed or permanently removed (for which the Company typically receives a service fee), the Company receives recurring payments of fixed periodic fees without incurring additional labor or marketing expenses or significant capital costs. The stable and growing storage base also provides the foundation for increases in revenues and EBITDA from service activities and sales of storage materials. (bullet)Historically Non-Cyclical Business. Iron Mountain has not experienced a reduction of its business as a result of past general economic downturns, although there can be no assurances that this would be the case in the future. Management believes that the outsourcing of records management may accelerate during economic downturns as companies focus on reducing costs through outsourcing non-core operating functions. In addition, management believes that companies that have outsourced records management are less likely during economic downturns to incur the move-out costs and other expenses associated with switching vendors or moving records management in-house. (bullet)Inherent Growth from Existing Customers. The Company's customers have on average generated additional Cartons at a faster rate than stored Cartons have been destroyed or permanently removed. From 1992 to 1995, net Cartons from existing customers grew at an average annual rate of 6.7%. The Company believes the consistent growth of its storage revenues is the result of a number of additional factors, including: (i) the trend toward increased records retention; (ii) customer satisfaction with the Company's services; and (iii) the costs and inconvenience of moving storage operations in-house or to another provider of records management services. (bullet)Diversified and Stable Customer Base. The Company has over 19,000 customer accounts in a variety of industries. The Company currently provides services to more than half of the Fortune 500 and numerous legal, banking, healthcare, accounting, insurance, entertainment and government organizations. Only one 43 of the Company's customers accounted for more than 3% of revenues in 1993, 1994 or 1995. From 1992 to 1995, average annual permanent removals of Cartons represented only approximately 4% of total Cartons stored. (bullet)Capital Expenditures Related Primarily to Growth. The Company's business requires limited annual maintenance capital expenditures. Maintenance capital expenditures were $1.8 million, $1.2 million and $0.9 million in 1993, 1994 and 1995, respectively. From 1992 to 1995, over 90% of the Company's aggregate capital expenditures were growth-related investments, primarily in racking systems, new buildings and leasehold improvements, equipment for new facilities, management information systems and facilities restructuring. These growth-related capital expenditures are primarily discretionary and create additional capacity for increases in revenues and EBITDA. Growth Strategy Iron Mountain's growth strategy is to expand aggressively in existing and new markets through increased business from existing customers, additions of new customers and acquisitions. The Company's goal is to be one of the largest records management companies in each of its markets. In addition, through its growth strategy, the Company seeks to attain increasing economies of scale in order to provide high-quality service at competitive prices. The following table sets forth the Company's approximate growth in Cartons stored by existing customers, new customers and as a result of acquisitions for the three years ended December 31, 1993, 1994 and 1995 and the twelve months ended June 30, 1996. The figures for the twelve months ended June 30, 1996 are not necessarily indicative of the results that will be achieved for the twelve months ended December 31, 1996. Cartons Added to Storage(1) (In millions)
Year Ended December 31, Twelve Months ----------------------- Ended June 30, 1993 1994 1995 1996 ---- ---- ---- --------------- Cartons at Beginning of Period 12.6 15.5 17.7 20.3 ==== ==== ==== ==== Additions from Existing Customers Gross Cartons Added(2) 1.9 2.6 2.5 3.1 Cartons Deleted: Destructions (0.6) (0.9) (1.0) (1.1) Permanent Removals (0.6) (0.6) (0.6) (0.8) ---- ---- ---- ---- Net Carton Growth from Existing Customers 0.7 1.1 0.9 1.2 Additions from New Customers(2) 2.2 1.0 1.4 1.8 Additions from Acquisitions 0.0 0.1 3.3 3.1 ---- ---- ---- ---- Total Carton Additions 2.9 2.2 5.6 6.1 ==== ==== ==== ==== Percentage Increase 23% 14% 32% 30%
- ----------- (1) Excludes storage volumes attributable to the Company's vital records services and data protection services. (2) Gross Cartons added by the RTC or its successor the FDIC were approximately 0.9 million, 0.3 million, 0.3 million and 0.3 million for 1993, 1994, 1995 and the twelve months ended June 30, 1996, respectively. RTC additions in 1993 are included in Additions from New Customers because the initial transfer of Cartons from the RTC commenced in the fourth quarter of 1992 and continued into 1993. Additions in 1994, 1995 and the twelve months ended June 30, 1996 are included in Additions from Existing Customers. Growth from Existing Customers Existing Iron Mountain customers have contributed to storage and services revenue growth because they have on average generated additional Cartons at a faster rate than old Cartons are destroyed or permanently removed. In order to maximize growth opportunities from existing customers, the Company seeks to maintain high levels of customer retention by providing premium customer service through its decentralized customer support staff. 44 The local customer support staff, working in conjunction with the corporate staff, is also responsible for marketing additional services to existing customers, including records tracking, indexing, customized reporting, vital records management and records management consulting services. Additions of New Customers The Company's direct sales force is dedicated solely to establishing new account relationships and draws on the Company's national marketing organization and senior management. New customer sales efforts have resulted in the addition of more than 900 new customer accounts in each of the last three years. Iron Mountain segments its market into large volume accounts (typically over 10,000 Cartons) and standard accounts. As of June 30, 1996, large volume accounts represented more than half of the total Cartons stored. The two segments differ in complexity of service and technology needs, purchasing behavior and purchasing leverage. The Company employs different database marketing techniques, program design features and pricing structures to meet the needs of each segment. In recent years the Company's large volume account segment has grown rapidly, driven by strategic outsourcing initiatives and the Company's marketing efforts. In 1993, 1994, 1995 and the six months ended June 30, 1996, large volume accounts represented 88%, 70%, 76% and 63% respectively, of the additions of Cartons from new customers. Growth through Acquisitions Iron Mountain has had a successful record of acquiring and integrating smaller records management companies. From 1990 through 1994, Iron Mountain completed five acquisitions. In order to capitalize on industry consolidation, the Company in mid-1994 adopted a more active acquisition strategy and implemented changes in its management, systems and financial infrastructure, including the consummation of the Initial Public Offering, to execute such strategy. Since June 1994, the Company has acquired or entered into agreements to acquire 19 companies, 18 of which have been completed and one of which is pending. The Company operates in 32 markets nationwide and intends to continue to make fold-in acquisitions in existing markets and to make strategic acquisitions in new geographic markets, with an emphasis on the 50 largest markets in the United States. The Company's corporate development staff is engaged in an ongoing review of acquisition candidates. As of the date hereof, the Company is in contact with approximately 40 companies, and expects that it will continue to meet several new candidates each month, although the actual number may vary from month to month and there can be no assurance that any such review will result in an acquisition. Management believes that Iron Mountain is well positioned to participate in the further consolidation of the records management industry. See "Risk Factors--Risks Associated with Acquisition Strategy" and "Recent and Pending Acquisitions." The Company seeks to expand its national presence, size and customer base through new-market acquisitions. Management believes that the high start-up costs of commencing operations make acquisitions an attractive means of entering new markets. The Company seeks to acquire records management companies in markets where management believes there is the potential for growth. Within such markets, the Company uses a variety of criteria to evaluate acquisition candidates, including the capacity and condition of existing storage facilities, past and current operating performance and revenues and the experience and depth of existing management. The Company is also considering investments in records management businesses outside of the United States. See "Potential International Investments." The Company believes that it can use its expertise and central administrative organization to leverage the acquisition candidate's local market presence, promoting the development of underperforming facilities and enhancing the value of the local assets. The Company believes that its new-market acquisition strategy could have a number of benefits, including: (i) continued growth in revenues and EBITDA and diversification across a greater number of markets; (ii) introduction of the Company's efficient storage, labor, transportation and other operating efficiencies into new markets; (iii) the increased utilization of efficiencies available through the Company's central administrative and management information functions; (iv) increased market awareness of Iron Mountain's national scope and presence; and (v) increased overall scale, which should broaden the range of and facilitate the Company's capital-raising activities. See "Risk Factors--Risks Associated with Acquisition Strategy." The Company also intends to continue to make fold-in acquisitions to augment its operations in existing markets. The Company's goal in its existing markets is to exploit economies of scale while maintaining high quality 45 service. Following a new-market acquisition, the Company seeks to increase its business with the acquired customer base and to supplement that growth with new customers and, potentially, with appropriate fold-in acquisitions so that the Company may benefit from economies of scale. Premium Service Strategy Organizations selecting a provider of records management services consider a number of factors in addition to price. Management believes that Iron Mountain is a "premium" brand in the marketplace based upon its reputation for reliability, customer-oriented organization, investment in technology and national operating presence. The Company seeks to exploit its strengths in each of these areas to maintain customer relationships and to attract new customers. Reputation for Reliability. The Company believes it has a reputation for reliability based on its more than 40 years of operations, the continuity and depth of its management, its successful historical growth, the quality and diversity of its customer base which includes more than half the Fortune 500, its technological capabilities and its size and financial resources. Customer-Oriented Organization and Locally Responsive Management. Iron Mountain has developed a decentralized, local management structure that brings significant management experience and stability to local markets and allows the Company to respond directly, effectively and flexibly to customers. Broad operating authority is delegated to regional Vice Presidents and to local managers. In pursuing its acquisition strategy, Iron Mountain seeks to capitalize upon the experience and strengths of existing management. In addition, all full-time union and non-union employees participate in incentive-based compensation programs that provide payments based on profits or attainment of specified objectives for the unit in which they work. Iron Mountain believes that the experience, stability and commitment of its regional and local management is integral to its ability to provide superior customer service and maximize growth potential. Investment in Technology. The Company has invested $12.5 million in technology since 1992 in order to provide faster and more flexible solutions for its customers and to enhance the quality and lower the costs of its own operations. The Company believes that its technological capabilities, especially its Safekeeper system, are a significant tool in attracting new customers. The Company plans to continue to invest in its proprietary technologies in the future. See "Technology and Development; Management Information Systems." National Operating Presence. The Company believes it is one of only four records management companies with a national operating presence. Traditionally, the purchase decision for large multi-site customers has been made at the local level. Recently, however, the Company has found that certain large organizations have sought to obtain operating and economic efficiencies by outsourcing a significant portion of their records management functions with a single records management company. The Company seeks to use its national operating presence to compete for such large multi-site customer accounts. Low-Cost Operating Strategy Iron Mountain pursues a low-cost operating strategy based primarily on achieving economies of scale in the areas of storage, labor and transportation, general and administrative functions and management information systems. The Company believes that it is one of the few records management companies with the size and resources to realize significant economies of scale in these areas. Storage Costs Because occupancy costs are a major component of the Company's cost of sales, reducing per Carton storage costs is a primary strategic goal of the Company and its real estate management staff. The Company seeks to minimize per Carton storage costs by: (i) designing racking systems and operating space to maximize facility storage efficiency; (ii) negotiating favorable facility leases and having facilities built to its custom specifications; and (iii) leasing larger facilities, which, when filled, are less expensive per Carton to operate. Since 1991, the Company has acquired or leased 11 custom-designed records management facilities. The average Carton density (the ratio of standard Carton storage capacity to total square feet of floor space) of these facilities is approximately twice 46 that of the Company's overall average Carton density. As a result of these practices and after giving effect to the consummation of the Acquisitions, average Carton density in the Company's facilities increased 32% from December 31, 1992 to June 30, 1996. Labor and Transportation Efficiency The Company has made significant investments in computer technologies for its service operations, resulting in greater efficiencies. In addition, by increasing its operations and customer base in a local market area, the Company seeks to maximize its courier delivery fleet usage and to increase delivery and routing efficiencies. The Company's incentive structure has also contributed to labor efficiency. Each of the Company's full-time employees participates in incentive compensation programs based upon achievement of specific operating targets designed to integrate the objectives and performance of records management facility employees and managers. For the six months ended June 30, 1996, the Company's employees earned incentive compensation in an amount equal to approximately 10.8% of the base wages paid by the Company. In part as a result of the foregoing factors, while the number of Cartons stored at the Company's facilities between January 1, 1992 and June 30, 1996 increased by approximately 15.6 million (or approximately 144%), the Company's staff increased during the same period by approximately 520 employees (or approximately 65%). G&A and MIS Efficiencies The Company's corporate staff provides support to local management in the areas of acquisitions, marketing, facility acquisition and leasing, racking system purchasing, finance and accounting and human resource management. In addition, the Company's corporate staff is responsible for the design and support of all records management technology. The Company believes that central support in these areas provides local managers with competitive advantages over smaller, local competitors and results in significant economies of scale. Technology and Development; Management Information Systems The Company pioneered the application of advanced information technology to the records management industry. Iron Mountain's proprietary Safekeeper system provides advanced inventory control and information access, enabling the Company to provide faster, higher quality and more flexible solutions to its customers and to lower the costs of its operations. Iron Mountain's Safekeeper system exploits bar-code technology to provide inventory integrity and a comprehensive, standardized approach to tracking, accessing and retrieving records. Safekeeper offers state-of-the-art records management capabilities and ease of access to customers while featuring security functions to protect customer information from unauthorized access. The system coordinates inventory control, order entry, billing, material sales, service activity, accounts receivable and management reporting, and features system-driven quality assurance and error-prevention. Since 1992, the Company has invested $12.5 million to develop and refine its management information systems, including Safekeeper. Safekeeper is built on an open systems architecture which is fully portable and can be implemented in small processing environments with several users and in large processing environments with hundreds of users. This allows the Company a substantial measure of flexibility and vendor independence, and reduces the risk of technological obsolescence. Safekeeper has improved the Company's customer support and operating efficiency in the following ways: (bullet)Acquisition System Integration. Safekeeper has been designed to easily and effectively integrate newly acquired records management companies and offer improved levels of customer service and records management capabilities to customers acquired through acquisitions. The critical components of integrating acquisition systems are the abilities to match the acquired company's carton identifiers, location identifiers, records descriptive data, and billing data. Safekeeper is designed with flexible, comprehensive capabilities in each of these areas. Consequently, an acquired company's inventory can be converted to Safekeeper without having to relabel cartons or reset and relabel inventory locations. The customers of the acquired company retain their records data and receive similar billing rate structures. In addition, acquisition customers experience minimal disruption during integration and, after conversion, gain access to advanced records management and information access capabilities. Safekeeper utilizes a suite of 47 conversion routines to automate the conversion process and effectively translate customer and inventory information. (bullet)Storage Efficiency. Safekeeper enables the Company to maximize the efficient use of storage space at its facilities. When cartons are added or returned to storage, Safekeeper identifies available space and the location of the customer's other records at the facility. Because there is a continual flow of cartons into and out of the Company's facilities, Safekeeper also permits facility operators to utilize space that becomes available as soon as cartons are removed. Safekeeper can pinpoint the location of any carton, enabling facility operators to quickly determine the optimal location for new or returning cartons. (bullet)Inventory Integrity. Bar-coding and scanning are used to track a carton or a record throughout its life cycle at Iron Mountain. Safekeeper identifies inventory discrepancies during the order processing cycle and forces their resolution before they affect the customer. This forced discrepancy resolution means that errors must be resolved before an order can be closed; until the order is closed, billing cannot be processed. Management believes that this system-driven quality assurance is a significant advantage over the "best efforts" approach used by most of its competitors. (bullet)Customer Information Access. Customers can access their records management data through a variety of formats, including direct access via Safekeeper Online, access on their own PCs via Safekeeper Desktop, integration of their internal system with Safekeeper via automated file transfers and paper reports. Safekeeper Online enables a customer to place orders directly via online access, resulting in efficiencies for Iron Mountain order processing. It features robust querying and searching tools to enable customers to identify records with only partial information. Safekeeper Desktop is a PC application, run from customers' desktop or network PCs; it provides customers with an entire set of records management data along with user-friendly tools for querying, reporting, and editing. Safekeeper's suite of file transfers enable customers to automatically transfer records data and service requests from their internal system to Safekeeper. The paper reports include inventory detail and summary, service activity analysis, quality assurance, and management review. (bullet)Records Management Flexibility. Safekeeper offers full life-cycle records management, from file creation to destruction, enabling each customer to establish schedules for records retention and destruction as dictated by the customer's specific needs. Safekeeper can flexibly accommodate large or small amounts of records management data in accordance with customer requirements. A series of customer-specific features and options allows Iron Mountain to tailor the records management functionality and reporting to the customer's needs. (bullet)Security. Safekeeper incorporates strict security protocols and procedures for all customers to prevent unauthorized access to a client's records information. Advanced security features that can automatically restrict access by departmental identification and/or type of service request are available to customers that are internally set up to provide this information. In addition to Safekeeper, the Company's data protection services facilities utilize the Company's Media Link(tm) software, a state-of-the-art media management system which provides integrated bar-code tracking and electronic data interface between customer and Iron Mountain facilities, as well as audit trail and remote inventory query functionality. The Company plans to continue to invest in its proprietary technologies in the future in order to enhance its customer service as well as to increase its own operating efficiency. Description of Iron Mountain Records Management Services Iron Mountain's records management services consist primarily of the storage operations for the management of hard copy documents. These and related services and products sold have, since 1992, accounted for approximately 85% of the Company's revenues. The balance of the Company's revenues come from the storage and service of vital records and data protection, consulting and other services. 48 Storage Operations Storage revenues accounted for approximately 60% of revenues in each of the Company's last five fiscal years. Storage charges are generally billed monthly on a per storage unit basis (usually either per unit or per cubic foot of records) and include the provision of space, racking, computerized inventory and activity tracking, physical security, environmental and climate control and fire protection. The storage of a carton begins by issuing Safekeeper bar-coded labels to the customer. The customer packs records in cartons and affixes the bar-coded label to each carton. Customer personnel and the Iron Mountain driver conduct a physical count of the cartons and the driver signs for the cartons, which are then transported to the records management facility. Upon delivery to the facility, the cartons are subjected to a second physical count. The cartons are delivered to available space identified by Safekeeper and the bar-coded information is scanned into the computer together with a bar-coded location identifier. At the same time, a computer operator enters the customer's data describing the stored material into the computer and the system confirms that the cartons sent match the data entered in the computer. Under the Company's computer control system, the order can only be closed out when all requisite steps and checks have been completed and counts and locations have been reconciled. Service and Courier Operations Principal services include adding cartons to storage, temporary removal of files or cartons from storage, refiling of removed records, permanent withdrawals from storage and destruction of records. Service charges are generally assessed for each procedure on a per unit basis. The Safekeeper system controls the service processes from order entry through transportation and invoicing. Courier operations consist primarily of the pickup and delivery of records upon customer request. Courier delivery schedules can be tailored to fit customers' needs, but generally customer orders received by 4:00 p.m. on a business day are delivered the following business day. The Company also provides same-day and immediate delivery during business hours and emergency delivery at night and on weekends and holidays. Charges for courier services are based on urgency of delivery, volume and location and are billed monthly as incurred. The Company currently utilizes a fleet of approximately 250 owned or leased delivery vehicles. Vital Records Services Vital records contain critical or irreplaceable data such as master audio and video recordings, film, software source code and other highly proprietary information. Vital records may require special facilities or services, either because of the data they contain or the media on which they are recorded. The Company's charges for providing enhanced security and special climate-controlled environments for vital records are higher than for typical storage functions. The Company provides the same ancillary services for vital records as it provides for its other storage operations. Data Protection Services Data protection services consist of the storage, backup and archiving of computer media as part of corporate disaster and business recovery plans. Computer tapes, cartridges and disk packs are transported off-site by the Company's courier operations on a scheduled basis to secure, climate-controlled facilities, where they are available to customers 24 hours a day, 365 days a year, to facilitate data recovery in the event of a disaster. This process is managed by Iron Mountain's Media Link software, a state-of-the-art media management system which provides integrated bar-code tracking, electronic data interface between customer and Iron Mountain's facilities as well as audit trail and remote inventory query functionality. Iron Mountain also manages tape library relocation and supports disaster recovery testing and execution. Additional Services and Products Iron Mountain offers a variety of additional services, which customers may request or contract for on an individual basis. These services include performing records inventories, packing records into cartons or other containers, computerized indexing of files and individual documents, developing schedules for the retention and destruction of records and records management consulting services. The Company also sells a full line of specially designed corrugated cardboard, metal and plastic storage containers. 49 The Company's subsidiary, Iron Mountain Information Partners, Inc., provides professional consulting services to large customers, enabling them to develop and implement comprehensive records management programs. The Company's consulting business draws on the Company's 45 years of experience to analyze the practices of such companies and assist them in creating more effective programs of records management. The Company's consultants work with such customers to develop policies for document review, analysis and evaluation and for scheduling of document retention and destruction. In addition to its historical focus on the management of inactive records, the Company has recently begun to provide services for the management of active records. The Company can provide these services, which generally include document and file processing and storage, both off-site at its own facilities and by supplying its own personnel to perform management functions on-site at the customer's premises. The Company sees active records management as a potential source of future revenue growth for the Company, although there can be no assurance in this regard. Potential International Investments Iron Mountain is considering capitalizing upon its expertise in the records management industry by making investments in records management businesses outside the United States. From time to time, the Company has had discussions concerning such investments. Such investments, if consummated, would be subject to risks and uncertainties relating to the indigenous political, social, regulatory, tax and economic structures of countries in those areas, as well as fluctuations in currency valuation, exchange controls, expropriation and governmental policies limiting returns to foreign investors. At this time, there can be no assurance as to whether any such investment will be made or, if made, will be successful in achieving its objectives. Customers The Company's customer base is diversified in terms of revenue and industry concentration. The Company has over 19,000 customer accounts. Iron Mountain considers each invoice it delivers to its customers a separate customer account and, accordingly, an organization which receives more than one invoice represents multiple customer accounts. The chart below shows, as of June 1994, the relative amounts of revenue attributable to certain business sectors. [PIE CHART] Other Financial Institutions 10% Health Care 10% Professional Services 7% Government 6% Manufacturing 4% Retail 4% Entertainment 2% Other 19% Legal Services 16% Depository Institutions 14% Insurance Companies 5% The Company services accounts of all sizes, from small businesses and professional groups to over half of the Fortune 500. Other than the RTC or its successor, the FDIC, which accounted for 7.4%, 6.3%, 4.8% and 3.6% of Iron Mountain's revenues for the years ended December 31, 1993, 1994 and 1995 and the six months ended June 30, 1996, respectively, no account or related set of accounts generated more than 3% of Iron Mountain's revenues during any such period. The Company's contract with the FDIC, as successor under the contract to the RTC, was renewed effective July 27, 1996 for a one-year term, with three further annual renewal options at the election of the FDIC. Although the substantial costs of removing its records from the Company's facilities may act as a disincentive to the FDIC 50 to select another vendor, there can be no assurance that the contract will be further renewed or that the terms of such renewal will be as favorable to Iron Mountain as the terms of the current contract. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview." Marketing and Sales The Company uses database marketing and a dedicated sales force to focus exclusively on new business development. A corporate marketing organization provides sales support, training, marketing communications and product management as support functions. The program has successfully produced over 900 new customer accounts per year since 1991. The selling effort is bolstered by regional and senior managers focused on key account selling. Properties As of June 30, 1996, Iron Mountain conducted operations through 77 leased and 12 owned facilities containing a total of approximately 6.3 million square feet of space. The leased facilities typically have initial lease terms of 10 years with options to renew for an additional 10 years. The weighted average remaining term of the leases on these facilities is approximately 7.0 years. In addition, many of the leases contain either a purchase option or a right of first refusal upon the sale of the property. The leases include one property leased from affiliates of the Company. See "Management--Executive Compensation--Compensation Committee Interlocks and Insider Participation" and Note 8 of Notes to the Company's Audited Consolidated Financial Statements. As of June 30, 1996, the Company owned or leased (directly or through its subsidiaries) the following records management facilities in the geographic locations indicated below. Records Management State Facilities - ----- ---------- Arizona 2 California 24 Colorado 3 Connecticut 2 Delaware 1 Florida 4 Georgia 8 Illinois 3 Kansas 1 Kentucky 1 Massachusetts 7 Maryland 3 Missouri 2 New Hampshire 1 New Jersey 4 New York 4 Ohio 4 Pennsylvania 2 Rhode Island 1 Tennessee 1 Texas 8 Virginia 3 -- Total 89 == The Company or its principal subsidiary is a guarantor of a substantial portion of the leases to which other subsidiaries are party. Substantially all of the property and assets currently owned and leased by the Company or its subsidiaries are pledged as security for the lenders under the Credit Agreement. It is expected that, in connection with the New Credit Facility, such liens (other than the pledge of the stock of the Company's subsidiaries) will be released. See Notes 3 and 7 of Notes to the Company's Audited Consolidated Financial Statements for additional information regarding the Credit Agreement and the minimum annual rental commitments of the Company, respectively. 51 Employees A key feature of Iron Mountain's operating strategy is its decentralized management structure and reliance on local management operating in local business environments. The Company's operations are divided into three areas comprising seven local management regions to maximize marketing and operating effectiveness and to minimize supervisory costs. The management regions, each of which is managed by a Vice President, are further divided into a total of 27 districts, each managed by a General Manager. The management regions are overseen by offices in Boston and Los Angeles, but regional Vice Presidents and General Managers have broad operating authority. The Company's headquarters staff performs a variety of central administrative and support functions in order to maximize the time and resources that local personnel can devote to customer service and client development. Iron Mountain had approximately 1,200 full-time employees as of June 30, 1996, of whom approximately 89% are employed at the district level, 8% at the corporate level and the balance at the area and regional levels. Approximately 11% of the Company's employees are represented by various Teamsters Union locals under five different agreements. Two of these agreements, representing 42 employees, have expired and are currently under negotiation. Based on its prior experience with the two union locals involved in these negotiations, the Company expects that it will enter into new agreements on satisfactory terms. The remaining three contracts expire in December 1996, March 1997 and March 1999. In addition, at two of Iron Mountain's facilities an election, subject to National Labor Relations Board regulations, was held on June 20, 1996. A majority of the approximately 40 employees voted for representation by a Teamsters Union local. The election results have not been certified as of the date hereof. All non-union employees are eligible to participate in the Company's benefit programs, which include medical, dental, life, short and long-term disability and accidental death and dismemberment plans. Unionized employees receive these types of benefits through their unions. In addition to base compensation and other usual benefits, all full-time union and non-union employees participate in some form of incentive-based compensation program that provides payments based on profits, collections, or attainment of specified objectives for the unit in which they work. Management believes that the Company has good relationships with its employees and unions. Competition Iron Mountain competes with three other national companies as well as a large number of local and regional concerns. The Company believes that competition for customers is based on price, reputation for reliability, quality of service and scope and scale of technology, and believes that it generally competes effectively based on these factors. Management believes that, except for Pierce Leahy Corp., all of these competitors have records management revenues significantly lower than those of the Company. To accommodate growth, a records management vendor must invest in incremental storage capacity, which requires added warehouses, racking systems, and related equipment including computer systems capable of tracking increasingly large inventories. The amount of such investment is significant relative to the immediate return that can be realized, and the faster a vendor grows, the more capital is required. As a result, the industry trend toward consolidation will, in management's opinion, continue and accelerate. In addition, the Company faces competition from the internal document handling capability of its current and potential customers. There can be no assurance that these organizations will outsource more of their document management needs or that they will not bring in-house some or all of the functions they currently outsource. The Company also faces competition for acquisition candidates. The substantial majority of the Company's revenues have been derived from the storage of paper documents and from related services. Such storage requires significant physical space. Alternative technologies for generating, capturing, managing, transmitting and storing information have been developed, many of which require significantly less space than paper. Such technologies include computer media, microforms, audio/video tape, film, CD-ROM and optical disk. None of these technologies has replaced paper as the principal means for storing information. However, there can be no assurance that one or more non-paper-based technologies (whether now existing or developed in the future) may not in the future significantly reduce or supplant the use of paper as a preferred medium, which could in turn adversely affect the Company's business. 52 Insurance Iron Mountain carries a comprehensive property insurance policy with insurers that it believes to be reputable and in amounts that it believes to be appropriate, covering replacement cost of real and personal property, including improvements. Subject to sub-limits, the policy also covers extraordinary expenses associated with business interruption and damage or loss from flood or earthquake, subject to certain deductibles. Separate policies for California earthquake insurance carry other deductibles that may be significant. Iron Mountain also maintains general liability and excess liability insurance covering bodily injury, property damage and personal injury. See "Risk Factors--Casualty." The Company's standard form of contract sets forth an agreed maximum value for each carton or other storage unit held by the Company as a limitation on liability for loss or damage, as permitted under the Uniform Commercial Code. In contracts containing such limits, such values are nominal, and the Company believes that in typical circumstances its liability would be so limited in the event of loss or damage relating to the value of information stored on media held by the Company. However, certain of the Company's agreements with certain large volume accounts contain no such limits or contain higher limits or supplemental insurance arrangements. Environmental Matters Under various environmental laws, an owner of real estate or a lessee conducting operations thereon may become liable for the costs of investigation, removal or remediation of soil and groundwater contaminated by certain hazardous substances or wastes or petroleum products. Certain such laws impose cleanup responsibility and liability without regard to whether the owner or operator of the real estate or operations thereon knew of or was responsible for the contamination, and whether or not operations at the property have been discontinued or title to the property has been transferred. In addition, the presence of such substances, or the failure to properly remediate such property may adversely affect the current property owner's or operator's ability to sell or rent such property or to borrow using such property as collateral. The owner or operator of contaminated real estate also may be subject to common law claims by third parties based on damages and costs resulting from off-site migration of the contamination. Certain environmental laws govern the removal, encapsulation or disturbance of ACMs. Such laws may impose liability for the release of ACMs and may enable third parties to seek recovery from owners or operators of real estate for personal injury associated with exposure to such substances. The Company is aware of the presence of ACMs at some of the Company's facilities, but believes that such materials are in acceptable condition at this time. The Company believes that future costs related to any remediation of ACMs at these facilities will not be material, either on an annual basis or in the aggregate, although there can be no assurance with respect thereto. In addition, certain of the properties formerly or currently owned or operated by the Company were previously used for industrial or other purposes that involved the use or storage of hazardous substances or petroleum products or the generation and disposal of hazardous wastes and, in some instances, included the operation of USTs. In connection with its former and current ownership or operation of certain properties, the Company may be potentially liable for environmental costs such as those discussed above, and as more specifically described below. At the Company's Hollywood, California facilities, certain USTs and contaminated soils have been removed. Some additional contamination of soils and groundwater remains and may be migrating. In 1990 and 1991, the Company filed certain reports documenting its efforts and site conditions with the appropriate environmental agencies pursuant to various environmental laws. Investigations conducted on behalf of the Company in connection with its on-site remedial activities disclosed that regional groundwater contamination, unrelated to the Company's property, exists. At this time, the Company has not received any notice from any regulatory agency or third party seeking further remediation of soil or groundwater by the Company; however, there can be no assurance that such further action will not be sought in the future. The Company has accrued estimated costs of $0.8 million that it believes it may reasonably be expected to incur in connection with this site if such additional remediation were to become necessary; however, there can be no assurance as to the adequacy of such accrual. The Company believes the ultimate outcome of the foregoing will not have a material adverse effect on the Company's financial condition or results of operations. See Note 7 of Notes to the Company's Audited Consolidated Financial Statements. The Company has also from time to time conducted certain environmental investigations and remedial activities at certain of its other former and current facilities, but an in-depth environmental review of the properties has not been conducted by or on behalf of the Company. The Company believes that it is in substantial compliance 53 with all applicable material environmental laws. The Company has not received any written notice from any governmental authority or third party asserting, and is not otherwise aware of, any material noncompliance, liability or claim relating to hazardous substances or wastes, petroleum products or material environmental laws applicable to Company operations in connection with any of its present or former properties other than as described above. However, no assurance can be given that there are no environmental conditions for which the Company might be liable in the future or that future regulatory action, as well as compliance with future environmental laws, will not require the Company to incur costs for or at its properties that could have a material adverse effect on the Company's financial condition and results of operations. Legal Proceedings The Company is involved in litigation from time to time in the ordinary course of business. In the opinion of management, no material legal proceedings are pending to which the Company, or any of its properties, is subject. 54 MANAGEMENT Directors, Executive Officers and Certain Other Officers The Directors, executive officers and certain other officers of the Company are as follows:
Names of Directors and Executive Officers Age Position - ----------------------------------------- --- -------- C. Richard Reese(1) 50 Chairman of the Board of Directors and Chief Executive Officer David S. Wendell 42 President and Chief Operating Officer, Director Eugene B. Doggett(1) 60 Executive Vice President and Chief Financial Officer, Director Robert P. Swift 55 Executive Vice President Kenneth F. Radtke, Jr. 51 Executive Vice President Constantin R. Boden(2)(3) 60 Director Arthur D. Little(2)(3) 52 Director Vincent J. Ryan(1)(3) 60 Director Names of Certain Other Officers Age Position - ------------------------------- --- -------- Jean A. Bua 38 Vice President and Corporate Controller James R. Jandl 42 Vice President of Human Resources John F. Kenny 39 Vice President of Corporate Development Joseph J. Larizza 54 Vice President and Chief Information Officer John P. Lawrence 45 Vice President and Treasurer Kenneth A. Rubin 34 Vice President of Marketing T. Anthony Ryan 56 Vice President of Real Estate
- ------------- (1) Member of the Executive Committee; Mr. Ryan is the Chairman of the Executive Committee. (2) Member of the Audit Committee; Mr. Boden is the Chairman of the Audit Committee. (3) Member of the Compensation Committee; Mr. Little is the Chairman of the Compensation Committee. The Board of Directors currently consists of six directors. There are three classes of directors who serve for three-year terms and are elected on a staggered basis, one class of two directors standing for election each year. The term of the Class B Directors, C. Richard Reese and Arthur D. Little, will expire at the 1997 Annual Meeting of Stockholders, the term of the Class C Directors, Eugene B. Doggett and Constantin R. Boden, will expire at the 1998 Annual Meeting of Stockholders and the term of the Class A Directors, David S. Wendell and Vincent J. Ryan, will expire at the 1999 Annual Meeting. Directors of each class will thereafter hold office until the third annual meeting of the stockholders of the Company following their election or until their successors are elected and qualified. The executive officers and other officers were elected by the Board of Directors on June 14, 1996. All executive officers and other officers hold office at the discretion of the Board until the first meeting of the Iron Mountain Board following the next annual meeting of stockholders and until their successors are chosen and qualified. Directors and Executive Officers C. Richard Reese is the Chairman of the Board of Directors of Iron Mountain, a position he has held since November 1995, and the Chief Executive Officer, a position he has held since December 1981. Prior to November 1995, Mr. Reese was the President of Iron Mountain, a position he had held since 1981. Mr. Reese is also a Director of Schooner. 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 the ACRC. He holds a Master of Business Administration degree from Harvard Business School. David S. Wendell is the President and Chief Operating Officer of Iron Mountain, a position 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 55 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. Eugene B. Doggett is the Executive Vice President and Chief Financial Officer of Iron Mountain, a position he has held since 1987. Mr. Doggett is also a Director of Schooner. Prior to joining the Company, 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. Robert P. Swift is an Executive Vice President of Iron Mountain, a position he has held since November 1995. Prior to November 1995, Mr. Swift was the Executive Vice President, Western Area of Iron Mountain and prior to 1988, Mr. Swift was employed in various positions at Bell & Howell Records Management Company. Kenneth F. Radtke, Jr. is an Executive Vice President of Iron Mountain, a position that he has held since June 1996. Prior to June 1996, Mr. Radtke was Northeast Regional Vice President and prior to 1995 was Sales Manager, New York Region. Mr. Radtke has worked in the records and information industry since 1988 as President and Chief Executive Officer, Dataport Company, Inc. and Senior Vice President, Arcus, Inc. He holds a graduate degree from the University of Wisconsin, Graduate School of Banking. Constantin R. Boden is a Director of Iron Mountain, a position he has held since December 1990. Mr. Boden is on the advisory board of Boston Capital Ventures, a risk capital concern. For 33 years, until January 1995, Mr. Boden was employed by Bank of Boston, most recently as Executive Vice President, International Banking. He holds a Master of Business Administration degree from Harvard Business School. Arthur D. Little is a Director of Iron Mountain, a position he has held 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. Vincent J. Ryan is a Director of Iron Mountain. Mr. Ryan is the founder of Schooner and has served as Chairman and Chief Executive Officer of Schooner since 1971. Prior to November 1995, Mr. Ryan served as Chairman of the Board of Directors of Iron Mountain. Mr. Ryan also serves as a Director and member of the Executive Committee of Continental Cablevision, Inc. He holds a Bachelors of Arts degree in English from Boston University. Certain Other Officers Jean A. Bua is Vice President and Corporate Controller. Ms. Bua joined Iron Mountain in such capacity in March 1996. From 1993 to 1996, Ms. Bua was the Corporate Controller for Duracraft Corp., a consumer products manufacturer. Prior to that, Ms. Bua was the accounting manager for a high-tech manufacturer and was a management consultant for Ernst & Young. She holds a Master of Business Administration degree from the University of Rhode Island. Ms. Bua is a certified public accountant. James R. Jandl is Vice President of Human Resources. Mr. Jandl joined Iron Mountain in 1989. For the preceding nine years he was involved in human resources management in the hospitality industry with focus on operational start-up and turn-around situations. He holds a masters degree in psychology from West Georgia College. John F. Kenny is Vice President of Corporate Development, with primary responsibility for implementing the Company's acquisition strategy. Mr. Kenny joined Iron Mountain in 1991. Prior to 1991, he was a Vice President of CS First Boston Merchant Bank, New York, with responsibility for risk capital, portfolio and transaction management. He holds a Master of Business Administration degree from Harvard Business School. Joseph J. Larizza is Vice President and Chief Information Officer, with responsibility for management information systems, including oversight of the development of Iron Mountain's Safekeeper system. Prior to joining Iron Mountain in 1996, Mr. Larizza was the chief information officer at Service America, a large food service corporation and, prior to that, chief information officer at the Advertising Checking Bureau, with responsibility for information systems and development of client-server products. He holds a Bachelors degree in management from Post College. John P. Lawrence is Vice President and Treasurer, with responsibility for acquisition integration, internal audit, risk management and purchasing and contracting. Mr. Lawrence has been associated with Iron Mountain since 1988. 56 Prior to 1988, he worked for Hewlett Packard for nine years in various management positions in finance, control, marketing and manufacturing. He holds a Master of Business Administration degree from Harvard Business School. Kenneth A. Rubin is Vice President of Marketing. Mr. Rubin joined Iron Mountain in 1989. Prior to 1989, he was Director of both Sales and Marketing for Leahy/Instar, a records management company. He was also a founding director of Software Escrow Security. He holds a Bachelors degree in political science from Drew University. T. Anthony Ryan is Vice President of Real Estate. Mr. Ryan manages the real estate department of Iron Mountain and is responsible for identifying and evaluating new facility opportunities and negotiating long-term leases. He has been involved in real estate development for 22 years. His work experience includes positions as Director of Development for Gilbane Property, Vice President of CRJ Investments and, more recently, Vice President and Partner at the Linpro Company. He holds a Bachelors degree in history from The George Washington University. Biographical information of the Directors, executive officers and other officers is as of September 24, 1996. Executive Compensation The following table provides certain information concerning compensation earned by the Chief Executive Officer and each other executive officer serving in such capacity at December 31, 1995 who received compensation in excess of $100,000 (the "Named Executive Officers") for the years ended December 31, 1994 and December 31, 1995. Summary Compensation Table
Annual Compensation Long-Term Compensation ---------------------- ----------------------------------- Number of Shares Underlying All Other Name and Principal Position Year(1) Salary Bonus Options Compensation(2) - --------------------------- ------ ------ ----- ----------------- -------------- C. Richard Reese 1995 $261,765 $200,000 0 $1,790 Chairman of the Board and Chief Executive Officer 1994 $255,400 $125,000 0 $1,623 David S. Wendell 1995 $136,627 $ 62,731 35,469 $1,573 President and Chief Operating Officer 1994 $129,800 $ 50,000 0 $1,352 Eugene B. Doggett 1995 $192,274 $165,000 0 $1,790 Executive Vice President and Chief Financial Officer 1994 $187,500 $ 93,750 0 $1,623 Robert P. Swift 1995 $131,119 $ 24,397 8,096 $1,243 Executive Vice President 1994 $126,600 $ 16,740 0 $ 865
- ----------- (1) In accordance with the requirements of Item 402(b) of Regulation S-K, information is presented for the Company's two most recent years. (2) Reflects the Company's matching contribution to the Iron Mountain Profit Sharing Retirement Plan for each individual. 57 Compensation Committee Interlocks and Insider Participation Prior to November 1995, Iron Mountain's Compensation Committee of the Board of Directors consisted of Constantin R. Boden and Vincent J. Ryan, who was until November 17, 1995 the Chairman of the Board. The present Compensation Committee consists of Mr. Little, who is the Chairman of the Committee, and Messrs. Boden and Ryan. Messrs. Reese and Doggett are executive officers of Iron Mountain and are directors of Schooner. Prior to November 1995, they were also executive officers of Schooner. Mr. Ryan is the Chairman of the Board and principal stockholder of Schooner. In 1993, the Company paid fees of $95,927 to Vincent J. Ryan for consulting services. In each of 1994 and 1995, the Company paid fees of $111,048 to Schooner for consulting services rendered by Mr. Ryan. These services and fees terminated as of December 31, 1995. Iron Mountain Records Management, Inc. ("IMRM"), a subsidiary of the Company, is the tenant under a lease dated January 1, 1991 for a 31,500 square-foot building in Houston, Texas. The owner of the building is IM Houston (CR) Limited Partnership, a Texas limited partnership, of which Mountain Realty, Inc., a Massachusetts corporation whose sole stockholder is Vincent J. Ryan, is the sole general partner, and the limited partners of which are C. Richard Reese and Eugene B. Doggett. The term of the lease expires December 31, 2000, with two five-year extension options exercisable by IMRM. IMRM currently pays annual rent in the amount of approximately $94,000, subject to adjustment in 1997 and 1999 (and in the option periods if the term is extended) based upon percentage changes in the consumer price index, with a floor of 3% and a ceiling of 5%, compounded annually. As tenant, IMRM is responsible for taxes, insurance and maintenance. The space is used by IMRM as a records management facility. During 1993, 1994, 1995 and the six months ended June 30, 1996, IMRM paid rent in the annual amount of $88,000, $88,000, $93,000 and $47,000, respectively, under the lease. The lease is, in the opinion of management, on commercially reasonable terms, no less favorable to IMRM than could have been obtained from an unaffiliated party at the time of the transaction. The Company paid compensation of $120,000, $144,000, $154,000 and $62,000 for 1993, 1994, 1995 and the six months ended June 30, 1996, respectively, to Mr. T. Anthony Ryan. Mr. Ryan is Vice President, Real Estate, of the Company and is the brother of Mr. Vincent J. Ryan, a Director and the former Chairman of the Board of the Company. The Company believes that the terms of Mr. Ryan's employment are no less favorable to it than would be negotiable with an unrelated third party. Iron Mountain is indebted to Schooner in the principal amount of $382,500 under a junior subordinated note, which was incurred by Iron Mountain in 1990 in connection with an acquisition. Schooner subsequently acquired the note from the holder as an investment. The Company intends to use a portion of the net proceeds from the Offering to prepay such indebtedness in its entirety. See "The Transactions--Repayment of FDS Notes." Schooner leases space from Iron Mountain at Iron Mountain's corporate headquarters. Such lease is a tenancy- at-will and may be terminated by either Iron Mountain or Schooner at any time. As consideration for such lease, Schooner pays rent to Iron Mountain based on its pro rata share of all expenses related to the use and occupancy of the premises. The rent paid by Schooner to Iron Mountain under such lease was approximately $48,000, $58,000, $49,000 and $33,000 in 1993, 1994, 1995 and the six months ended June 30, 1996, respectively. Employees of Schooner were eligible to participate in the Iron Mountain Profit Sharing Retirement Plan, a Section 401(k) plan, as well as the Company's group medical, dental, life, disability and accidental death and dismemberment arrangements (the "Company Benefit Plans"). Schooner reimbursed the Company for costs incurred as a result of the participation of Schooner employees in Company Benefit Plans. Participation by Schooner employees in the Company Benefit Plans terminated shortly after the consummation of the Initial Public Offering. Director Compensation Directors who are employees of the Company do not receive additional compensation for serving as directors. Each director who is not an employee of the Company (each an "Eligible Director") receives an annual retainer fee of $10,000 as compensation for his or her services as a member of the Board of Directors and is also paid $2,500 per quarter (to a maximum of $10,000 per year) for attendance at meetings (the "Director's Compensation"). All directors of the Company are 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 directors of the Company. 58 Pursuant to the Iron Mountain Incorporated 1995 Stock Plan for Non-Employee Directors (the "Directors Plan"), Eligible Directors may elect to receive all or a portion of their Director Compensation in the form of Common Stock. An Eligible Director electing to receive Common Stock under the Directors Plan will, as an incentive, receive in lieu of cash an amount of Common Stock equivalent to 110% of the Director Compensation otherwise due to be paid in cash. The Company has reserved 15,000 shares of Common Stock for issuance under the Directors Plan. Stock Option Information Effective November 30, 1995, Iron Mountain instituted the Iron Mountain Incorporated 1995 Stock Incentive Plan (the "Stock Option Plan"), which is administered by the Compensation Committee, as a restatement of Iron Mountain's then-existing stock option plan. The purpose of the Stock Option Plan is to encourage key employees, directors, and consultants of the Company and its subsidiaries who render services of special importance to, and who have contributed or may be expected to contribute materially to the success of, the Company or a subsidiary to continue their association with the Company and its subsidiaries by providing favorable opportunities for them to participate in the ownership of the Company and in its future growth through the granting of restricted shares ("Restricted Stock"), options to acquire Common Stock ("Options"), stock appreciation rights ("SARs") and other rights to compensation in amounts determined by the value of the Common Stock. Restricted Stock, SARs and other rights are referred to collectively as "Other Rights." The total number of shares of Common Stock that may be subject to Options and Other Rights under the Stock Option Plan may not exceed 1,000,000. As of June 30, 1996, options for 757,827 shares of Common Stock were outstanding under the Stock Option Plan and 213,258 shares of Common Stock were available for grants of Options and/or Other Rights under the Stock Option Plan. The duration of the Options granted under the Stock Option Plan may be specified pursuant to each respective stock option agreement, but in no event can any Option intended to qualify as an incentive stock option (an "ISO") within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), be exercisable after the expiration of 10 years after the date of grant. In the case of any employee who owns (or is considered under Section 424(d) of the Code as owning) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, no ISO shall be exercisable after the expiration of five years from its date of grant. The following table sets forth certain information concerning the grant of Options to Messrs. Wendell and Swift. Neither of the other Named Executive Officers was granted Options in 1995. Option Grants in Last Fiscal Year
Potential Realizable Value At Number of % of Total Assumed Annual Rates of Securities Options Stock Appreciation for Underlying Granted to Exercise Option Terms(2) Options Employees in Price Per Expiration ----------------------------- Name Granted Fiscal Year Share Date 5%($) 10%($) - ---- ------------ -------------- ----------- -------- ----------- -------------- David S. Wendell 35,469 21.9% $16.125 (1) $359,688 $911,521 President and Chief Operating Officer Robert P. Swift 8,096 5.0% $16.125 2/5/2006 $ 82,101 $208,066 Executive Vice President
- ------------ (1) Options granted to Mr. Wendell with respect to 29,410 shares of Common Stock expire February 5, 2006, and options with respect to the remaining 6,059 shares expire 60 days after termination of Mr. Wendell's employment with the Company. (2) Potential Realizable Value is based on the assumed growth rates for an assumed ten-year option term. 5% annual growth results in a Common Stock price per share of $26.27, and 10% results in a Common Stock price per share of $41.82, respectively, for such term. The actual value, if any, an executive may realize will depend on the excess of the market price of the Common Stock over the exercise price on the date the option is exercised, so that there is no assurance the value realized by an executive will be at or near the amounts reflected in this table. 59 The following table sets forth certain information with respect to the unexercised Options granted to Messrs. Wendell and Swift. Neither of such individuals exercised any stock options during the year ended December 31, 1995. Neither of the other Named Executive Officers has any unexercised Options. Fiscal Year End Option Values
Value of Unexercised Number of Unexercised In-the-Money-Options at Options at December 31, 1995 December 31, 1995(1) -------------------------------- ---------------------------- Name Exercisable Unexercisable Exercisable Unexercisable - ---- ------------ ------------- ----------- ------------- David S. Wendell 71,077 53,266 $676,653 $169,427 President and Chief Operating Officer Robert P. Swift 11,566 15,806 $110,108 $ 73,399 Executive Vice President
- ------------ (1) Based on the initial public offering price of $16.00 per share, less the exercise price. CERTAIN TRANSACTIONS In 1993, in connection with the employment of David S. Wendell, the Company made demand loans to Mr. Wendell in an aggregate principal amount of $70,000 in connection with Mr. Wendell's purchase of a home. The loans bear interest at a rate equal to the Company's cost to borrow such funds and are secured by a second mortgage on the home. As of September 3, 1996, the principal balance of the loans was $25,000. See "Management--Executive Compensation--Compensation Committee Interlocks and Insider Participation" for a discussion of: (i) certain payments to Vincent J. Ryan and Schooner for consulting services; (ii) a lease between a partnership affiliated with Messrs. Doggett, Reese and Ryan and a subsidiary of the Company; (iii) the familial relationship between Vincent J. Ryan, an Iron Mountain Director, and T. Anthony Ryan, an Iron Mountain officer; (iv) a lease between Schooner and the Company; (v) certain indebtedness of Iron Mountain to Schooner to be repaid with a portion of the net proceeds of the Offering; and (vi) Schooner's prior participation in Iron Mountain's 401(k) plan and certain other employee benefit plans. 60 PRINCIPAL STOCKHOLDERS The following table sets forth certain information known to the Company with respect to beneficial ownership of Common Stock by: (i) each stockholder known by the Company to be the beneficial owner of more than five percent of the Common Stock; (ii) each director; (iii) each Named Executive Officer; and (iv) all executive officers and directors of the Company as a group. Such information is presented as of September 3, 1996. Amount of Beneficial Ownership(1) ------------------------------ Percent Name Shares Owned - ---------------------------------- ------------ -------------- Directors and Executive Officers: C. Richard Reese(2) 1,127,503 11.7% David S. Wendell(3) 83,815 * Eugene B. Doggett(4) 219,745 2.3% Robert P. Swift(5) 15,421 * Constantin R. Boden(6) 19,746 * Arthur D. Little(7) 98,730 1.0% Vincent J. Ryan(8) 3,503,250 36.4% All Directors and executive officers as a group (8 persons)(9) 4,371,289 45.0% Five Percent Stockholder: Schooner Capital Corporation(10) 1,909,384 19.8% - ----------- * Less than 1% (1) Except as otherwise indicated, the persons named in the table above have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them. (2) Mr. Reese is a director and Chairman of the Board and Chief Executive Officer of the Company. Includes 12,160 shares of Common Stock held by trusts for the benefit of Mr. Reese's children, as to which Mr. Reese disclaims beneficial ownership. Also includes 668,166 shares of Common Stock as to which Mr. Reese shares beneficial ownership with Schooner as a result of a 1988 deferred compensation arrangement, as amended, between Schooner and Mr. Reese relating to Mr. Reese's former services as President of Schooner. Pursuant to such arrangement, upon the earlier to occur of (i) Schooner's sale or exchange of substantially all of the shares of Common Stock held by Schooner or (ii) the cessation of Mr. Reese's employment with Iron Mountain, Schooner is required to transfer such shares of Common Stock to Mr. Reese or remit to Mr. Reese cash in an amount equal to the then current fair market value of such shares of Common Stock. Schooner has agreed to vote the shares of Common Stock subject to such arrangement at the direction of Mr. Reese. Mr. Reese's address is c/o Iron Mountain Incorporated, 745 Atlantic Avenue, Boston, Massachusetts 02111. (3) Mr. Wendell is a director and President and Chief Operating Officer of the Company. Includes 79,960 shares that Mr. Wendell has the right to acquire pursuant to currently exercisable options. See "Executive Compensation." Mr. Wendell's address is c/o Iron Mountain Incorporated, 745 Atlantic Avenue, Boston, Massachusetts 02111. (4) Mr. Doggett is a director and Executive Vice President and Chief Financial Officer of the Company. Includes 29,550 shares of Common Stock as to which Mr. Doggett shares beneficial ownership with Schooner as a result of a 1988 deferred compensation arrangement, as amended, between Schooner and Mr. Doggett relating to Mr. Doggett's former services as Chief Financial Officer of Schooner. Pursuant to such arrangement, upon the earlier to occur of (i) Schooner's sale or exchange of substantially all of the shares of Common Stock held by Schooner or (ii) the cessation of Mr. Doggett's employment with Iron Mountain, Schooner is required to transfer such shares of Common Stock to Mr. Doggett or remit to Mr. Doggett cash in an amount equal to the then current fair market value of such shares of Common Stock. Schooner has agreed to vote the shares of Common Stock subject to such arrangement at the direction of Mr. Doggett. Mr. Doggett's address is c/o Iron Mountain Incorporated, 745 Atlantic Avenue, Boston, Massachusetts 02111. 61 (5) Mr. Swift is a director and Executive Vice President of the Company. Consists of shares that Mr. Swift has the right to acquire pursuant to currently exercisable options. See "Executive Compensation." Mr. Swift's address is c/o Iron Mountain Incorporated, 1340 East 6th Street, Los Angeles, California 90021. (6) Mr. Boden is a director of the Company. Mr. Boden's address is c/o Boston Capital Ventures, 45 School Street, Boston, Massachusetts 02110. (7) Mr. Little is a director of the Company. Consists of 49,365 shares held by The Little Family Trust and 49,365 shares held by The Little Family Foundation, as to which Mr. Little disclaims beneficial ownership. Mr. Little's address is c/o The Little Investment Company, 33 Broad Street, Boston, Massachusetts 02109. (8) Mr. Ryan is a director of the Company. Mr. Ryan holds 1,593,866 shares of Common Stock. The remaining shares of Common Stock listed as being beneficially owned by Mr. Ryan are held by Schooner, as to which Mr. Ryan has sole voting power and investment power as the Chairman of the Board and principal stockholder of Schooner. Mr. Ryan's address is c/o Schooner Capital Corporation, 745 Atlantic Avenue, Boston, Massachusetts 02111. See footnote (10) regarding shares held by Schooner. (9) Includes 96,156 shares that directors and executive officers have the right to acquire pursuant to currently exercisable options. (10) Mr. Ryan is the Chairman of the Board and the principal stockholder of Schooner and, accordingly has sole voting and investment power with respect to the shares of Common Stock held by Schooner. Includes 668,166 shares of Common Stock as to which Schooner shares beneficial ownership with Mr. Reese as described in footnote (2). Also includes 29,550 shares of Common Stock as to which Schooner shares beneficial ownership with Mr. Doggett as described in footnote (4). Schooner has agreed to vote the shares of Common Stock subject to such arrangements at the direction of Mr. Reese or Mr. Doggett, as the case may be. 62 DESCRIPTION OF THE NOTES General The Notes will be issued pursuant to an Indenture (the "Indenture") among the Company, the Subsidiary Gaurantors (as defined below) and First Bank National Association, as trustee (the "Trustee"). The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the Trust Indenture Act for a statement thereof. The following summary of certain provisions of the Indenture does not purport to be complete and is qualified in its entirety by reference to the Indenture, including the definitions therein of certain terms used below. A copy of the proposed form of Indenture has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. The definitions of certain terms used in the following summary are set forth below under "Certain Definitions." Principal, Maturity and Interest The Notes will be general unsecured obligations of the Company, will be limited in aggregate principal amount to $150 million and will mature on , 2006. Interest on the Notes will accrue at the rate of % per annum and will be payable semi-annually in arrears on and , commencing on , 1997, to Holders of record on the immediately preceding and . Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. The Notes will be payable both as to principal and interest at the office or agency of the Company maintained for such purpose within the City and State of New York or, at the option of the Company, payment of interest may be made by check mailed to the Holders of Notes at their addresses set forth in the register of Holders of Notes. Until otherwise designated by the Company, the Company's office or agency in New York will be the office of the Trustee maintained for such purpose. The Notes will be issued in registered form, without coupons, and in denominations of $1,000 and integral multiples thereof. Subsidiary Guarantees The Company's payment obligations under the Notes will be jointly and severally guaranteed (the "Subsidiary Guarantees") on an unsecured senior subordinated basis by all of the Company's existing and future Restricted Subsidiaries other than the Excluded Restricted Subsidiaries (each, a "Subsidiary Guarantor"). See "Certain Covenants--Additional Subsidiary Guarantees." Each Subsidiary Guarantee will be subordinated to the prior payment in full of all Senior Debt of each such Subsidiary Guarantor, which on a pro forma basis would have been $24.5 million at June 30, 1996 for all Subsidiary Guarantors. Notwithstanding the subordination provisions contained in the Indenture, the obligations of a Subsidiary Guarantor under its Subsidiary Guarantee will be unconditional. See "Risk Factors--Unenforceability and Release of Guarantees." Subordination The payment of principal of, premium, if any, and interest on the Notes will be subordinated in right of payment, as set forth in the Indenture, to the prior payment in full in cash of all Obligations with respect to Senior Debt, whether outstanding on the date of the Indenture or thereafter incurred. Upon any payment or distribution to creditors of the Company or any Subsidiary Guarantor in a liquidation or dissolution of the Company or such Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or any Subsidiary Guarantor or its property, an assignment for the benefit of creditors or any marshaling of the assets and liabilities of the Company or any Subsidiary Guarantor, (a) the holders of Senior Debt will be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt, whether or not allowed as a claim in such proceeding) before the Holders of Notes will be entitled to receive any payment or distribution with respect to the Notes, and (b) until all Obligations with respect to Senior Debt are paid in full in cash, any payment or distribution to which the Holders of Notes would be entitled shall be made to the holders of Senior Debt. 63 Neither the Company nor any Subsidiary Guarantor may make any payment or distribution upon or in respect of the Notes, including, without limitation, by way of set-off or otherwise, or redeem (or make a deposit in redemption of), defease or acquire any of the Notes for cash, properties or securities if (a) a default in the payment of any Obligation in respect of any Senior Debt occurs and is continuing or (b) any other default (or any event that, after notice or passage of time would become a default) (a "Non-Monetary Default") occurs and is continuing with respect to Senior Debt and, in the case of clause (b), the Trustee receives a notice of such default (a "Payment Blockage Notice") from the holders (or the agent or representative of such holders) of any Designated Senior Debt. Payments on the Notes may and shall be resumed (i) in the case of a payment default, on the date on which such default is cured or waived and (ii) in the case of a Non-Monetary Default, on the earlier of the date on which such Non-Monetary Default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Senior Debt has been accelerated. Any number of Payment Blockage Notices may be given, provided, however, that (A) not more than one Payment Blockage Notice may be commenced during any period of 360 consecutive days and (B) any Non-Monetary Default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee (to the extent the holder of Designated Senior Debt, or such trustee or agent, giving such Payment Blockage Notice had knowledge of the same) shall not be the basis for a subsequent Payment Blockage Notice, unless such default has been cured or waived for a period of not less than 90 consecutive days. The Indenture will further require that the Company promptly notify holders of Senior Debt if payment of the Notes is accelerated because of an Event of Default. As a result of the subordination provisions described above, in the event of a liquidation or insolvency, Holders of Notes may recover less ratably than creditors of the Company who are holders of Senior Debt. On a pro forma basis, after giving effect to the Transactions, the principal amount of Senior Debt of the Company and the Restricted Subsidiaries outstanding at June 30, 1996 would have been $24.5 million. The Indenture will not limit the amount of additional Indebtedness, including Senior Debt, that the Company and its Subsidiaries can incur if certain financial tests are met. See "Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock." Optional Redemption The Notes will not be redeemable at the Company's option prior to , 2001. Thereafter, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon to but excluding the applicable redemption date, if redeemed during the twelve-month period beginning on of the years indicated below: Year Percentage - ---- ---------- 2001 % 2002 % 2003 % 2004 and thereafter 100% Notwithstanding the foregoing, at any time during the first 36 months after the date of issuance of the Notes, the Company may redeem up to 35% of the initial principal amount of the Notes originally issued with the net proceeds of one or more Qualified Equity Offerings at a redemption price equal to % of the principal amount of such Notes, plus accrued and unpaid interest, if any, to but excluding the date of redemption; provided, that at least 65% of the principal amount of Notes originally issued remains outstanding immediately after the occurrence of any such redemption and that such redemption occurs within 60 days following the closing of any such Qualified Equity Offering. 64 Mandatory Redemption Except with respect to required repurchases upon the occurrence of a Change of Control or in the event of certain Asset Sales, each as described below under "Repurchase at the Option of Holders," the Company is not required to make sinking fund or redemption payments with respect to the Notes. Repurchase at the Option of Holders Change of Control Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to but excluding the date of purchase (the "Change of Control Payment"). Within 30 calendar days following any Change of Control, the Company will mail a notice to each Holder stating: (a) that the Change of Control Offer is being made pursuant to the covenant entitled "Change of Control" and that all Notes tendered will be accepted for payment; (b) the purchase price and the purchase date, which will be no earlier than 30 calendar days nor later than 60 calendar days from the date such notice is mailed (the "Change of Control Payment Date"); (c) that any Note not tendered will continue to accrue interest; (d) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on and after the Change of Control Payment Date; (e) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in such notice prior to the close of business on the fifth Business Day preceding the Change of Control Payment Date; (f) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased; and (g) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable to the repurchase of the Notes in connection with a Change of Control. On the Change of Control Payment Date, the Company will, to the extent lawful, (a) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer, (b) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (c) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the Notes or portions thereof tendered to the Company. The Paying Agent will promptly mail to each Holder of Notes so accepted the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar restructuring, nor does it contain any other "event risk" protections for Holders of the Notes. Although the Change of Control provision may not be waived by the Company, and may be waived by the Trustee only in accordance with the provisions of the Indenture, there can be no assurance that any particular transaction (including a highly leveraged transaction) cannot be structured or effected in a manner not constituting a Change of Control. The Credit Agreement currently prohibits the Company from purchasing any Notes prior to the expiration of the Credit Agreement and also provides that certain change of control events with respect to the Company would constitute a default thereunder. The New Credit Facility will contain, and any future credit agreements or other 65 agreements relating to Senior Debt to which the Company becomes a party may contain, similar restrictions and provisions. In the event a Change of Control occurs at a time when the Company is prohibited from purchasing Notes, the Company could seek the consent of its lenders to the purchase of Notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain such a consent or repay such borrowings, the Company will remain prohibited from purchasing Notes. In such case, the Company's failure to purchase tendered Notes would constitute an Event of Default under the Indenture which would, in turn, constitute a default under the Credit Agreement and is expected to constitute an event of default under the New Credit Facility. In such circumstances, the subordination provisions in the Indenture would likely restrict payments to the Holders of Notes. "Change of Control" means the occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than the Principal Stockholders (or any of them), is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than a majority of the voting power of all classes of Voting Stock of the Company; (b) the Company consolidates with, or merges with or into, another Person or conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company is converted into or exchanged for cash, securities or other property, other than any such transaction where (i) the outstanding Voting Stock of the Company is not converted or exchanged at all (except to the extent necessary to reflect a change in the jurisdiction of incorporation) or is converted into or exchanged for (A) Voting Stock (other than Disqualified Stock) of the surviving or transferee Person or (B) cash, securities and other property (other than Capital Stock described in the foregoing clause (A)) of the surviving or transferee Person in an amount that could be paid as a Restricted Payment as described under the "Restricted Payments" covenant and (ii) immediately after such transaction, no "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than the Principal Stockholders (or any of them), is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than a majority of the total outstanding Voting Stock of the surviving or transferee Person; (c) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election to such Board of Directors, or whose nomination for election by the stockholders of the Company, was approved by a vote of 66-2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office; or (d) the Company is liquidated or dissolved or adopts a plan of liquidation or dissolution other than in a transaction which complies with the provisions described under "Consolidation, Merger and Sale of Assets." Asset Sales The Indenture will provide that the Company will not, and will not permit any of its Restricted Subsidiaries to, (a) sell, lease, convey or otherwise dispose of any assets (including by way of a Sale and Leaseback Transaction, but excluding a Qualifying Sale and Leaseback Transaction) other than sales of inventory in the ordinary course of business (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company will be governed by the provisions of the Indenture described above under the caption "Change of Control" and/or the provisions described below under the caption "Merger, Consolidation or Sale of Assets" and not by the provisions of this covenant), or (b) issue or sell Equity Interests of any of its Restricted Subsidiaries, that, in the case of either clause (a) or (b) above, whether in a single transaction or a series of related transactions, (i) have a fair market value in excess of $1.0 million, or (ii) result in Net Proceeds in excess of $1.0 million (each of the foregoing, an "Asset Sale"), unless (x) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by an Officers' Certificate delivered to the Trustee, and for Asset Sales having a fair market value or resulting in net proceeds in excess of $5.0 million, evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate 66 delivered to the Trustee) of the assets sold or otherwise disposed of and (y) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or like-kind assets (in each case as determined in good faith by the Company, evidenced by a resolution of the Board of Directors and certified by an Officers' Certificate filed with the Trustee); provided, however, that the amount of (A) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto) of the Company or such Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets and (B) any notes or other obligations received by the Company or such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) or Cash Equivalents, shall be deemed to be cash for purposes of this provision; and provided, further, that the 75% limitation referred to in the foregoing clause (y) shall not apply to any Asset Sale in which the cash portion of the consideration received therefrom is equal to or greater than what the after-tax proceeds would have been had such Asset Sale complied with the aforementioned 75% limitation. A transfer of assets or issuance of Equity Interests by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary will not be deemed to be an Asset Sale. Within 360 days of any Asset Sale, the Company may, at its option, apply an amount equal to the Net Proceeds from such Asset Sale either (a) to permanently reduce Senior Debt, or (b) to an investment in a Restricted Subsidiary or in another business or capital expenditure or other long-term/tangible assets, in each case, in the same line of business as the Company or any of its Restricted Subsidiaries was engaged in on the date of the Indenture or in businesses similar or reasonably related thereto. Pending the final application of any such Net Proceeds, the Company may temporarily reduce Senior Bank Debt or otherwise invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from such Asset Sale that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company shall make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. Selection and Notice If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate, provided that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions of them called for redemption. Certain Covenants Restricted Payments The Indenture will provide that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (a) declare or pay any dividend or make any distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or such Restricted Subsidiary or dividends or distributions payable to the Company or any Restricted Subsidiary); (b) purchase, redeem or otherwise acquire or retire for value 67 any Equity Interests of the Company or any Restricted Subsidiary or other Affiliate of the Company (other than any such Equity Interests owned by the Company or any Restricted Subsidiary); (c) purchase, redeem or otherwise acquire or retire prior to scheduled maturity for value any Indebtedness that is subordinated in right of payment to the Notes or (d) make any Investment other than a Permitted Investment (all such payments and other actions set forth in clauses (a) through (d) above being collectively referred to as "Restricted Payments"), unless, at the time of such Restricted Payment: (i) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (ii) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the test set forth in the first paragraph of the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock;" and (iii) such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of the Indenture is less than (x) the cumulative EBITDA of the Company, minus 1.75 times the cumulative Consolidated Interest Expense of the Company, in each case for the period (taken as one accounting period) from June 30, 1996, to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, plus (y) the aggregate net Equity Proceeds received by the Company from the issuance or sale since the date of the Indenture of Equity Interests of the Company or of debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests or convertible debt securities sold to a Restricted Subsidiary of the Company and other than Disqualified Stock or debt securities that have been converted into Disqualified Stock), plus (z) $2.0 million. The foregoing provisions will not prohibit (A) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture; (B) the redemption, repurchase, retirement or other acquisition or retirement for value of any Equity Interests of the Company in exchange for, or with the net cash proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of other Equity Interests of the Company (other than any Disqualified Stock); (C) the defeasance, redemption, repurchase, retirement or other acquisition or retirement for value of Indebtedness that is subordinated or pari passu in right of payment to the Notes in exchange for, or with the net cash proceeds of, a substantially concurrent issuance and sale (other than to a Restricted Subsidiary of the Company) of Equity Interests of the Company (other than Disqualified Stock); (D) the defeasance, redemption, repurchase, retirement or other acquisition or retirement for value of Indebtedness that is subordinated or pari passu in right of payment to the Notes in exchange for, or with the net cash proceeds of, a substantially concurrent issue and sale (other than to the Company or any of its Restricted Subsidiaries) of Refinancing Indebtedness; (E) the repurchase of any Indebtedness subordinated or pari passu in right of payment to the Notes at a purchase price not greater than 101% of the principal amount of such Indebtedness in the event of a Change of Control in accordance with provisions similar to the "Change of Control" covenant, provided that prior to or contemporaneously with such repurchase the Company has made the Change of Control Offer as provided in such covenant with respect to the Notes and has repurchased all Notes validly tendered for payment in connection with such Change of Control Offer; (F) the prepayment of the Chrysler Notes, together with premium and interest thereon; (G) the prepayment of $450,000 of junior subordinated notes issued by the Company in connection with a 1990 acquisition, together with interest thereon; and (H) additional payments to current or former employees or directors of the Company for repurchases of stock, stock options or other equity interests, provided that the aggregate amount of all such payments under this clause (H) does not exceed $500,000 in any year and $2.0 million in the aggregate. The Restricted Payments described in clauses (B), (C), (E) and (H) of the immediately preceding paragraph will be Restricted Payments that will be permitted to be taken in accordance with such paragraph but will reduce the amount that would otherwise be available for Restricted Payments under clause (iii) of the first paragraph of this section, and the Restricted Payments described in clauses (A), (D), (F) and (G) of the immediately preceding paragraph will be Restricted Payments that will be permitted to be taken in accordance with such paragraph and will not reduce the amount that would otherwise be available for Restricted Payments under clause (iii) of the first paragraph of this section. If an Investment results in the making of a Restricted Payment, the aggregate amount of all Restricted Payments deemed to have been made as calculated under the foregoing provision will be reduced by the amount of any net 68 reduction in such Investment (resulting from the payment of interest or dividends, loan repayment, transfer of assets or otherwise) to the extent such net reduction is not included in the Company's EBITDA; provided, however, that the total amount by which the aggregate amount of all Restricted Payments may be reduced may not exceed the lesser of (a) the cash proceeds received by the Company and its Restricted Subsidiaries in connection with such net reduction and (b) the initial amount of such Investment. If the aggregate amount of all Restricted Payments calculated under the foregoing provision includes an Investment in an Unrestricted Subsidiary or other Person that thereafter becomes a Restricted Subsidiary, such Investment will no longer be counted as a Restricted Payment for purposes of calculating the aggregate amount of Restricted Payments. For the purpose of making any calculations under the Indenture, (a) an Investment will include the fair market value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and will exclude the fair market value of the net assets of any Unrestricted Subsidiary that is designated as a Restricted Subsidiary, (b) any property transferred to or from an Unrestricted Subsidiary will be valued at fair market value at the time of such transfer, provided that, in each case, the fair market value of an asset or property is as determined by the Board of Directors in good faith, and (c) subject to the foregoing, the amount of any Restricted Payment, if other than cash, will be determined by the Board of Directors, whose good faith determination will be conclusive. The Board of Directors may designate a Restricted Subsidiary to be an Unrestricted Subsidiary in compliance with the covenant entitled "Unrestricted Subsidiaries." Upon such designation, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments made at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Incurrence of Indebtedness and Issuance of Preferred Stock The Indenture will provide that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty or otherwise become directly or indirectly liable with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and that the Company will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Company may incur Indebtedness and may permit a Restricted Subsidiary to incur Indebtedness if at the time of such incurrence and after giving effect thereto the Leverage Ratio would be less than 6.0 to 1.0. The foregoing limitations will not apply to (a) the incurrence by the Company or any Restricted Subsidiary of Senior Bank Debt in an aggregate amount not to exceed $25.0 million at any one time outstanding, (b) the issuance by the Restricted Subsidiaries of Subsidiary Guarantees, (c) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness, (d) the issuance by the Company of the Notes, (e) the incurrence by the Company and its Restricted Subsidiaries of Capital Lease Obligations and/or additional Indebtedness constituting purchase money obligations up to an aggregate of $2.5 million at any one time outstanding, provided that the Liens securing such Indebtedness constitute Permitted Liens, (f) the incurrence of Indebtedness between (i) the Company and its Restricted Subsidiaries and (ii) the Restricted Subsidiaries, (g) Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of the Indenture to be outstanding, (h) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness arising out of letters of credit, performance bonds, surety bonds and bankers' acceptances incurred in the ordinary course of business up to an aggregate of $2.0 million at any one time outstanding, (i) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock, and (j) the incurrence by the Company and its Restricted Subsidiaries of Refinancing Indebtedness issued in exchange for, or the proceeds of which are used to repay, redeem, defease, extend, refinance, renew, replace or refund, Indebtedness referred to in clauses (b) through (e) above, and this clause (j). Liens The Indenture will provide that neither the Company nor any of its Restricted Subsidiaries may directly or indirectly create, incur, assume or suffer to exist any Lien (other than a Permitted Lien) upon any property or assets 69 now owned or hereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income therefrom, unless (a) in the case of any Lien securing any Indebtedness that is subordinate to the Notes, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien and (b) in the case of any other Lien, the Notes are equally and ratably secured with the obligation or liability secured by such Lien. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries The Indenture will provide that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (a) (i) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or (B) with respect to any other interest or participation in, or measured by, its profits, or (ii) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries, (b) make loans or advances to the Company or any of its Restricted Subsidiaries or (c) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (1) Existing Indebtedness, (2) the Credit Agreement as in effect as of the date of the Indenture, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancing thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are no more restrictive in the aggregate with respect to such dividend and other payment restrictions than those contained in the Credit Agreement as in effect on the date of the Indenture, (3) the Indenture and the Notes, (4) applicable law, (5) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that the EBITDA of such Person is not taken into account in determining whether such acquisition was permitted by the terms of the Indenture, (6) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices, (7) restrictions on the transfer of property subject to purchase money or Capital Lease Obligations otherwise permitted by clause (e) of the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock," or (8) permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Refinancing Indebtedness are no more restrictive in the aggregate than those contained in the agreements governing the Indebtedness being refinanced. Merger, Consolidation, or Sale of Assets The Indenture will provide that the Company may not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another Person unless: (a) the Company is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (c) immediately after such transaction no Default or Event of Default exists; and (d) the Company or any Person formed by or surviving any such consolidation or merger, or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made, will, at the time of such transaction and after giving pro forma effect thereto, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the test set forth in the first paragraph of the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock." Transactions with Affiliates The Indenture will provide that the Company will not, and will not permit any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, 70 any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (a) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with a non-Affiliated Person and (b) the Company delivers to the Trustee (i) with respect to any Affiliate Transaction involving aggregate payments in excess of $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (a) above and such Affiliate Transaction is approved by a majority of the disinterested members of the Board of Directors and (ii) with respect to any Affiliate Transaction involving aggregate payments in excess of $5.0 million, an opinion as to the fairness to the Company or such Restricted Subsidiary from a financial point of view issued by an investment banking firm of national standing; provided, however, that (A) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary, (B) transactions between or among the Company and/or its Restricted Subsidiaries, (C) transactions permitted by the provisions of the Indenture described above under the covenant entitled "Restricted Payments" and (D) the grant of stock, stock options or other equity interests to employees and directors of the Company in accordance with duly adopted Company stock grant, stock option and similar plans, in each case, shall not be deemed Affiliate Transactions; and further provided that (1) the provisions of clause (b) shall not apply to sales of inventory by the Company or any Restricted Subsidiary to any Affiliate in the ordinary course of business and (2) the provisions of clause (b) (ii) shall not apply to loans or advances to the Company or any Restricted Subsidiary from, or equity investments in the Company or any Restricted Subsidiary by, any Affiliate to the extent permitted by the provisions of the Indenture described above under the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock." Certain Senior Subordinated Debt The Indenture will provide that (a) the Company will not incur any Indebtedness that is subordinated or junior in right of payment to any Senior Debt of the Company and senior in any respect in right of payment to the Notes, and (b) the Company will not permit any Restricted Subsidiary to incur any Indebtedness that is subordinated or junior in right of payment to its Senior Debt and senior in any respect in right of payment to its Subsidiary Guarantee. Additional Subsidiary Guarantees The Indenture will provide that if any entity (other than an Excluded Restricted Subsidiary) shall become a Restricted Subsidiary after the date of the Indenture, then such Restricted Subsidiary shall execute a Subsidiary Guarantee and deliver an opinion of counsel with respect thereto, in accordance with the terms of the Indenture. The Indenture will provide that no Restricted Subsidiary may consolidate with or merge with or into (whether or not such Restricted Subsidiary is the surviving Person), another Person (other than the Company) whether or not affiliated with such Restricted Subsidiary unless (a) subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Restricted Subsidiary) assumes all the obligations of such Restricted Subsidiary under its Subsidiary Guaranty, if any, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee; (b) immediately after giving effect to such transaction, no Default or Event of Default exists; and (c) such Restricted Subsidiary, or any Person formed by or surviving any such consolidation or merger, would be permitted to incur, immediately after giving effect to such transaction, at least $1.00 of additional Indebtedness pursuant to the test set forth in the first paragraph of the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock." The Indenture will provide that in the event of (a) a sale or other disposition of all of the assets of any Restricted Subsidiary, by way of merger, consolidation or otherwise, (b) a sale or other disposition of all of the capital stock of any Restricted Subsidiary, or (c) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary in accordance with the terms of the covenant entitled "Unrestricted Subsidiaries," then such Subsidiary (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the capital stock of such Restricted Subsidiary or in the event of the designation of such Restricted Subsidiary as an Unrestricted Subsidiary) or the corporation acquiring the property (in the event of a sale or other disposition of all of the assets of such Restricted Subsidiary) will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture. See "Redemption or Repurchase at Option of Holders--Asset Sales." 71 Unrestricted Subsidiaries The Board of Directors may designate any Subsidiary (including any Restricted Subsidiary or any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as: (i) neither the Company nor any Restricted Subsidiary is directly or indirectly liable for any Indebtedness of such Subsidiary; (ii) no default with respect to any Indebtedness of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Indebtedness of the Company or any Restricted Subsidiary to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; (iii) any Investment in such Subsidiary deemed to be made as a result of designating such Subsidiary an Unrestricted Subsidiary will not violate the provisions of the covenant entitled "Restricted Payments;" (iv) neither the Company nor any Restricted Subsidiary has a contract, agreement, arrangement, understanding or obligation of any kind, whether written or oral, with such Subsidiary other than (A) those that might be obtained at the time from Persons who are not Affiliates of the Company or (B) administrative, tax sharing and other ordinary course contracts, agreements, arrangements and understandings or obligations entered into in the ordinary course of business; and (v) neither the Company nor any Restricted Subsidiary has any obligation to subscribe for additional shares of Capital Stock or other Equity Interests in such Subsidiary, or to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results other than as permitted under the covenant entitled "Restricted Payments." Notwithstanding the foregoing, the Company may not designate as an Unrestricted Subsidiary any Subsidiary which, on the date of the Indenture, is a Significant Subsidiary, and may not sell, transfer or otherwise dispose of any properties or assets of any such Significant Subsidiary to an Unrestricted Subsidiary, other than in the ordinary course of business. The Board of Directors may designate any Unrestricted Subsidiary as a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if (i) such Indebtedness is permitted under the "Incurrence of Indebtedness and Issuance of Preferred Stock" covenant and (ii) no Default or Event of Default would occur as a result of such designation. Limitation on Sale and Leaseback Transactions. The Company will not, and will not permit any Restricted Subsidiary to, enter into any Sale and Leaseback Transaction unless (a) the consideration received in such Sale and Leaseback Transaction is at least equal to the fair market value of the property sold, as determined by a resolution of the Board of Directors of the Company, and (b) the Company or such Restricted Subsidiary could incurr the Attributable Indebtedness in respect of such Sale and Leaseback Transaction in compliance with the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock." Reports Whether or not required by the rules and regulations of the Securities and Exchange Commission (the "Commission"), so long as any Notes are outstanding, the Company will furnish to the Holders of Notes (a) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (b) all financial information that would be required to be included in a Form 8-K filed with the Commission if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information and reports with the Commission for public availability (unless the Commission will not accept such a filing) and make such information available to investors who request it in writing. Events of Default and Remedies The Indenture will provide that each of the following constitutes an Event of Default: (a) default for 30 days in the payment when due of interest on the Notes (whether or not prohibited by the subordination provisions of the Indenture); (b) default in payment when due of the principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture); (c) failure by the Company to comply with the provisions described under "Change of Control;" (d) failure by the Company or any Subsidiary Guarantor for 60 days after written notice from the Trustee or Holders of not less than 25% of the aggregate principal amount of the Notes outstanding to comply with any of its other agreements in the Indenture, Notes or the Subsidiary Guarantees; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee exists on the date of the Indenture or is created thereafter, if (i) such default results in the acceleration of such Indebtedness prior to its express maturity or shall constitute a default in the payment of such Indebtedness at final maturity of such Indebtedness, and (ii) the principal amount of any such Indebtedness 72 that has been accelerated or not paid at maturity, when added to the aggregate principal amount of all other such Indebtedness that has been accelerated or not paid at maturity, exceeds $5.0 million; (f) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments remain unpaid, undischarged or unstayed for a period of 60 days; (g) certain events of bankruptcy or insolvency with respect to the Company or any of its Restricted Subsidiaries that are Significant Subsidiaries; and (h) except as permitted by the Indenture or the Subsidiary Guarantees, any Subsidiary Guarantee issued by a Restricted Subsidiary shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect, or any Restricted Subsidiary or any Person acting on behalf of any Restricted Subsidiary shall deny or disaffirm in writing its obligations under its Subsidiary Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately; provided, however, that if any Obligation with respect to Senior Bank Debt is outstanding pursuant to the Credit Agreement upon a declaration of acceleration of the Notes, the principal, premium, if any, and interest on the Notes will not be payable until the earlier of (i) the day which is five business days after written notice of acceleration is received by the Company and the Credit Agent, or (ii) the date of acceleration of the Indebtedness under the Credit Agreement. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company or any Restricted Subsidiary that is a Significant Subsidiary, the principal of, and premium, if any, and any accrued and unpaid interest on all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. In the event of a declaration of acceleration of the Notes because an Event of Default has occurred and is continuing as a result of the acceleration of any Indebtedness described in clause (e) of the preceding paragraph, the declaration of acceleration of the Notes shall be automatically annulled if the holders of any Indebtedness described in clause (e) have rescinded the declaration of acceleration in respect of such Indebtedness within 30 days of the date of such declaration and if (i) the annulment of the acceleration of the Notes would not conflict with any judgment or decree of a competent jurisdiction, and (ii) all existing Events of Default, except non-payment of principal or interest on the Notes that became due solely because of the acceleration of the Notes, have been cured or waived. In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to , 2004 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to , 2004, then the premium specified in the Indenture shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. No Personal Liability of Directors, Officers, Employees and Stockholders No director, officer, employee, incorporator or stockholder of the Company or any Restricted Subsidiary, as such, shall have any liability for any obligations of the Company or any Restricted Subsidiary under the Notes, the Subsidiary Guarantees or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note and the Subsidiary Guarantees waives and releases 73 all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Subsidiary Guarantees. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. Legal Defeasance and Covenant Defeasance The Company may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes ("Legal Defeasance") except for (a) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (b) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust, (c) the rights, powers, trusts, duties and immunities of the Trustee, and the Company's obligations in connection therewith and (d) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance"), and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in Dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, of such principal or installment of principal of, premium, if any, or interest on the outstanding Notes; (b) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (ii) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (h) the Company shall have delivered to the Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with. Transfer and Exchange A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The 74 Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered Holder of a Note will be treated as the owner of it for all purposes. Book-Entry, Delivery and Form The Notes will be represented by one or more fully registered global notes (collectively, the "Global Note"). The Global Note will be deposited upon issuance with, or on behalf of, The Depository Trust Company, as Depositary (the "Depositary"), and registered in the name of the Depositary or a nominee of the Depositary (the "Global Note Registered Owner"). Except as set forth below, the Global Note may be transferred, in whole and not in part, only to another nominee of the Depositary or to a successor of the Depositary or its nominee. The Depositary has advised the Company that the Depositary is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between the Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the Underwriters), banks, trust companies, clearing corporations and certain other organizations. Access to the Depositary's systems is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the "Indirect Participants"). Persons who are not Participants may beneficially own securities held by or on behalf of the Depositary only through the Participants or the Indirect Participants. The ownership interest and transfer of ownership interest of each actual purchaser of each security held by or on behalf of the Depositary are recorded on the records of the Participants and Indirect Participants. The Depositary has also advised the Company that, pursuant to procedures established by it, (i) upon deposit of the Global Note, the Depositary will credit the accounts of Participants designated by the Underwriters with portions of the principal amount of the Global Note and (ii) ownership of such interests in the Global Note will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depositary (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interests in the Global Note). The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer the Notes will be limited to that extent. Except as provided below, owners of interests in the Global Note will not have Notes registered in their names, will not receive physical delivery of the Notes in definitive form and will not be considered the registered owners or holders thereof under the Indenture for any purpose. Payments in respect of the principal of and premium, if any, and interest on any Notes registered in the name of the Global Note Registered Owner will be payable by the Trustee to the Global Note Registered Owner in its capacity as the registered holder under the Indenture. Under the terms of the Indenture, the Company and the Trustee will treat the persons in whose names the Notes, including the Global Note, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Consequently, neither the Company, the Trustee nor any agent of the Company or the Trustee has or will have any responsibility or liability for (i) any aspect of the Depositary's records or any Participant's records relating to or payments made on account of beneficial ownership interests in the Global Note, or for maintaining, supervising or reviewing any of the Depositary's records or any Participant's records relating to the beneficial ownership interests in the Global Note or (ii) any other matter relating to the actions and practices of the Depositary or any of its Participants. The Depositary has advised the Company that its current practice, upon receipt of any payment in respect of securities such as the Notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date, in amounts proportionate to their respective holdings in principal amount of beneficial interests in the relevant security as shown on the records of the Depositary. Payments by the Participants and the Indirect Participants to the beneficial owners of the Notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of the Depositary, the Trustee or the Company. Neither the Company nor the Trustee will be liable for any delay by the Depositary or any of its Participants in identifying the beneficial owners of the Notes, and 75 the Company and Trustee may conclusively rely on and will be protected in relying on instructions from the Global Note Registered Owner for all purposes. The Global Note is exchangeable for definitive Notes: (i) if the Depositary notifies the Company that it is unwilling or unable to continue as Depositary of the Global Note and the Company thereupon fails to appoint a successor Depositary; (ii) if the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Notes in definitive registered form; or (iii) if there shall have occurred and be continuing an Event of Default or any event which after notice or lapse of time or both would be an Event of Default with respect to the Notes. Such definitive Notes shall be registered in the names of the owners of the beneficial interests in the Global Note as provided by the Participants. Upon issuance of the Notes in definitive form, the Trustee is required to register the Notes in the name of, and cause the Notes to be delivered to, the person or persons (or the nominee thereof) identified as the beneficial owners as the Depositary shall direct. Settlement for purchases of beneficial interests in the Global Note upon the original issuance thereof will be required to be made by wire transfer in immediately available funds. Payments in respect of the Notes represented by the Global Note (including principal, premium, if any, and interest) will be made by wire transfer in immediately available funds to the accounts specified by the Global Note Registered Owner. With respect to the definitive Notes, the Company will make all payments of principal, premium, if any, and interest by wire transfer in immediately available funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing a check to such Holder's registered address. Secondary trading in long-term notes of corporate issuers is generally settled in clearing-house or next-day funds. In contrast, the beneficial interests in the Global Note are expected to trade in the Depositary's Same-Day Funds Settlement System, in which secondary market trading activity in those beneficial interests would be required by the Depositary to settle in immediately available funds. There is no assurance as to the effect, if any, that settlement in immediately available funds would have on trading activity in such beneficial interests. Amendment, Supplement and Waiver Except as provided in the next two succeeding paragraphs, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes). Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder of Notes): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes in a manner adverse to the Holders of the Notes; (c) reduce the rate of or change the time for payment of interest on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes; (g) waive a redemption payment with respect to any Note (other than a payment required by one of the covenants described above under the caption "Repurchase at the Option of Holders"); (h) except pursuant to the Indenture, release any Restricted Subsidiary from its obligations under its Subsidiary Guarantee, or change any Subsidiary Guarantee in any manner that would materially adversely affect the Holders; or (i) make any change in the foregoing amendment and waiver provisions. Notwithstanding the foregoing, without the consent of any Holder of Notes, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of the Notes in the case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under 76 the Indenture of any such Holder, or to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. Concerning the Trustee The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. Additional Information Anyone who receives this Prospectus may obtain a copy of the Indenture without charge by writing to Iron Mountain Incorporated, 745 Atlantic Avenue, Boston, MA 02111, Attention: Executive Vice President/Chief Financial Officer. Certain Definitions Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "Acquired Debt" means, with respect to any specified Person, (a) Indebtedness of any other Person, existing at the time such other Person merged with or into or became a Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person and (b) Indebtedness encumbering any asset acquired by such specified Person. "Acquisition EBITDA" means, as of any date of determination, with respect to an Acquisition EBITDA Entity, the sum of (a) EBITDA of such Acquisition EBITDA Entity for its last fiscal quarter for which financial statements are available at such date of determination, multiplied by four (or if such quarterly statements are not available, EBITDA for the most recent fiscal year for which financial statements are available), plus (b) projected quantifiable improvements in operating results (on an annualized basis) due to cost reductions calculated in good faith by the Company or one of its Restricted Subsidiaries, as certified by an Officers' Certificate filed with the Trustee, without giving effect to any operating losses of the acquired Person. "Acquisition EBITDA Entity" means, as of any date of determination, a business or Person (a) which has been acquired by the Company or one of its Restricted Subsidiaries and with respect to which financial results on a consolidated basis with the Company have not been made available for an entire fiscal quarter or (b) which is to be acquired in whole or in part with Indebtedness, the incurrence of which will require the calculation on such date of the Acquisition EBITDA of such Acquisition EBITDA Entity for purposes of the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock." "Adjusted EBITDA" means, as of any date of determination and without duplication, the sum of (a) EBITDA of the Company and its Restricted Subsidiaries for the most recent fiscal quarter for which internal financial statements are available at such date of determination, multiplied by four, and (b) Acquisition EBITDA of each business or Person that is an Acquisition EBITDA Entity as of such date of determination, multiplied by a fraction, the numerator of which is three minus the number of months (and/or any portion thereof) in such most recent fiscal quarter for which the financial results of such Acquisition EBITDA Entity are included in the EBITDA of the Company and its Restricted Subsidiaries under clause (a) above, and (ii) the denominator of which is three. The 77 effects of unusual or non-recurring items in respect of the Company, a Restricted Subsidiary or an Acquisition EBITDA Entity occurring in any period shall be excluded in the calculation of Adjusted EBITDA. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Attributable Indebtedness" in respect of a Sale and Leaseback Transaction means, as of the time of determination, the greater of (a) the fair market value of the property subject to such arrangement (as determined by the Board of Directors of the Company) and (b) the present value (discounted at the rate of interest implicit in such transaction) of the total obligations of the lessee for rental payments during the remaining terms of the lease included in such Sale and Leaseback Transaction (including any period for which such lease has been extended). "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be so required to be capitalized on the balance sheet in accordance with GAAP. "Capital Stock" means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, with respect to partnerships, partnership interests (whether general or limited) and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership. "Cash Equivalents" means (a) securities with maturities of one year or less from the date of acquisition, issued, fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit, time deposits, overnight bank deposits, bankers acceptances and repurchase agreements issued by a Qualified Issuer having maturities of 270 days or less from the date of acquisition, (c) commercial paper of an issuer rated at least A-2 by Standard & Poor's Rating Group, a division of McGraw Hill, Inc., or P-2 by Moody's Investors Service, or carrying an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments and having maturities of 270 days or less from the date of acquisition, (d) money market accounts or funds with or issued by Qualified Issuers and (e) Investments in money market funds substantially all of the assets of which are comprised of securities and other obligations of the types described in clauses (a) through (c) above. "Consolidated Adjusted Net Income" means, for any period, the net income (or net loss) of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, adjusted to the extent included in calculating such net income or loss by excluding (a) any net after-tax extraordinary gains or losses (less all fees and expenses relating thereto), (b) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to Asset Sales, (c) the portion of net income (or loss) of any Person (other than the Company or a Restricted Subsidiary), including Unrestricted Subsidiaries, in which the Company or any Restricted Subsidiary has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any Restricted Subsidiary in cash dividends or distributions by such Person during such period, and (d) the net income (or loss) of any Person combined with the Company or any Restricted Subsidiary on a "pooling of interests" basis attributable to any period prior to the date of combination. "Consolidated Income Tax Expense" means, for any period, the provision for federal, state, local and foreign income taxes of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, for any period, without duplication, the sum of (a) the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on a consolidated statement of operations of the Company and its Restricted Subsidiaries for such period, including, without limitation, (i) amortization of debt discount, (ii) the net cost of interest rate contracts (including amortization of discounts), (iii) the interest portion of any deferred payment obligation, (iv) amortization of debt issuance costs, and (v) the interest component of Capital Lease Obligations of the Company and its Restricted Subsidiaries, plus (b) all interest on any Indebtedness of any other Person guaranteed and paid by the Company or any of its Restricted Subsidiaries; provided, however, that Consolidated Interest Expense will not include any gain or loss from extinguishment of debt, including write-off of debt issuance costs. "Consolidated Non-Cash Charges" means, for any period, the aggregate depreciation, amortization and other non-cash expenses of the Company and its Restricted Subsidiaries reducing Consolidated Adjusted Net Income for 78 such period, determined on a consolidated basis in accordance with GAAP (excluding any such non-cash charge that requires an accrual of or reserve for cash charges for any future period). "Credit Agent" means The Chase Manhattan Bank, in its capacity as administrative agent for the lenders party to the Credit Agreement, or any successor or successors party thereto. "Credit Agreement" means that certain Credit Agreement, dated as of December 10, 1990, as amended and restated as of April 15, 1993, and as further amended and restated as of January 31, 1995, among the Company, the lenders party thereto and the Credit Agent, as the same may be refunded, replaced or refinanced by the New Credit Facility, and in each case as amended, restated, supplemented, modified, renewed, refunded, increased, extended, replaced or refinanced from time to time. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Designated Senior Debt" means (a) Senior Bank Debt and (b) other Senior Debt the principal amount of which is $50.0 million or more at the date of designation by the Company in a written instrument delivered to the Trustee; provided that Senior Debt designated as Designated Senior Debt pursuant to clause (b) shall cease to be Designated Senior Debt at any time that the aggregate principal amount thereof outstanding is $10.0 million or less. "Disqualified Stock" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, for cash or other property (other than Capital Stock that is not Disqualified Stock) pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the Holder thereof, in whole or in part, in each case on or prior to the stated maturity of the Notes. "Dollars" and "$" mean lawful money of the United States of America. "EBITDA" means for any period Consolidated Adjusted Net Income for such period increased by (a) Consolidated Interest Expense for such period, plus (b) Consolidated Income Tax Expense for such period, plus (c) Consolidated Non-Cash Charges for such period. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Proceeds" means (a) with respect to Equity Interests (or debt securities converted into Equity Interests) issued or sold for cash Dollars, the aggregate amount of such cash Dollars and (b) with respect to Equity Interests (or debt securities converted into Equity Interests) issued or sold for any consideration other than cash Dollars, the aggregate Market Price thereof computed on the date of the issuance or sale thereof. "Excluded Restricted Subsidiary" means any Wholly Owned Restricted Subsidiary principally engaged in the records management business domiciled outside the United States of America if the issuance of a Subsidiary Guarantee by such Subsidiary would, as determined in a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee, create a tax disadvantage that is material in relation to the aggregate amount of the Company's and any Restricted Subsidiary's Investment or proposed Investment therein. "Existing Indebtedness" means Indebtedness of the Company and its Subsidiaries (other than under the Credit Agreement) in existence on the date of the Indenture, until such amounts are repaid. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States of America is pledged. "Guarantee" means, as applied to any obligation, (a) a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner, of any part or all of such obligation and (b) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of all or any part of such obligation, including, without limiting the foregoing, the obligation to reimburse amounts drawn down under letters of credit securing such obligations. 79 "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (a) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (b) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Indebtedness" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person, and whether or not contingent, (a) every obligation of such Person for money borrowed, (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services, (e) every Capital Lease Obligation and every obligation of such Person in respect of Sale and Leaseback Transactions that would be required to be capitalized on the balance sheet in accordance with GAAP, (f) all Disqualified Stock of such Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price, plus accrued and unpaid dividends (unless included in such maximum repurchase price), (g) all obligations of such Person under or with respect to Hedging Obligations which would be required to be reflected on the balance sheet as a liability of such Person in accordance with GAAP and (h) every obligation of the type referred to in clauses (a) through (g) of another Person and dividends of another Person the payment of which, in either case, such Person has guaranteed. For purposes of this definition, the "maximum fixed repurchase price" of any Disqualified Stock that does not have a fixed repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were repurchased on any date on which Indebtedness is required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value will be determined in good faith by the board of directors of the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade accounts payable and accrued liabilities arising in the ordinary course of business and any liability for federal, state or local taxes or other taxes owed by such Person shall not be considered Indebtedness for purposes of this definition. The amount outstanding at any time of any Indebtedness issued with original issue discount is the aggregate principal amount at maturity of such Indebtedness, less the remaining unamortized portion of the original issue discount of such Indebtedness at such time, as determined in accordance with GAAP. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "Leverage Ratio" means, at any date, the ratio of (a) the aggregate principal amount of Indebtedness of the Company and its Restricted Subsidiaries outstanding as of the most recent available quarterly or annual balance sheet to (b) Adjusted EBITDA, after giving pro forma effect, without duplication, to (i) the incurrence, repayment or retirement of any Indebtedness by the Company or its Restricted Subsidiaries since the last day of the most recent full fiscal quarter of the Company, (ii) if the Leverage Ratio is being determined in connection with the incurrence of Indebtedness by the Company or a Restricted Subsidiary, such Indebtedness, and (iii) the Indebtedness to be incurred in connection with the acquisition of any Acquisition EBITDA Entity. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code, or equivalent statutes, of any jurisdiction). "Market Price" means, (a) with respect to the calculation of Equity Proceeds from the issuance or sale of debt securities which have been converted into Equity Interests, the value received upon the original issuance or sale of such converted debt securities, as determined reasonably and in good faith by the Board of Directors, and (b) with respect to the calculation of Equity Proceeds from the issuance or sale of Equity Interests, the average of the daily closing prices for such Equity Interests for the 20 consecutive trading days preceding the date of such computation. The closing price for each day shall be (a) if such Equity Interests are then listed or admitted to trading on the New York Stock Exchange, the closing price on the NYSE Consolidated Tape (or any successor consolidated tape reporting transactions on the New York Stock Exchange) or, if such composite tape shall not be in use or shall not report transactions in such Equity Interests, or if such Equity Interests shall be listed on a stock exchange other 80 than the New York Stock Exchange (including for this purpose the Nasdaq National Market), the last reported sale price regular way for such day, or in case no such reported sale takes place on such day, the average of the closing bid and asked prices regular way for such day, in each case on the principal national securities exchange on which such Equity Interests are listed or admitted to trading (which shall be the national securities exchange on which the greatest number of such Equity Interests have been traded during such 20 consecutive trading days), or (b) if such Equity Interests are not listed or admitted to trading on any such exchange, the average of the closing bid and asked prices thereof in the over-the-counter market as reported by the National Association of Securities Dealers Automated Quotation System or any successor system, or if not included therein, the average of the closing bid and asked prices thereof furnished by two members of the National Association of Securities Dealers selected reasonably and in good faith by the Board of Directors for that purpose. In the absence of one or more such quotations, the Market Price for such Equity Interests shall be determined reasonably and in good faith by the Board of Directors. "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale, which amount is equal to the excess, if any, of (a) the cash received by the Company or such Restricted Subsidiary (including any cash payments received by way of deferred payment pursuant to, or monetization of, a note or installment receivable or otherwise, but only as and when received) in connection with such disposition over (b) the sum of (i) the amount of any Indebtedness which is secured by such asset and which is required to be repaid in connection with the disposition thereof, plus (ii) the reasonable out-of-pocket expenses incurred by the Company or such Restricted Subsidiary, as the case may be, in connection with such disposition or in connection with the transfer of such amount from such Restricted Subsidiary to the Company, plus (iii) provisions for taxes, including income taxes, attributable to the disposition of such asset or attributable to required prepayments or repayments of Indebtedness with the proceeds thereof, plus (iv) if the Company does not first receive a transfer of such amount from the relevant Restricted Subsidiary with respect to the disposition of an asset by such Restricted Subsidiary and such Restricted Subsidiary intends to make such transfer as soon as practicable, the out-of-pocket expenses and taxes that the Company reasonably estimates will be incurred by the Company or such Restricted Subsidiary in connection with such transfer at the time such transfer is expected to be received by the Company (including, without limitation, withholding taxes on the remittance of such amount). "Obligations" means any principal, interest (including post-petition interest, whether or not allowed as a claim in any proceeding), penalties, fees, costs, expenses, indemnifications, reimbursements, damages and other liabilities payable under or in connection with any Indebtedness. "Officers' Certificate" means a certificate signed, unless otherwise specified, by any two of the Chairman of the Board, a Vice Chairman of the Board, the President, the Chief Financial Officer, the Controller, or an Executive Vice President of the Company, and delivered to the Trustee. "Permitted Investments" means (a) any Investments in the Company or in a Restricted Subsidiary (other than an Excluded Restricted Subsidiary) of the Company, including without limitation the Guarantee of Indebtedness permitted under the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock;" (b) any Investments in Cash Equivalents; (c) Investments by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Restricted Subsidiary (other than an Excluded Restricted Subsidiary) of the Company or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary (other than an Excluded Restricted Subsidiary) of the Company; (d) Investments in assets (including accounts and notes receivable) owned or used in the ordinary course of business; (e) Investments for any purpose related to the Company's records management business in an aggregate outstanding amount not to exceed $10.0 million; and (f) Investments by the Company or a Restricted Subsidiary (other than an Excluded Restricted Subsidiary) in one or more Excluded Restricted Subsidiaries, the aggregate outstanding amount of which does not exceed 10% of the consolidated assets of the Company and its Restricted Subsidiaries. "Permitted Liens" means: (a) Liens existing as of the date of issuance of the Notes; (b) Liens on property or assets of the Company or any Restricted Subsidiary securing Senior Debt; 81 (c) Liens on any property or assets of a Restricted Subsidiary granted in favor of the Company or any Wholly Owned Restricted Subsidiary; (d) Liens securing the Notes or the Guarantees; (e) any interest or title of a lessor under any Capital Lease Obligation or Sale and Leaseback Transaction so long as the Indebtedness, if any, secured by such Lien does not exceed the principal amount of Indebtedness permitted under the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock;" (f) Liens securing Acquired Debt created prior to (and not in connection with or in contemplation of) the incurrence of such Indebtedness by the Company or any Restricted Subsidiary; provided that such Lien does not extend to any property or assets of the Company or any Restricted Subsidiary other than the assets acquired in connection with the incurrence of such Acquired Debt; (g) Liens securing Hedging Obligations permitted to be incurred pursuant to clause (g) of the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock;" (h) Liens arising from purchase money mortgages and purchase money security interests, or in respect of the construction of property or assets, incurred in the ordinary course of the business of the Company or a Restricted Subsidiary; provided that (i) the related Indebtedness is not secured by any property or assets of the Company or any Restricted Subsidiary other than the property and assets so acquired or constructed and (ii) the Lien securing such Indebtedness is created within 60 days of such acquisition or construction; (i) statutory Liens or landlords' and carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's or other like Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate proceedings, if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (j) Liens for taxes, assessments, government charges or claims with respect to amounts not yet delinquent or that are being contested in good faith by appropriate proceedings diligently conducted, if a reserve or other appropriate provision, if any, as is required in conformity with GAAP has been made therefor; (k) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory obligations, surety and appeal bonds, government contracts, performance bonds and other obligations of a like nature incurred in the ordinary course of business (other than contracts for the payment of money); (l) easements, rights-of-way, restrictions and other similar charges or encumbrances not interfering in any material respect with the business of the Company or any Restricted Subsidiary incurred in the ordinary course of business; (m) Liens arising by reason of any judgment, decree or order of any court so long as such Lien is adequately bonded and any appropriate legal proceedings that may have been duly initiated for the review of such judgment, decree or order shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (n) Liens arising under options or agreements to sell assets; (o) other Liens securing obligations incurred in the ordinary course of business, which obligations do not exceed $1.0 million in the aggregate at any one time outstanding; and (p) any extension, renewal or replacement, in whole or in part, of any Lien described in the foregoing clauses (a) through (o); provided that any such extension, renewal or replacement shall not extend to any additional property or assets. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Principal Stockholders" means each of Vincent J. Ryan, Schooner Capital Corporation, C. Richard Reese, Eugene B. Doggett, and their respective Affiliates. 82 "Qualified Equity Offering" means an offering of Capital Stock, other than Disqualified Stock, of the Company for Dollars, whether registered or exempt from registration under the Securities Act. "Qualified Issuer" means (a) any lender party to the Credit Agreement or (b) any commercial bank (i) which has capital and surplus in excess of $500,000,000 and (ii) the outstanding short- term debt securities of which are rated at least A-2 by Standard & Poor's Rating Group, a division of McGraw-Hill, Inc. or at least P-2 by Moody's Investors Service, or carry an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments. "Qualifying Sale and Leaseback Transaction" means any Sale and Leaseback Transaction between the Company or any of its Restricted Subsidiaries and any bank, insurance company or other lender or investor providing for the leasing to the Company or such Restricted Subsidiary of any property (real or personal) which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor and where the property in question has been constructed or acquired after the date of the Indenture. "Refinancing Indebtedness" means new Indebtedness incurred or given in exchange for, or the proceeds of which are used to repay, redeem, defease, extend, refinance, renew, replace or refund, other Indebtedness; provided, however, that (a) the principal amount of such new Indebtedness shall not exceed the principal amount of Indebtedness so repaid, redeemed, defeased, extended, refinanced, renewed, replaced or refunded (plus the amount of fees, premiums, consent fees, prepayment penalties and expenses incurred in connection therewith); (b) such Refinancing Indebtedness shall have a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of the Indebtedness so repaid, redeemed, defeased, extended, refinanced, renewed, replaced or refunded or shall mature after , 2006; (c) to the extent such Refinancing Indebtedness refinances Indebtedness that has a final maturity date occurring after , 2006, such new Indebtedness shall have a final scheduled maturity not earlier than the final scheduled maturity of the Indebtedness so repaid, redeemed, defeased, extended, refinanced, renewed, replaced or refunded and shall not permit redemption at the option of the holder earlier than the earliest date of redemption at the option of the holder of the Indebtedness so repaid, redeemed, defeased, extended, refinanced, renewed, replaced or refunded; (d) to the extent such Refinancing Indebtedness refinances Indebtedness subordinate to the Notes, such Refinancing Indebtedness shall be subordinated in right of payment to the Notes and to the extent such Refinancing Indebtedness refinances Notes or Indebtedness pari passu with the Notes, such Refinancing Indebtedness shall be pari passu with or subordinated in right of payment to the Notes, in each case on terms at least as favorable to the holders of Notes as those contained in the documentation governing the Indebtedness so repaid, redeemed, defeased, extended, refinanced, renewed, replaced or refunded; and (e) with respect to Refinancing Indebtedness incurred by a Restricted Subsidiary, such Refinancing Indebtedness shall rank no more senior, and shall be at least as subordinated, in right of payment to the Subsidiary Guarantee of such Restricted Subsidiary as the Indebtedness being extended, refinanced, renewed, replaced or refunded. "Restricted Subsidiary" means (a) each direct or indirect Subsidiary of the Company existing on the date of the Indenture and (b) any other direct or indirect Subsidiary of the Company formed, acquired or existing after the date of the Indenture, in each case which is not designated by the Board of Directors as a "Unrestricted Subsidiary." "Sale and Leaseback Transaction" means any transaction or series of related transactions pursuant to which a Person sells or transfers any property or asset in connection with the leasing, or the resale against installment payments, of such property or asset to the seller or transferor. "Senior Bank Debt" means all Obligations outstanding under or in connection with the Credit Agreement (including Guarantees of such Obligations by Subsidiaries of the Company). "Senior Debt" means (a) the Senior Bank Debt and (b) any other Indebtedness permitted to be incurred by the Company or any Restricted Subsidiary, as the case may be, under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is (i) on a parity with or subordinated in right of payment to the Notes or (ii) subordinated to Senior Debt on terms substantially similar to those of the Notes. Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not include (i) any liability for federal, state, local or other taxes owed or owing by the Company, (ii) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates, (iii) any trade payables or (iv) any Indebtedness that is incurred in violation of the Indenture, provided that such Indebtedness shall be deemed not to have been incurred in violation of the 83 Indenture for purposes of this clause (iv) if, in the case of any obligations under the Credit Agreement, the holders of such obligations or their agent or representative shall have received a representation from the Company to the effect that the incurrence of such Indebtedness does not violate the provisions of the Indenture. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect on the date hereof. "Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof. "Unrestricted Subsidiary" means (a) any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary in accordance with the "Unrestricted Subsidiaries" covenant and (b) any Subsidiary of an Unrestricted Subsidiary. "Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency). "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (b) the then outstanding principal amount of such Indebtedness. "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary of the Company all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by the Company or by one or more Wholly Owned Restricted Subsidiaries of the Company. DESCRIPTION OF NEW CREDIT FACILITY The Company intends to replace the Credit Agreement with the New Credit Facility. The following description is based upon the current draft credit agreement relating to the New Credit Facility. No assurances can be given that the Company will enter into the New Credit Facility on these or any other terms. The Offering is not conditioned on the closing of the New Credit Facility. The New Credit Facility will be a $100 million revolving credit facility with up to $2 million of availability for letters of credit. The New Credit Facility will terminate on September 30, 2001, at which time all outstanding revolving credit loans and other amounts payable thereunder will become due. Borrowings under the New Credit Facility may be used to finance possible future acquisitions, as well as for working capital and general corporate purposes. As with the Credit Agreement, the Company's obligations under the New Credit Facility will be guaranteed by substantially all of the Company's subsidiaries; however, unlike the Credit Agreement, the New Credit Facility will be secured only by the pledge of the stock of such subsidiaries. Prepayments of outstanding borrowings under the New Credit Facility will be required in certain circumstances out of the proceeds of certain insurance payments, condemnations, issuances of indebtedness and asset dispositions. The New Credit Facility will permit the Company to elect from time to time, as to all or any portion of the borrowings thereunder, an interest rate based upon (i) a fluctuating rate equal to the highest of (x) the prime rate of The Chase Manhattan Bank, (y) the secondary market rate for three-month certificates of deposit (adjusted for statutory reserves and FDIC assessments), plus 1%, or (z) the overnight federal funds rate plus 1/2 of 1% (the "Adjusted Base Rate") or (ii) the interest rates prevailing on the date of determination in the London interbank market (the "Eurodollar Rate") for the interest period selected by the Company, plus, in the case of either (i) or (ii), a margin (the "Applicable Margin") over the Adjusted Base Rate or the Eurodollar Rate. The Applicable Margins for loans bearing interest at a rate based upon the Adjusted Base Rate or the Eurodollar Rate ("Eurodollar Loans"), and commitment fees on the undrawn portion of the New Credit Facility, will vary based on the Company's 84 achieving and maintaining specified ratios of funded indebtedness (net of cash and cash equivalents on hand) to EBITDA. The New Credit Facility will provide for payment by the Company in respect of letters of credit of: (i) a per annum fee equal to the Applicable Margin for Eurodollar Loans from time to time in effect; (ii) a fronting fee of 1/4 of 1%; plus (iii) customary issuing fees and expenses. The New Credit Facility will contain covenants restricting the ability of the Company and its subsidiaries to, among other things: (i) declare dividends or redeem or repurchase capital stock; (ii) make optional payments and modifications of subordinated and other debt instruments; (iii) incur liens and engage in sale and leaseback transactions; (iv) make loans and investments; (v) incur indebtedness and contingent obligations; (vi) make capital expenditures; (vii) engage in mergers, acquisitions and asset sales; (viii) enter into transactions with affiliates; and (ix) make changes in their lines of business. The Company will also be required to comply with financial covenants with respect to: (i) a maximum leverage ratio; (ii) a minimum interest coverage ratio; and (iii) a minimum fixed charge coverage ratio. The Company will also be required to make certain customary affirmative covenants. Events of default under the New Credit Facility will include: (i) the Company's failure to pay principal or interest when due; (ii) the Company's material breach of any covenant, representation or warranty contained in the loan documents; (iii) customary cross-default provisions; (iv) events of bankruptcy, insolvency or dissolution of the Company or its subsidiaries; (v) the levy of certain judgments against the Company, its subsidiaries or their assets; (vi) certain adverse events under ERISA plans of the Company or its subsidiaries; (vii) the actual or asserted invalidity of security documents or guarantees of the Company or its subsidiaries; (viii) a change of control of the Company; and (ix) the creation of certain environmental liabilities. DESCRIPTION OF CAPITAL STOCK The Company's authorized capital stock consists of 13,000,000 shares of Common Stock, 1,000,000 shares of Nonvoting Common Stock, $.01 par value per share (the "Nonvoting Common Stock"), and 2,000,000 shares of Preferred Stock, $.01 par value per share. On September 3, 1996, 9,627,141 shares of Common Stock were outstanding and 500,000 shares of Nonvoting Common Stock were outstanding. Holders of shares of Common Stock are entitled to one vote per share for each matter submitted to the stockholders of the Company without cumulative voting rights in the election of Directors. Holders of Nonvoting Common Stock have no right to vote on any matter voted on by the stockholders of the Company, except as may otherwise be provided by law. In all other respects (other than as to convertibility), the rights of holders of the Common Stock and the Nonvoting Common Stock are identical. Shares of Nonvoting Common Stock are convertible, at any time at the option of the holder, on a share-for-share basis into shares of Common Stock without the payment of any additional consideration; provided that the conversion of any shares of Nonvoting Common Stock by a "bank holding company" under the Bank Holding Company Act of 1956, as amended, or an affiliate thereof is prohibited if the conversion of the total number of shares of Nonvoting Common Stock held by such holder would cause it to be in violation of such Act. The 2,000,000 authorized and unissued shares of Preferred Stock may be issued with such designations, preferences, limitations and relative rights as the Board of Directors may authorize including, but not limited to: (i) the distinctive designation of each series and the number of shares that will constitute such series; (ii) the voting rights, if any, of shares of such series; (iii) the dividend rate on the shares of such series, any restriction, limitation or condition upon the payment of such dividends, whether dividends shall be cumulative, and the dates on which dividends are payable; (iv) the prices at which, and the terms and conditions on which, the shares of such series may be redeemed, if such shares are redeemable; (v) the purchase or sinking fund provisions, if any, for the purchase or redemption of shares of such series; (vi) any preferential amount payable upon shares of such series in the event of the liquidation, dissolution or winding-up of the Company or the distribution of its assets; and (vii) the price or rates of conversion at which, and the terms and conditions on which the shares of such series may be converted into other securities, if such shares are convertible. Although the Company has no present intention to issue shares of Preferred Stock, the issuance of Preferred Stock, or the issuance of rights to purchase such shares, could discourage an unsolicited acquisition proposal and the rights of holders of Common Stock will be subject to, and may be adversely affected by, the rights of holders of any Preferred Stock that may be issued in the future. 85 UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement (the "Underwriting Agreement") between the Company and Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), Bear, Stearns & Co. Inc. ("Bear Stearns") and Prudential Securities Incorporated (together with DLJ and Bear Stearns, the "Underwriters"), each of the several Underwriters has severally agreed to purchase from the Company, and the Company has agreed to sell to each of the Underwriters, the respective principal amounts of Notes set forth opposite its name below, at the public offering price set forth on the cover page of this Prospectus, less the underwriting discount: Principal Amount Underwriters of Notes - ------------ ---------------- Donaldson, Lufkin & Jenrette Securities Corporation $ Bear, Stearns & Co. Inc. Prudential Securities Incorporated ------------ $150,000,000 ============ The Underwriting Agreement provides that the obligations of the several Underwriters are subject to certain conditions precedent, including the approval of certain legal matters by counsel. The Company and the Guarantors have agreed to indemnify the Underwriters against certain liabilities and expenses, including liabilities under the Securities Act or to contribute to payments that the Underwriters may be required to make in respect thereof. The nature of the Underwriters' obligations is such that the Underwriters are committed to purchase all of the Notes if any of the Notes are purchased. The Underwriters have advised the Company that they propose to offer the Notes directly to the public initially at the public offering price set forth on the cover page of this Prospectus and to certain dealers at such offering price less a concession not to exceed % of the principal amount of the Notes. The Underwriters may allow, and such dealers may reallow, discounts not in excess of % of the principal amount of the Notes to certain other dealers. After the initial public offering of the Notes, the offering price and other selling terms may be changed by the Underwriters. The Notes are a new issue of securities, have no established trading market, will not be listed on any securities exchange or included in the National Association of Securities Dealers Automated Quotation System and may not be widely distributed. The Company has been advised by the Underwriters that, following the completion of this Offering, the Underwriters presently intend to make a market in the Notes as permitted by applicable laws and regulations. The Underwriters, however, are under no obligation to do so and may discontinue any market-making activities at any time at the sole discretion of the Underwriters. No assurances can be given as to the liquidity of any trading market for the Notes. VALIDITY OF SECURITIES The validity of the securities offered hereby will be passed upon for the Company by Sullivan & Worcester LLP, Boston, Massachusetts, and for the Underwriters by Jones, Day, Reavis & Pogue, New York, New York. Jas. Murray Howe, Secretary of the Company, is of counsel to Sullivan & Worcester LLP and beneficially owns 3,855 shares of Common Stock. EXPERTS The consolidated financial statements and schedule of Iron Mountain Incorporated and its subsidiaries for each of the three years ended December 31, 1995 included in this Prospectus and elsewhere in the Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. The financial statements of National Business Archives, Inc. for the two years ended December 31, 1993 and 1994, included in this Prospectus and elsewhere in the Registration Statement have been audited by Wolpoff & Company, LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. 86 The financial statements of Data Management Business Records Storage, Inc. for the year ended June 30, 1995, included in this Prospectus and elsewhere in the Registration Statement have been audited by Morrison and Smith, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. The financial statements of Nashville Vault Company, Ltd., for the year ended December 31, 1995, included in this Prospectus and elsewhere in the Registration Statement have been audited by Geo. S. Olive & Co. LLC, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. The combined financial statements of Data Archive Services, Inc. and Data Archive Services of Miami, Inc. for the year ended May 31, 1996, included in this Prospectus and elsewhere in the Registration Statement have been audited by Perless, Roth, Jonas & Hartney, CPAs, PA, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. The financial statements of Data Storage Systems, Inc. for the year ended December 31, 1995, included in this Prospectus and elsewhere in the Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. The financial statements of DataVault Corporation, for the year ended December 31, 1995, included in this Prospectus and elsewhere in the Registration Statement have been audited by Robert F. Gayton, CPA, independent public accountant, as indicated in his report with respect thereto, and are included herein in reliance upon the authority of said firm as an expert in giving said report. The financial statements of International Record Storage and Retrieval Service, Inc. for the year ended December 31, 1995, included in this Prospectus and elsewhere in the Registration Statement have been audited by Rothstein, Kass & Company, P.C., independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. The financial statements of DKA Industries, Inc., for the year ended December 31, 1995, included in this Prospectus and elsewhere in the Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. The financial statements of Security Archives Corporation, for the year ended December 31, 1995, included in this Prospectus and elsewhere in the Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. The financial statements of Mohawk Business Record Storage, Inc., for the year ended December 31, 1995, included in this Prospectus and elsewhere in the Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. ADDITIONAL INFORMATION The Company has filed with the Commission, Washington, D.C. 20549, a Registration Statement on Form S-1 under the Securities Act with respect to the Notes offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. For further information with respect to the Company and the Notes offered hereby, reference is made to the Registration Statement and the exhibits and schedules filed therewith. Statements contained in this Prospectus as to the contents of any contract or any other document to which reference is made are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement. Each such statement is qualified in all respects by such reference. A copy of the Registration Statement may be inspected without charge at the offices of the Commission in Washington D.C. 20549, and copies of all or any part of the Registration Statement may be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 upon the payment of the fees prescribed by the Commission. 87 The Company is subject to the informational requirements of the Exchange Act and in accordance therewith files reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information filed by the Company can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Judiciary Plaza, Washington, D.C. 20549, and at the Commission's Regional Offices at Citicorp Center, 500 West Madison, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York 10048. Copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024, Judiciary Plaza, Washington, D.C. 20549, at prescribed rates. In addition, the Common Stock is listed on the Nasdaq National Market, and such reports, proxy statements and certain other information can also be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006. The Commission maintains a Web site that contains reports, proxy statements and other information filed with the Commission; the address of such site is http://www.sec.gov. Certain such reports, proxy statements and other information filed with the Commission by the Company on or after August 14, 1996 may be found at such Web site. 88 INDEX TO FINANCIAL STATEMENTS Page ------- Financial Statements of Iron Mountain Incorporated: Unaudited Condensed Consolidated Interim Financial Statements ......... F-2 Audited Consolidated Financial Statements ............................. F-8 Financial Statements of Completed Acquisitions: National Business Archives, Inc. ...................................... F-24 Data Management Business Records Storage, Inc. ........................ F-33 Nashville Vault Company, Ltd. ......................................... F-44 Data Archive Services, Inc. and Data Archive Services of Miami, Inc. .. F-50 Data Storage Systems, Inc. ............................................ F-59 DataVault Corporation ................................................. F-66 International Record Storage and Retrieval Service, Inc. .............. F-72 DKA Industries, Inc. d/b/a Systems Record Storage ..................... F-80 Security Archives Corporation ......................................... F-88 Financial Statements of Pending Acquisition: Mohawk Business Record Storage, Inc. .................................. F-96 F-1 IRON MOUNTAIN INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) ASSETS
December 31, June 30, 1995 1996 ------------ --------- Current Assets: Cash and Cash Equivalents ........................................ $ 1,585 $ 2,232 Accounts Receivable (Less allowance for doubtful accounts of $651 and of $790, respectively) .................................... 16,936 19,756 Inventories ...................................................... 682 523 Deferred Income Taxes ............................................ 1,943 2,036 Prepaid Expenses and Other ....................................... 1,862 1,318 ------------ --------- Total Current Assets ........................................... 23,008 25,865 Property, Plant and Equipment: Property, Plant and Equipment .................................... 125,240 141,601 Less: Accumulated Depreciation ................................... (32,564) (38,597) ------------ --------- Net Property, Plant and Equipment .............................. 92,676 103,004 Other Assets: Goodwill ......................................................... 59,253 72,213 Customer Acquisition Costs ....................................... 5,210 5,671 Deferred Financing Costs ......................................... 2,638 2,268 Other ............................................................ 4,096 3,609 ------------ --------- Total Other Assets ............................................. 71,197 83,761 ------------ --------- Total Assets ................................................... $186,881 $212,630 ============ ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current Portion of Long-term Debt ................................ $ 2,578 $ 3,194 Accounts Payable ................................................. 4,797 6,342 Accrued Expenses ................................................. 10,917 10,638 Deferred Income .................................................. 3,108 2,454 Other Liabilities ................................................ 469 501 ------------ --------- Total Current Liabilities ...................................... 21,869 23,129 Long-term Debt, Net of Current Portion ............................ 119,296 115,700 Deferred Rent ..................................................... 7,983 7,897 Deferred Income Taxes ............................................. 3,621 4,406 Other Long-term Liabilities ....................................... 6,769 6,769 Commitments and Contingencies Redeemable Put Warrant ............................................ 6,332 -- Stockholders' Equity: Preferred Stock .................................................. 5 -- Common Stock--Voting ............................................. 0 96 Common Stock--Non-voting ......................................... -- 5 Additional Paid-In Capital ....................................... 28,809 62,014 Accumulated Deficit .............................................. (7,803) (7,386) ------------ --------- Total Stockholders' Equity ..................................... 21,011 54,729 ------------ --------- Total Liabilities and Stockholders' Equity ..................... $186,881 $212,630 ============ =========
The accompanying notes are an integral part of these condensed consolidated financial statements. F-2 IRON MOUNTAIN INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data) (Unaudited)
Three Months Ended June 30, ----------------------------- 1995 1996 ------------ -------------- Revenues: Storage .......................................................... $15,866 $20,209 Service and Storage Material Sales ............................... 10,020 12,713 ------------ -------------- Total Revenues ................................................. 25,886 32,922 Operating Expenses: Cost of Sales (Excluding Depreciation) ........................... 12,888 16,715 Selling, General and Administrative .............................. 6,848 8,260 Depreciation and Amortization .................................... 2,676 3,922 ------------ -------------- Total Operating Expenses ....................................... 22,412 28,897 ------------ -------------- Operating Income .................................................. 3,474 4,025 Interest Expense .................................................. 2,868 3,091 ------------ -------------- Income Before Provision for Income Taxes .......................... 606 934 Provision for Income Taxes ........................................ 364 523 ------------ -------------- Net Income ........................................................ 242 411 Accretion of Redeemable Put Warrant ............................... 501 -- ------------ -------------- Net Income (Loss) Applicable to Common Stockholders ............... $ (259) $ 411 ============ ============== Net Income (Loss) Per Common and Common Equivalent Share .......... $ (0.03) $ 0.04 ============ ============== Weighted Average Common and Common Equivalent Shares Outstanding .. 7,779 10,336 ============ ==============
The accompanying notes are an integral part of these condensed consolidated financial statements. F-3 IRON MOUNTAIN INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data) (Unaudited)
Six Months Ended June 30, -------------------------- 1995 1996 ---------- ------------ Revenues: Storage .......................................................... $30,748 $39,363 Service and Storage Material Sales ............................... 19,476 24,587 ---------- ------------ Total Revenues ................................................. 50,224 63,950 Operating Expenses: Cost of Sales (Excluding Depreciation) ........................... 25,112 32,383 Selling, General and Administrative .............................. 12,697 16,067 Depreciation and Amortization .................................... 5,428 7,530 ---------- ------------ Total Operating Expenses ....................................... 43,237 55,980 ---------- ------------ Operating Income .................................................. 6,987 7,970 Interest Expense .................................................. 5,936 6,385 ---------- ------------ Income Before Provision for Income Taxes .......................... 1,051 1,585 Provision for Income Taxes ........................................ 631 888 ---------- ------------ Net Income ........................................................ 420 697 Accretion of Redeemable Put Warrant ............................... 953 280 ---------- ------------ Net Income (Loss) Applicable to Common Stockholders ............... $ (533) $ 417 ========== ============ Net Income (Loss) Per Common and Common Equivalent Share .......... $ (0.07) $ 0.04 ========== ============ Weighted Average Common and Common Equivalent Shares Outstanding .. 7,790 9,899 ========== ============
The accompanying notes are an integral part of these condensed consolidated financial statements. F-4 IRON MOUNTAIN INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Six Months Ended June 30, -------------------------- 1995 1996 ---------- ------------ Cash Flows from Operating Activities: Net Income ...................................................... $ 420 $ 697 Adjustments to Reconcile Net Income to Net Cash Provided by Operations: Depreciation and Amortization .................................. 5,428 7,530 Amortization of Financing Costs ................................ 756 429 Provision for Deferred Income Taxes ............................ 540 492 Changes in Assets and Liabilities (Exclusive of Acquisitions): Accounts Receivable ............................................ (910) (2,194) Inventories .................................................... (29) 174 Prepaid Expenses and Other Current Assets ...................... (195) 444 Other Assets ................................................... 180 674 Accounts Payable ............................................... 645 1,545 Accrued Expenses ............................................... 1,324 (279) Deferred Income ................................................ 127 (865) Other Current Liabilities ...................................... (27) (474) Deferred Rent .................................................. (86) (86) Other Long-term Liabilities .................................... 1 -- ---------- ------------ Cash Flows Provided by Operations ............................. 8,174 8,087 Cash Flows from Investing Activities: Capital Expenditures ............................................ (7,322) (11,162) Additions to Customer Acquisition Costs ......................... (418) (717) Cash Paid for Acquisitions ...................................... (15,484) (19,187) Other ........................................................... -- (25) ---------- ------------ Cash Flows Used in Investing Activities ....................... (23,224) (31,091) Cash Flows Provided by Financing Activities: Repayment of Debt ............................................... (8,369) (29,515) Net Proceeds from Borrowings .................................... 25,186 26,500 Financing Costs ................................................. (1,402) (24) Proceeds from Exercise of Stock Options ......................... 200 -- Repurchase of Stock ............................................. (199) -- Proceeds from Initial Public Offering, Net of Costs and Expenses -- 33,302 Retirement of Put Warrant ....................................... -- (6,612) ---------- ------------ Cash Flows Provided by Financing Activities ................... 15,416 23,651 ---------- ------------ Increase in Cash and Cash Equivalents ............................ 366 647 Cash and Cash Equivalents, Beginning of Period ................... 1,303 1,585 ---------- ------------ Cash and Cash Equivalents, End of Period ......................... $ 1,669 $ 2,232 ========== ============
The accompanying notes are an integral part of these condensed consolidated financial statements. F-5 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, 1995, 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 notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. 2. Initial Public Offering of Common Stock On February 6, 1996, the Company completed the sale of 2,350 shares of its common stock in an initial public offering at a price of $16.00 per share. The proceeds from the public offering were $34,968 after underwriting discounts and commissions, and $33,302 after other expenses of the offering totaling $1,666. Such net proceeds were used to retire the redeemable put warrant for $6,612, to fund acquisitions, to repay debt that had been incurred to make acquisitions and for working capital. 3. Acquisitions and Dispositions During 1995, the Company purchased four records management businesses. During the six months ended June 30, 1996, the Company purchased six additional records management businesses. Each of these acquisitions was accounted for using the purchase method of accounting, and accordingly, the results of operations for each acquisition have been included in the consolidated results of the Company from the respective acquisition dates. The purchase price for the 1996 acquisitions exceeded the underlying fair value of the net assets acquired by $14,554, which has been assigned to goodwill and is being amortized over the estimated benefit period of 25 years. Funds used to make the various acquisitions were provided through the Company's acquisition credit facility and, indirectly, a portion of the net proceeds of the Company's initial public offering. A summary of the cash consideration and allocation of the purchase price as of the acquisition dates are as follows: 1996 -------- Fair Value of Assets Acquired in 1996 ............... $20,104 Liabilities Assumed ................................. (917) -------- Cash Paid ........................................... $19,187 ======== F-6 IRON MOUNTAIN INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) (In thousands except per share data) (Unaudited) The following unaudited pro forma information shows the results of the Company's operations for the year ended December 31, 1995 and the six months ended June 30, 1996, as though each of the completed acquisitions had occurred as of January 1, 1995. 1995 1996 ------- --------- Revenues ...................................... $123,438 $65,678 Net Income (Loss) ............................. (348) 728 Accretion of Redeemable Put Warrant ........... 2,107 280 ------- --------- Net Income (Loss) Applicable to Stockholders .. $ (2,455) $ 448 ======= ========= Net Income (Loss) Per Share ................... $ (0.32) $ 0.05 ======= ========= The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results of operations had the acquisitions taken place as of January 1, 1995 or the results that may occur in the future. Furthermore, the pro forma results do not give effect to all cost savings or incremental costs which may occur as a result of the integration and consolidation of the companies. 4. Long-term Debt Long-term debt as of December 31, 1995 and June 30, 1996, is as follows: 1995 1996 ------- -------- Term Loans A and B ......................... $ 59,625 $ 58,750 $50,000 Acquisition Credit Facility ........ 34,400 25,300 $15,000 Working Capital Facility ........... 1,700 8,800 Chrysler Notes ............................. 14,772 14,807 Real Estate Mortgages ...................... 10,797 10,761 Other ...................................... 580 476 ------- -------- Total Long-term Debt .................... 121,874 118,894 Less: Current Portion ...................... (2,578) (3,194) ------- -------- Long-term Debt, Net of Current Portion .. $119,296 $115,700 ======= ======== 5. Commitments and Contingencies Litigation During the second quarter of 1996, the Company paid $600 to cover the uninsured portion of a judgment previously entered by the California Workers Compensation Board against the Company relating to injuries sustained by a driver employed by a courier company used at the time by the Company. This amount had been fully reserved in the second quarter of 1995 and therefore had no impact on the results of operations for the three and six month periods ended June 30, 1996. 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. 6. Subsequent Events Subsequent to June 30, 1996, the Company acquired four records management businesses for $23,523 in transactions that were accounted for as purchases. On August 29, 1996 the Company amended its Credit Agreement to increase its Acquisition Credit Facility from $50,000 to $55,000. F-7 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, 1994 and 1995 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Iron Mountain Incorporated and its subsidiaries, as of December 31, 1994 and 1995 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Los Angeles, California February 26, 1996 F-8 IRON MOUNTAIN INCORPORATED CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1994 AND 1995 (In thousands) ASSETS
December 31, -------------------- 1994 1995 ------- --------- Current Assets: Cash and Cash Equivalents ........................................ $ 1,303 $ 1,585 Accounts Receivable (Less allowance for doubtful accounts of $531 and $651 as of 1994 and 1995, respectively) ..................... 13,270 16,936 Inventories ...................................................... 503 682 Deferred Income Taxes ............................................ 778 1,943 Prepaid Expenses and Other ....................................... 1,223 1,862 ------- --------- Total Current Assets ........................................... 17,077 23,008 Property, Plant and Equipment: Property, Plant and Equipment .................................... 99,753 125,240 Less--Accumulated Depreciation ................................... (24,735) (32,564) ------- --------- Net Property, Plant and Equipment .............................. 75,018 92,676 Other Assets: Goodwill ......................................................... 36,720 59,253 Customer Acquisition Costs ....................................... 4,273 5,210 Deferred Financing Costs ......................................... 2,247 2,638 Other ............................................................ 1,524 4,096 ------- --------- Total Other Assets ............................................. 44,764 71,197 ------- --------- Total Assets ...................................................... $136,859 $186,881 ======= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current Portion of Long-term Debt ................................ $ 628 $ 2,578 Accounts Payable ................................................. 3,756 4,797 Accrued Expenses ................................................. 4,710 10,917 Deferred Income .................................................. 2,096 3,108 Other Liabilities ................................................ 344 469 ------- --------- Total Current Liabilities ...................................... 11,534 21,869 Long-term Debt, Net of Current Portion ............................ 85,630 119,296 Other Long Term Liabilities ....................................... 7,296 6,769 Deferred Rent ..................................................... 2,837 7,983 Deferred Income Taxes ............................................. 2,468 3,621 Commitments and Contingencies Redeemable Put Warrant ............................................ 4,225 6,332 Stockholders' Equity: Preferred Stock .................................................. 5 5 Common Stock ..................................................... 0 0 Additional Paid-In Capital ....................................... 28,808 28,809 Accumulated Deficit .............................................. (5,944) (7,803) ------- --------- Total Stockholders' Equity ..................................... 22,869 21,011 ------- --------- Total Liabilities and Stockholders' Equity ........................ $136,859 $186,881 ======= =========
The accompanying notes are an integral part of these consolidated financial statements. F-9 IRON MOUNTAIN INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (In thousands except per share data)
1993 1994 1995 -------- -------- ---------- Revenues: Storage .................................................. $48,892 $54,098 $ 64,165 Service and Storage Material Sales ....................... 32,781 33,520 40,271 -------- -------- ---------- Total Revenues ........................................ 81,673 87,618 104,436 Operating Expenses: Cost of Sales (Excluding Depreciation) ................... 43,054 45,880 52,277 Selling, General and Administrative ...................... 19,971 20,853 26,035 Depreciation and Amortization ............................ 6,789 8,690 12,341 -------- -------- ---------- Total Operating Expenses .............................. 69,814 75,423 90,653 -------- -------- ---------- Operating Income ......................................... 11,859 12,195 13,783 Interest Expense ......................................... 8,203 8,954 11,838 -------- -------- ---------- Income Before Provision for Income Taxes ................. 3,656 3,241 1,945 Provision for Income Taxes ............................... 2,088 1,957 1,697 -------- -------- ---------- Net Income ............................................... 1,568 1,284 248 Accretion of Redeemable Put Warrant ...................... 940 1,412 2,107 -------- -------- ---------- Net Income (Loss) Applicable to Common Stockholders ...... $ 628 $ (128) $ (1,859) ======== ======== ========== Net Income (Loss) Per Common and Common Equivalent Share . $ 0.08 $ (0.02) $ (0.24) Weighted Average Common and Common Equivalent Shares Outstanding ............................................. 8,067 7,984 7,784
The accompanying notes are an integral part of these consolidated financial statements. F-10 IRON MOUNTAIN INCORPORATED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AS OF DECEMBER 31, 1993, 1994 AND 1995 (Dollars in thousands)
December 31, ---------------------------------- 1993 1994 1995 -------- -------- ---------- Series A1 Preferred Stock: Balance, Beginning of Period .................................. $ 2 $ 2 $ 1 Conversion of 100,000 Shares of Series A1 Preferred Stock to Series A2 Preferred Stock .................................... -- (1) -- Conversion of 43,500 Shares of Series A1 Preferred Stock to Series A3 Preferred Stock .................................... -- -- (1) -------- -------- ---------- Balance, End of Period; (150,000, 50,000 and 6,500 Shares Outstanding as of December 31, 1993, 1994 and 1995, Respectively) ................................................ 2 1 0 Series A2 Preferred Stock: Balance, Beginning of Period .................................. -- -- 1 Conversion of 100,000 Shares of Series A1 Preferred Stock to Series A2 Preferred Stock .................................... -- 1 -- Repurchase of 2,000 Shares of Series A2 Preferred Stock ....... -- -- 0 -------- -------- ---------- Balance, End of Period; (None Outstanding as of December 31, 1993; 100,000 and 98,000 Shares Outstanding as of December 31, 1994 and 1995, Respectively) ................................. -- 1 1 Series A3 Preferred Stock: Balance, Beginning of Period .................................. -- -- -- Conversion of 43,500 Shares of Series A1 Preferred Stock to Series A3 Preferred Stock .................................... -- -- 1 -------- -------- ---------- Balance, End of Period (None outstanding December 31, 1993 and 1994; 43,500 Shares Outstanding December 31, 1995) ........... -- -- 1 Series C Preferred Stock: Balance, End of Period; (351,395 Shares Outstanding as of December 31, 1993, 1994 and 1995, Respectively) .............. 3 3 3 -------- -------- ---------- Total Preferred Stock ........................................ 5 5 5 -------- -------- ---------- Class A Common Stock: Balance, Beginning of Period .................................. 0 0 0 Stock Options Exercised for 15,976 Shares of Class A Common Stock in 1995 ................................................ -- -- 0 -------- -------- ---------- Balance, End of Period; 28,912, 28,912 and 44,888 Shares Outstanding as of December 31, 1993, 1994 and 1995, Respectively) ................................................ 0 0 0 Class C Common Stock: Balance, Beginning of Period .................................. 0 0 -- Repurchase of 17,289 Shares of Class C Common Stock ........... -- (0) -- -------- -------- ---------- Balance, End of Period; (17,289 Shares Outstanding as of December 31, 1993; None Outstanding as of December 31, 1994 and 1995) .................................................... 0 -- -- -------- -------- ---------- Total Common Stock ........................................... 0 0 0 -------- -------- ----------
The accompanying notes are an integral part of these consolidated financial statements. F-11 IRON MOUNTAIN INCORPORATED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY -- (Continued)
December 31, ---------------------------- 1993 1994 1995 ------ ------ -------- Additional Paid in Capital: Balance, Beginning of Period ........................ $29,858 $29,858 $28,808 Class C Common Stock Repurchased, 17,289 Shares ..... -- (1,050) -- Series A2 Preferred Stock Repurchased, 2,000 Shares . -- -- (199) Class A Common Stock, Options Exercised, 15,976 Shares ............................................. -- -- 200 ------ ------ -------- Balance, End of Period .............................. 29,858 28,808 28,809 ------ ------ -------- Accumulated Deficit: Balance, Beginning of Period ........................ (6,444) (5,816) (5,944) Net Income .......................................... 1,568 1,284 248 Accretion of Redeemable Put Warrant ................. (940) (1,412) (2,107) ------ ------ -------- Balance, End of Period .............................. (5,816) (5,944) (7,803) ------ ------ -------- Total Stockholders' Equity ........................... $24,047 $22,869 $21,011 ====== ====== ========
The accompanying notes are an integral part of these consolidated financial statements. F-12 IRON MOUNTAIN INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (In thousands)
1993 1994 1995 ------- ------- --------- Cash Flows from Operating Activities: Net Income .................................... $ 1,568 $ 1,284 $ 248 Adjustments to Reconcile Net Income to Cash Flows Provided by Operations: Depreciation and Amortization ............... 6,789 8,690 12,341 Amortization of Financing Costs ............. 954 1,046 1,135 Loss on Sale of Fixed Assets ................ 145 278 400 Provision for Deferred Income Taxes ......... 1,766 1,714 1,179 Changes in Deferred Rent .................... 605 441 (110) Changes in Other Long-term Liabilities ...... 1,051 (394) (527) Changes in Assets and Liabilities (Exclusive of Acquisitions): Accounts Receivable ......................... (1,005) (1,807) (2,541) Inventory ................................... (33) (39) (100) Prepaid Expenses ............................ (304) (517) (639) Accounts Payable ............................ 304 83 265 Accrued Expenses ............................ (70) 1,191 4,252 Deferred Income ............................. 971 (26) (301) Other Liabilities ........................... 80 (369) 125 ------- ------- --------- Cash Flows Provided by Operations ........... 12,821 11,575 15,727 ------- ------- --------- Cash Flows from Investing Activities: Capital Expenditures ......................... (15,451) (16,980) (15,253) Additions to Customer Acquisition Costs ...... (922) (1,366) (1,379) Cash Paid for Acquisitions ................... -- (2,846) (33,048) Proceeds from Sale of Assets ................. 14 2,973 73 Other, Net ................................... (209) 705 71 ------- ------- --------- Cash Flows Used in Investing Activities ..... (16,568) (17,514) (49,536) ------- ------- --------- Cash Flows Provided by Financing Activities: Repayment of Debt .............................. (4,659) (13,642) (812) Net Proceeds from Borrowings ................... 9,100 21,350 36,350 Cash From Exercise of Stock Options ............ -- -- 200 Repurchase of Stock ............................ -- (1,050) (199) Financing Costs ................................ (601) (7) (1,448) ------- ------- --------- Cash Flows Provided by Financing Activities ... 3,840 6,651 34,091 ------- ------- --------- Increase in Cash ............................... 93 712 282 Cash and Cash Equivalents, Beginning of Year ... 498 591 1,303 ------- ------- --------- Cash and Cash Equivalents, End of Year ......... $ 591 $ 1,303 $ 1,585 ======= ======= ========= Supplemental Information: Cash Paid for Interest ......................... $ 7,239 $ 7,741 $ 9,111 ======= ======= ========= Cash Paid for Income Taxes ..................... $ 859 $ 339 $ 1,177 ======= ======= =========
The accompanying notes are an integral part of these consolidated financial statements. F-13 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995 (Amounts in thousands except share data) 1. Nature of Business The accompanying financial statements represent the consolidated accounts of Iron Mountain Incorporated (formerly Iron Mountain Information Services, Inc.) and its subsidiaries (collectively Iron Mountain or the Company). Iron Mountain is a full service records management company providing storage and related services for all media in various locations throughout the United States to Fortune 500 Companies and numerous legal, banking, health care, accounting, insurance, entertainment, and government organizations. 2. Summary of Significant Accounting Policies a. Principles of Consolidation The financial statements reflect the financial position and results of operations of Iron Mountain on a consolidated basis. All significant intercompany account balances and transactions with affiliates have been eliminated. b. Property, Plant and Equipment Property, plant and equipment are stated at cost and depreciated using the straight-line method with the following useful lives: 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 Office equipment ................. 3 to 5 years Computer hardware and software ... 3 to 5 years Property, plant and equipment consist of the following: December 31, ------------------ 1994 1995 ------ -------- Real property ..................... $33,118 $ 34,162 Leasehold improvements ............ 8,958 11,206 Racking ........................... 35,977 53,348 Warehouse equipment/vehicles ...... 5,238 5,810 Furniture and fixtures ............ 2,411 2,754 Computer hardware and software .... 9,771 13,729 Construction in progress .......... 4,280 4,231 ------ -------- $99,753 $125,240 ====== ======== Minor maintenance costs are expensed as incurred. Major improvements to the leased buildings are capitalized as leasehold improvements and depreciated as described above. c. 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. 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. These amounts are included in deferred income in the accompanying financial statements. F-14 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) (Amounts in thousands except share data) d. 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 years. The Company assesses the recoverability of goodwill, as well as other long lived assets based upon expectations of future undiscounted cash flows in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed of." Accumulated amortization of goodwill was $11,205 and $15,071 as of December 31, 1994 and 1995, respectively. e. Deferred Financing Costs Deferred financing costs are amortized over the life of the related debt using the effective interest rate method. As of December 31, 1994 and 1995, deferred financing costs were $6,271, and $4,688, respectively, and accumulated amortization of those costs were $4,024, and $2,050, respectively. f. Customer Acquisition Costs Costs, net of revenues received for the initial transfer of the records, related to the acquisition of large volume accounts (accounts consisting of 10,000 or more cartons) are capitalized and amortized for an appropriate period not exceeding 12 years, unless the customer terminates its relationship with the Company, at which time 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 unamortized customer acquisition costs. As of December 31, 1994 and 1995 those costs were $5,114 and $6,492, respectively, and accumulated amortization of those costs were $841 and $1,282, respectively. g. 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. h. Inventories Inventories are carried at the lower of cost using the first-in, first-out basis or market and are comprised primarily of cartons. i. Accrued expenses Accrued expenses consist of the following: December 31, ---------------- 1994 1995 ----- ------- Accrued incentive compensation ............. $1,202 $ 1,701 Accrued vacation ........................... 809 1,014 Accrued interest ........................... 145 1,737 Accrued workers' compensation .............. 499 2,415 Other ...................................... 2,055 4,050 ----- ------- Accrued expenses ........................... $4,710 $10,917 ===== ======= F-15 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) (Amounts in thousands except share data) j. Net Income (Loss) Per Common Share Net income (loss) per common share is computed based on the weighted average number of common and common stock equivalent shares outstanding during each period. Common stock equivalents consist of preferred stock that is convertible into common stock and employee options to purchase common stock. Pursuant to certain SEC regulations, the calculation of weighted average shares outstanding assumes the conversion of preferred stock for all periods presented. The stock options have not been included in the calculation of common stock equivalents because their dilutive effect was immaterial. k. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect 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. l. 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. 3. Debt Debt consists of the following:
December 31, ------------------ 1994 1995 ------ -------- Working Capital Line and $36,000 Term Loan Refinanced in 1995 $59,934 $ -- Term Loans A and B ........................................... -- 59,625 $50,000 Acquisition Credit Facility .......................... -- 34,400 $15,000 Working Capital Facility ............................. -- 1,700 Chrysler Notes ............................................... 14,693 14,772 Real Estate Mortgages ........................................ 10,855 10,797 Other ........................................................ 776 580 ------ -------- Long-term Debt ............................................... 86,258 121,874 Less -- current portion ...................................... (628) (2,578) ------ -------- Long-term Debt, Net of Current Portion ....................... $85,630 $119,296 ====== ========
During 1994, the Company had a revolving credit facility of $44,625. This facility along with a $36,000 senior term loan was refinanced on January 31, 1995 under an amended and restated credit agreement (the Credit Agreement). Interest on the $36,000 senior debt term loan and the $44,625 revolving credit facility was based, at the Company's option, on a choice of base rates plus a margin. The margin varied depending upon the base rate selected. F-16 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) (Amounts in thousands except share data) The Credit Agreement is with a syndicate of lenders and provides for four separate credit facilities representing an aggregate commitment of $125,000 as follows: Maturity Amount Date ------ -------- Term Loan A ............................ $10,000 2000 Term Loan B ............................ 50,000 2002 Working Capital Facility ............... 15,000 2000 Acquisition Credit Facility ............ 50,000 2002 Commencing in 1996, Term Loans A and B are payable in quarterly installments of $625 and $125, respectively. Term Loan B has a balloon payment due upon maturity of $46,375. The Working Capital Facility is due in full upon maturity and the Acquisition Credit Facility is payable in eight quarterly installments equal to one-eighth of the outstanding balance commencing in 2000. Interest rates on all four facilities under the Credit Agreement are based, at the Company's option, on a choice of base rates plus a margin. The margin varies for each facility depending upon the base rate selected. The margins are subject to adjustment after January 1996 based on the Company's ability to meet certain financial covenant targets. At December 31, 1995, the effective interest rates for Term Loans A and B were 8.22% and 8.72%, respectively, and for the Working Capital Facility and Acquisition Credit Facility were 9.75% and 8.72%, respectively. There is a commitment fee of 1/2% per year on the unused portion of the Working Capital Facility and Acquisition Credit Facility. The $15,000 Chrysler Notes were issued in 1990 and mature in 2000. Annual principal payments of $5,000 commence in 1998. A warrant was issued in connection with the Chrysler Notes to which management assigned an initial value of $750 for financial reporting purposes (see Note 5). The value of the warrant is being accounted for as an original issue discount of the Chrysler Notes and is being amortized as interest expense over the life of the loan using the effective interest rate method. The note is junior only to the Credit Agreement and has an effective interest rate of 13.7%. The Credit Agreement and Chrysler Notes specify certain minimum or maximum relationships between operating cash flows (earnings before interest, taxes, depreciation and amortization) and interest, total debt and fixed charges. There are restrictions on dividends, sales or pledging of assets, capital expenditures and change in business and ownership; cash dividends are effectively prohibited. The Company was in compliance with the applicable provisions of these agreements at December 31, 1995. Loans under the Credit Agreement are secured by substantially all of the stock and assets of the Company's subsidiaries, with the exception of a secondary position on two owned properties encumbered by first mortgages. The real estate mortgages consist of an $8,037, 10 year, 11% mortgage based on 30 year amortization with a balloon payment due October, 2000 and a $3,000, 8% note that is payable in various installments commencing in 1996 and maturing in November, 2006. The Company is required to maintain interest rate protection under the Credit Agreement. In 1988, the Company entered into an interest rate swap (which expired in October 1995) whereby the Company paid a fixed interest rate of 9.28% and received a rate equal to the 3-month LIBOR rate. The interest was based on the outstanding notional principal amount which was $2,338 at December 31, 1994. The Company has also purchased two interest rate caps under which it will receive payments in the event that the three month LIBOR rate exceeds those specified in the caps. Each cap covers $10,000 of notional principal amount. One had a rate cap of 6.5% and expired on August 11, 1995 and the other has a rate cap of 7.5% and expires August 12, 1997. On March 24, 1995, the Company entered into two three-year interest rate collar swap transactions. Under these agreements, interest costs for the debt covered by the notional amount of these contracts will essentially float when the three-month LIBOR is between 6% and 7.5% but the Company will receive a payment from the bank in the event that the three month LIBOR interest rate exceeds 7.5%, or make a payment to the bank if such rate F-17 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) (Amounts in thousands except share data) is below 6%. Each transaction covers $10,000 of notional principal amount which will result in a maximum interest cost (including margin and transaction costs) of approximately 10.54% and 10.67%, respectively, for the covered amounts. In the event of non-performance by the counterparty, the Company would be exposed to additional interest rate risk if the variable interest rate were to exceed the ceiling (7.5%) under the terms of the swap agreement. Maturities of long-term debt are as follows: Year Amount ---- -------- 1996 ....................................... $ 2,578 1997 ....................................... 3,386 1998 ....................................... 8,320 1999 ....................................... 8,366 2000 ....................................... 28,824 Thereafter ................................. 70,400 ------ $121,874 ====== 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 and swap agreements as of December 31, 1995 as follows: Carrying Fair Amount Value -------- ---------- Credit Agreement ............. $(95,725) $(95,725) Chrysler Notes ............... (14,772) (15,737) Real Estate Mortgages ........ (10,797) (11,849) Other ........................ (580) (580) Swap Agreements .............. 25 (638) The fair value of the various swap agreements is based on the estimated amount a bank would charge to terminate the various swap agreements. 4. Acquisitions and Dispositions During 1994, the Company purchased substantially all of the assets, and assumed certain liabilities, of three separate records management businesses. During 1995, the Company purchased substantially all of the assets, subject to certain liabilities, of four records management businesses. Each of these acquisitions was accounted for using the purchase method of accounting and accordingly, the results of operations for each acquisition have been included in the consolidated results of the Company from the respective acquisition dates. The excess of the purchase price over the underlying fair value of the assets and liabilities of each acquisition has been assigned to goodwill ($2,484 and $26,054 in 1994 and 1995, respectively) and is being amortized over the estimated benefit period of 25 years. Funds used to make the various acquisitions were provided through the Company's acquisition credit facilities. A summary of the cash consideration and allocation of the purchase price as of the acquisition dates are as follows: 1994 1995 ----- -------- Fair value of assets acquired ..... $3,223 $41,286 Liabilities assumed ............... (377) (8,238) --- ------ Cash paid ......................... $2,846 $33,048 === ====== F-18 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) (Amounts in thousands except share data) The following unaudited pro forma combined information shows the results of the Company's operations for the years ended December 31, 1994 and 1995 as though each of the completed acquisitions had occurred as of January 1, 1994. 1994 1995 ------- ------- Revenues ............................................ $103,644 $112,675 Net income (loss) ................................... 574 (577) Accretion of redeemable Put Warrant ................. 1,412 2,107 ----- ----- Net loss applicable to Common Stockholders .......... $ (838) $ (2,684) ===== ===== Net loss per common share ........................... $(0.10) $(0.34) 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, 1994 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 companies. In 1995, the Company made a decision to sell one of its subsidiaries and has estimated that the purchase price will be $900 less than the book value of the assets and related goodwill. Consequently, the Company has recorded an impairment of the related goodwill in the accompanying statement of operations for 1995. 5. Common and Preferred Stock and Redeemable Put Warrant During 1995, the Company declared a 15.4215-for-1 stock split of the Class A and Class B Common Stock in the form of a stock dividend payable on November 29, 1995 to stockholders of record on November 28, 1995. All weighted average common share and stock related data in the consolidated financial statements have been retroactively restated to reflect the stock split. The Company has authorized the following eight classes of capital stock as of December 31, 1995: Number of Shares ------------------------- Par Issued and Equity Type Value Authorized Outstanding - ----------------------------------- -------- --------- ------------ Class A Common (voting) ........... $0.01 13,000,000 44,888 Class B Common (non-voting) ....... $0.01 10,300,000 -- Class C Common (non-voting) ....... $0.01 1 -- Series A1 Preferred (non-voting) .. $0.01 6,500 6,500 Series A2 Preferred (non-voting) .. $0.01 98,000 98,000 Series A3 Preferred (voting) ...... $0.01 43,500 43,500 Series B Preferred (voting) ....... $0.01 148,000 -- Series C Preferred (voting) ....... $0.01 351,395 351,395 Upon consummation of the underwritten public offering of common stock (See Note 10), all shares of preferred stock were automatically converted into shares of common stock. The number of common shares received upon conversion were as follows: Preferred Common -------- ---------- Series A1 and Series A3 ........... 50,000 987,314 Series A2 ......................... 98,000 1,935,146 Series C .......................... 351,395 4,809,793 The preferred stock is entitled to weighted average anti-dilution protection and receives dividends on a common stock equivalent basis. F-19 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) (Amounts in thousands except share data) In anticipation of the public offering, the Board of Directors approved and the shareholders ratified a recapitalization plan as follows: The designation of three new classes of stock: Authorized Class Shares - ----- ----------- Preferred Stock, $0.01 par value .................... 2,000,000 Common Stock, $0.01 par value ....................... 13,000,000 Nonvoting Common Stock, $0.01 par value ............. 1,000,000 In connection with the issuance of the Chrysler Notes, the Company also issued a warrant, dated December 14, 1990 (the Warrant), exercisable for 444,385 shares of common stock for nominal consideration upon the occurrence of certain specified events, including the effectiveness of an underwritten public offering of the Company's capital stock, and at any time after December 14, 1995. Chrysler Capital had the right to put (the Put) all or any part of the Warrant to the Company at any time after December 14, 1995, at the higher of a formula price based on a specified multiple of the Company's operating cash flow for the preceding 12 months, subject to certain adjustments, or fair market value of the Company (the Put Price). The Put was to terminate upon the consummation of an underwritten public offering which yielded net proceeds of not less than $10 million to the Company. Chrysler Capital and the Company reached an agreement pursuant to which Chrysler Capital would not exercise the Warrant or the Put until April 30, 1996 and the Company would redeem the Warrant upon completion of the closing of the public offering (See Note 10). On February 7, 1996, the Warrant was redeemed for $6,612. This Warrant has been 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 and is reflected as a redeemable put warrant in the accompanying balance sheets. In September, 1991 the Company created a non-qualified stock option plan pursuant to which up to 444,385 shares of Class A common stock of the Company can be issued at the discretion of the stock option committee to key employees, consultants and directors. The following is a summary of stock option transactions during the applicable periods: Option Price Options Per Share ------- ------------------ Options outstanding, December 31, 1992 ..... 302,040 $6.48 - $12.58 Expired ................................... (18,506) 6.48 ----- Options outstanding, December 31, 1993 ..... 283,534 6.48 - 12.58 Expired ................................... (23,903) 6.48 ----- Options outstanding, December 31, 1994 ..... 259,631 6.48 - 12.58 Granted ................................... 162,184 12.58 - 16.00 Exercised ................................. (15,976) 12.58 Expired ................................... (6,370) 12.58 ----- Options outstanding, December 31, 1995 ..... 399,469 $6.48 - $16.00 ===== The stock options were granted at an amount equal to or greater than the fair market value at the date of grant as determined by the Board of Directors. There are no shares available for grant under the 1991 plan as of December 31, 1995. The majority of options become exercisable ratably over a period of five years unless the holder terminates employment. As of December 31, 1995, 175,380 of the options outstanding were exercisable. Effective November 30, 1995, the Board of Directors approved the adoption of the 1995 Stock Incentive Plan (the Stock Option Plan), which replaced the previous stock option plan. A total of 1,000,000 shares of Class A Common Stock are available for grant as options and other rights under the Stock Option Plan, including the options issued under the 1991 plan. The number of options available for grant at December 31, 1995 was 555,615. F-20 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) (Amounts in thousands except share data) 6. 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 tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below: December 31, -------------------- 1994 1995 ------- --------- Current deferred tax assets: Accrued liabilities ................................ $ 527 $ 1,585 Other .............................................. 251 358 ----- ------- Current deferred tax assets ......................... $ 778 $ 1,943 ===== ======= Non-current deferred tax assets (liabilities): Accrued liabilities ................................ $ 1,147 $ 3,462 Net operating loss carryforwards ................... 3,280 2,522 AMT credit ......................................... 206 628 Deferred income .................................... 791 360 Other .............................................. 511 792 ----- ------- Non-current deferred tax assets ..................... 5,935 7,764 ----- ------- Other assets principally due to differences in amortization ....................................... (1,165) (2,051) Plant and equipment, principally due to differences in depreciation ................................... (5,383) (7,201) Customer acquisition costs ......................... (1,335) (1,716) Other .............................................. (520) (417) ----- ------- Non-current deferred tax liabilities ................ (8,403) (11,385) ----- ------- Net non-current deferred tax liability .............. $(2,468) $ (3,621) ===== ======= The Company and its subsidiaries file a consolidated Federal income tax return. The provision for income taxes consists of the following components: Years ended December 31, ------------------------ 1993 1994 1995 ----- ----- ------ Federal -- current ......................... $ 131 $ 68 $ 422 Federal -- deferred ........................ 1,645 1,416 837 State -- current ........................... 191 175 96 State -- deferred .......................... 121 298 342 --- --- ---- $2,088 $1,957 $1,697 === === ==== A reconciliation of total income tax expense and the amount computed by applying the U.S. Federal income tax rate of 34% to income before income taxes is as follows: 1993 1994 1995 ----- ----- ------ Computed "expected" tax provision ............ $1,243 $1,102 $ 661 Increase in income taxes resulting from: State taxes ................................. 206 312 289 Non-deductible Goodwill amortization ........ 521 521 843 Other ....................................... 118 22 (96) --- --- ---- $2,088 $1,957 $1,697 === === ==== F-21 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) (Amounts in thousands except share data) The Company has estimated Federal net operating loss carryforwards of $7,296 at December 31, 1995 to reduce future Federal income taxes, if any, which begin to expire in 2005. The Company has estimated state net operating loss carryforwards of approximately $441 to reduce future state income taxes, if any. The Company has alternative minimum tax credit carryforwards of $628 which have no expiration date and are available to reduce future income taxes, if any. 7. 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 escalation clauses or Consumer Price Index escalation. The Company also leases equipment under operating and capital 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 five years. Rent expense was $12,680, $13,555, and $15,661 for the years ended December 31, 1993, 1994 and 1995, respectively. Minimum future lease payments are as follows: Year Operating ----------------------------------------------------- ---------- 1996 ................................................ $ 18,278 1997 ................................................ 15,571 1998 ................................................ 13,585 1999 ................................................ 13,332 2000 ................................................ 13,537 Thereafter .......................................... 53,465 -------- Total minimum lease payments ........................ $127,768 ======== b. Litigation In 1992, the Company was named co-defendant in a suit alleging personal injuries sustained in an automobile collision with a driver employed by a courier company used at the time by Iron Mountain. The courier company subsequently filed for bankruptcy. In March, 1995, a judgment was entered against the Company in the Superior Court of the State of California for County of Los Angeles. The Company has accrued $600 in the accompanying financial statements which approximates the uninsured portion of the judgment. 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. c. Other The Company may be responsible for environmental clean-up costs at certain of its facilities. Estimated costs of $800 to perform the necessary remediation work are included in other liabilities in the accompanying balance sheets. In 1994, the Company incurred losses at one of its facilities in California, resulting from the Northridge earthquake. The Company has filed a claim for reimbursement with its insurance carrier and has received partial reimbursement to date, with the balance of $1,400 expected to be received upon the insurance company's completion of its review of the pending claim. Management believes the ultimate outcome of the above issues will not have a material adverse effect on Iron Mountain's financial condition or results of operations. F-22 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) (Amounts in thousands except share data) 8. Related Party Transactions a. Rental Arrangements Iron Mountain leases space to an affiliated company, Schooner Capital Corporation (Schooner) for its corporate headquarters located in Boston, Massachusetts. Accordingly, for the years ended December 31, 1993, 1994 and 1995, Schooner paid Iron Mountain rent totaling $48, $58, and $49, respectively. Iron Mountain leases one facility from a landlord which is a related party. Total rental payments for the years ended December 31, 1993, 1994 and 1995 for this facility totaled $88, $88, and $93, respectively. In the opinion of management, both of these leases were entered into at market prices and terms. b. Long Term Debt Iron Mountain is obligated in the amount of $383 on a junior subordinated note bearing interest at 8%, payable in March, 2000. This note, originally issued in connection with an acquisition, was purchased by and is now held by Schooner. 9. 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 $131, $146, and $294, for the years ended December 31, 1993, 1994 and 1995, respectively. 10. Subsequent Events In January and February 1996, the Company acquired three records services businesses for $10,047 in transactions that will be accounted for as purchases. On February 6, 1996, the Company completed an initial public offering of its stock. The net proceeds from the public offering of $34,968 were used to repay $28,313 of indebtedness and interest under the acquisition credit facility, to retire a warrant of $6,612, and for working capital. F-23 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of National Business Archives, Inc.: Towson, Maryland. We have audited the accompanying balance sheet of National Business Archives, Inc. as of December 31, 1993 and 1994, and the related statements of income, stockholder's equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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 National Business Archives, Inc. as of December 31, 1993 and 1994, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Wolpoff & Company, LLP Baltimore, Maryland November 3, 1995 F-24 NATIONAL BUSINESS ARCHIVES, INC. BALANCE SHEETS ASSETS December 31, ----------------------- 1993 1994 --------- ---------- Current Assets: Cash--Note 1 .............................. $ -- $ 1,000 Note Receivable, Related Party--Note 2 .... -- 1,416,148 Accounts Receivable--Note 1 ............... 714,974 687,645 Inventory--Note 1 ......................... 75,620 69,149 Prepaid Expenses .......................... 149,724 44,362 ------- -------- Total Current Assets ................... 940,318 2,218,304 ------- -------- Property, Plant and Equipment--Notes 1 and 4: Shelving .................................. 2,702,645 3,153,726 Motor Vehicles ............................ 479,961 498,011 Computers and Software .................... 195,033 212,830 Furniture, Fixtures and Equipment ......... 148,638 195,544 Leasehold Improvements .................... 76,820 318,258 ------- -------- 3,603,097 4,378,369 Less Accumulated Depreciation ............. 1,083,347 1,255,781 ------- -------- Property, net .......................... 2,519,750 3,122,588 ------- -------- Other Assets .............................. 7,498 56,001 ------- -------- Total Assets ........................... $3,467,566 $5,396,893 ======= ======== The notes to financial statements are an integral part of this statement. F-25 NATIONAL BUSINESS ARCHIVES, INC. BALANCE SHEETS LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
December 31, ------------------------ 1993 1994 ---------- ---------- Current Liabilities: Accounts Payable ..................................... $ 171,566 $ 302,222 Accrued Expenses ..................................... 176,355 238,354 Deferred Revenue--Note 1 ............................. 977,212 1,201,314 Long-term Liabilities, Current Portion--Notes 2 and 4 652,584 63,092 Note Payable, Related Party--Note 2 .................. 150,000 -- Dividends Payable--Note 3 ............................ 11,064 -- -------- -------- Total Current Liabilities. ........................ 2,138,781 1,804,982 -------- -------- Long-term Liabilities: Note Payable, Bank--Note 3 ........................... -- 2,333,901 Notes Payable, Stockholder--Note 2 ................... 1,913,333 355,000 Motor Vehicle Loans Payable--Note 4 .................. 171,636 100,582 -------- -------- 2,084,969 2,789,483 Less Current Portion ................................. 652,584 63,092 -------- -------- Total Long-term Liabilities ....................... 1,432,385 2,726,391 -------- -------- Deferred Rent--Note 5 ................................ 1,068,904 1,007,488 -------- -------- Total Liabilities .................................... 4,640,070 5,538,861 -------- -------- Commitments--Notes 2 and 5 Stockholder's Equity (Deficit): Common Stock ......................................... 100 100 Accumulated Deficit .................................. (1,172,604) (142,068) -------- -------- Total Stockholder's Equity (Deficit) .............. (1,172,504) (141,968) -------- -------- Total Liabilities and Stockholder's Equity (Deficit) ................................. $ 3,467,566 $5,396,893 ======== ========
The notes to financial statements are an integral part of this statement. F-26 NATIONAL BUSINESS ARCHIVES, INC. STATEMENTS OF INCOME Year Ended December 31, ------------------------ 1993 1994 --------- ----------- Revenue: Storage .............................. $3,406,317 $3,872,529 Service and Storage Material Sales ... 2,586,223 2,825,546 ------- --------- Total Revenue ..................... 5,992,540 6,698,075 ------- --------- Operating Expenses: Cost of Sales (Excluding Depreciation) 3,273,478 3,866,897 Selling, General and Administrative .. 1,040,057 1,093,935 Depreciation and Amortization ........ 286,843 344,800 ------- --------- Total Operating Expenses .......... 4,600,378 5,305,632 ------- --------- Operating Income ..................... 1,392,162 1,392,443 Interest Expense ..................... 187,115 101,490 ------- --------- Net Income--Note 1 ................... $1,205,047 $1,290,953 ======= ========= The notes to financial statements are an integral part of this statement. F-27 NATIONAL BUSINESS ARCHIVES, INC. STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
Year Ended December 31, --------------------------- 1993 1994 ----------- ------------ Common Stock: 5,000 Shares Authorized, 100 Shares Issued and Outstanding, No Par Value .......................................... $ 100 $ 100 --------- ---------- Retained Earnings (Deficit): Beginning Balance ....................................... (2,283,254) (1,172,604) Net Income .............................................. 1,205,047 1,290,953 Dividends ............................................... (94,397) (260,417) --------- ---------- Ending Balance .......................................... (1,172,604) (142,068) --------- ---------- Total Stockholder's Equity (Deficit) .................... $(1,172,504) $ (141,968) ========= ==========
The notes to financial statements are an integral part of this statement. F-28 NATIONAL BUSINESS ARCHIVES, INC. STATEMENTS OF CASH FLOWS
Year Ended December 31, -------------------------- 1993 1994 ---------- ------------ Cash Flows From Operating Activities: Net Income .............................................. $ 1,205,047 $ 1,290,953 -------- ---------- Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Depreciation and Amortization .......................... 286,843 344,800 (Gain) Loss on Disposal of Assets ...................... (1,115) 3,818 Increase in Accounts Payable ........................... 26,685 130,656 Increase in Accrued Expenses ........................... 145,939 61,991 Change in Accounts Receivable .......................... (121,414) 27,329 Change in Inventory .................................... (19,161) 6,471 Change in Prepaid Expenses ............................. (27,949) 105,362 Decrease in Deferred Rent Payable ...................... (62,830) (61,416) Increase in Deferred Revenue ........................... 154,985 224,102 -------- ---------- Total Adjustments .................................... 381,983 843,113 -------- ---------- Net Cash Provided by Operating Activities ........... 1,587,030 2,134,066 -------- ---------- Cash Flows From Investing Activities: Property and Equipment Expenditures ..................... (534,070) (955,924) Proceeds from Disposal of Assets ........................ 7,783 12,973 Other Assets ............................................ -- (57,000) Loan to Related Party ................................... -- (1,416,148) -------- ---------- Net Cash Used by Investing Activities ................ (526,287) (2,416,099) -------- ---------- Cash Flows From Financing Activities: Stockholder Loan Proceeds ............................... 672,222 -- Stockholder Note Principal Payments ..................... (580,558) (1,558,333) Net Bank Loan Proceeds .................................. -- 2,333,901 Bank Loan Principal Payments ............................ (1,218,662) -- Motor Vehicle Loan Proceeds ............................. 106,226 21,419 Repayment of Motor Vehicle Loans ........................ (106,638) (92,473) Net Proceeds to Related Party ........................... 150,000 (150,000) Dividends Paid .......................................... (83,333) (271,481) -------- ---------- Net Cash Used by Financing Activities ................ (1,060,743) 283,033 -------- ---------- Net Change in Cash ...................................... -- 1,000 Cash at Beginning of Year ............................... -- -- -------- ---------- Cash at End of Year ..................................... $ -- $ 1,000 ======== ========== Supplemental Disclosures of Cash Flow Information: Cash Paid During the Year for Interest ................. $ 166,875 $ 106,965 ======== ==========
The notes to financial statements are an integral part of this statement. F-29 NATIONAL BUSINESS ARCHIVES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Activity National Business Archives, Inc. was incorporated under the laws of Maryland pursuant to Articles of Incorporation dated June 18, 1987. The Company provides record storage and management services in the Baltimore-Washington area. Cash Cash in excess of the minimum balance required is swept daily to and offset against the revolving loan (see Note 3). Allowance for Doubtful Accounts The Company established an allowance for doubtful accounts of $120,000 in the current year. Inventory Inventory is stated at the lower of cost or market and is comprised of computer tape cases and records and storage boxes used in the business. Property, Plant and Equipment Property is recorded at cost. Depreciation is computed using either the straight-line method or accelerated methods with useful lives ranging from 5 to 7 years for equipment, 20 years for shelving and 31.5 to 39 years for leasehold improvements. Revenue Recognition Revenue is recognized when earned. Storage revenue is billed either monthly, quarterly or annually, depending on the terms of the lease. The estimated amount of storage revenue collected in advance as of December 31, 1993 and 1994, is shown as deferred revenue. Income and Taxes The shareholder has elected under Subchapter S of the Internal Revenue Code to report the Company's income at the shareholder level. Accordingly, no provision for income taxes is included herein. NOTE 2--RELATED PARTY TRANSACTIONS Note Receivable, Related Party In December 1994, the Company advanced $1,416,148 to James F. Knott Development Corp., an entity related to the shareholder. The unsecured loan is due on demand and bears interest at 9.5%. The note was repaid in January 1995. On May 19, 1994, the loan remaining from the sole shareholder was repaid when the revolving loan was modified. The interest expense in 1993 and 1994 was $108,652 and $39,037. F-30 NATIONAL BUSINESS ARCHIVES, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) NOTE 2--RELATED PARTY TRANSACTIONS -- (Continued) The sole shareholder loaned an additional $355,000 to the Company. This unsecured loan is subordinated to the bank loans. The terms are as follows:
Balance -------------------- Lender 12/31/93 12/31/94 Interest Rate Terms Maturity Date ---------------- --------- ------- ------------- ---------- ---------------- Stockholder .... $1,558,333 $ -0- Prime + 2% * October 1, 1996 Stockholder .... 355,000 355,000 -- Non-interest October 1, 1996 bearing ------- ----- $1,913,333 $355,000 ======= =====
* Principal was payable in consecutive monthly installments of $45,833 commencing on November 1, 1993 (36 X $45,833 = $1,650,000). The remaining stockholder note balance of $355,000 matures in 1996. Note Payable, Related Party James F. Knott Development Corp., an entity related to the shareholder, advanced the Company various amounts in 1993 and 1994. The loans were due on demand and bear interest at 6.5%. The balance at December 31, 1993 and 1994, was $150,000 and $-0-, respectively. Interest on the unsecured loans for 1993 and 1994 was $7,228 and $23,807, respectively. Office and Warehouse Leases See Note 5. NOTE 3--NOTE PAYABLE, BANK On December 19, 1994, the revolving loan was modified for the second time and the amount available was increased to $3,000,000. The balance at December 31, 1993 and 1994, was $-0- and $2,333,901, respectively. The terms of the loan are interest only at prime + 1/2% (prime at December 31, 1994, was 8.5%) until maturity on December 31, 1996. The loan is secured by all property and assets of the Company. The maximum unpaid outstanding principal available under the revolving loan is $2,500,000 and $1,500,000 as of December 31, 1995 and 1996, respectively. Interest on this loan was $51,408 and $25,049 in 1993 and 1994, respectively. Under the loan agreement, the Company is permitted to pay dividends to its sole shareholder in an aggregate amount equal to the amount of federal and state income taxes due on the taxable income of the Company, as if such taxable income was the sole taxable income of the shareholder. NOTE 4--MOTOR VEHICLE LOANS PAYABLE Pertinent information on the motor vehicle loans payable is as follows:
Balance ------------------ Total Interest Monthly Lender 12/31/93 12/31/94 Rate Payments Maturity Collateral - ---------------------- ------- ------- ------- ------- -------- ---------------- Ford Motor Credit .... Automobiles/ $171,636 $100,582 6.42-12% $9,442 3/95-8/97 Trucks Less Current Portion . 103,077 63,092 ----- ----- $ 68,559 $ 37,490 ===== =====
F-31 NATIONAL BUSINESS ARCHIVES, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) NOTE 4--MOTOR VEHICLE LOANS PAYABLE -- (Continued) Interest on these loans was $15,077 and $11,825 in 1993 and 1994, respectively. The remaining principal payments on these loans are as follows: 1995 .............................. $ 63,092 1996 .............................. 33,596 1997 .............................. 3,894 ------ $100,582 ====== NOTE 5--COMMITMENTS Deferred Rent Office and warehouse leases:
Square Effective Lease Free Expiration Lessor* Feet Date Term Rent Date - --------------------------------- ------ ------- ---------------- ---------- ---------- B.W.I.P. Associates Limited 11 Yrs. 7.5 Partnership .................. 68,200 12/01/87 Mths.** 8 Mths. 7/15/99 Dorsey Run Industrial Park 10 Yrs. 9 Limited Partnership (DRIP) .... 142,885 11/01/89 Mths. 14 Mths. 7/31/00 DRIP ............................ 42,413 9/01/94 5 Years -- 8/31/99 DRIP ............................ 97,587 3/01/95 4 Yrs. 6 Mths. -- 8/31/99
* Lessors are related to sole shareholder. ** Lease term was extended 1 year and 7.5 months in the current year. Annual rental expense recognized on the straight-line basis on the above leases for 1993 and 1994 was $1,092,132 and $1,146,564, respectively. Future minimum annual rental payments are as follows: 1995 ...................................... $1,764,714 1996 ...................................... 1,825,706 1997 ...................................... 1,834,600 1998 ...................................... 1,826,606 1999 ...................................... 1,427,525 2000 ...................................... 510,099 ---------- Total minimum future rental payments ......... $9,189,250 ========== NOTE 6--SUBSEQUENT EVENT On March 1, 1995, the Company sold all of its assets to Iron Mountain Records Management, Inc. and all debt was repaid from the proceeds of the sale. In addition, the Company's assets were released from security interests held by the bank with the full payment of the note payable (see Note 3). F-32 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Data Management Business Records Storage, Inc.: We have audited the accompanying balance sheet of Data Management Business Records Storage, Inc. as of June 30, 1995 and the related statement of operations and retained earnings (deficit), and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audit provides 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 Data Management Business Records Storage, Inc. as of June 30, 1995 and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. MORRISON AND SMITH Tuscaloosa, Alabama September 18, 1995 (except for Note 14, as to which the date is December 1, 1995) F-33 DATA MANAGEMENT BUSINESS RECORDS STORAGE, INC. BALANCE SHEETS
June 30, September 30, 1995 1995 ---------- ------------- (unaudited) ASSETS Cash ................................................... $ 125,982 $ 626,578 Accounts receivables, net .............................. 576,979 517,903 Materials inventory .................................... 7,909 7,909 Prepaid expenses ....................................... 11,744 12,867 Other .................................................. 115,154 374 -------- ----------- Total current assets ................................ 837,768 1,165,631 -------- ----------- Plant, property and equipment, net ..................... 3,334,017 2,435,362 -------- ----------- Intangible assets ...................................... 572,558 533,228 Notes receivable, intercompany ......................... 316,551 373,082 Deferred income tax .................................... 810,431 554,752 Other .................................................. 11,748 11,748 -------- ----------- 1,711,288 1,472,810 -------- ----------- Total assets ...................................... $ 5,883,073 $ 5,073,803 ======== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Accounts payable--trade ................................ $ 92,193 $ 61,592 Accrued expenses ....................................... 136,505 137,043 Unearned income ........................................ 309,735 309,735 Current portion--leases ................................ 68,242 63,240 Current portion--notes ................................. 5,353,941 4,428,159 -------- ----------- Total current liabilities ........................... 5,960,616 4,999,769 -------- ----------- Leases payable, long-term .............................. 114,216 96,885 Notes payable, long-term ............................... 1,328,764 1,292,495 Notes payable, intercompany ............................ 50,000 38,760 Deferred compensation payable .......................... 12,115 -- Earnest money deposit .................................. 154,988 -- -------- ----------- Total long-term liabilities ......................... 1,660,083 1,428,140 -------- ----------- Total liabilities ................................. 7,620,699 6,427,909 Stockholders' equity (deficit) Common stock ........................................... 500 500 Paid-in capital ........................................ 1,321,809 1,321,809 Retained earnings (deficit) ............................ (3,059,935) (2,676,415) -------- ----------- (1,737,626) (1,354,106) ======== =========== Total liabilities and stockholders' equity (deficit) ............................... $ 5,883,073 $ 5,073,803 ======== ===========
The accompanying notes are an integral part of these financial statements. F-34 DATA MANAGEMENT BUSINESS RECORDS STORAGE, INC. STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) Three Year Ended Months Ended June 30, September 30, 1995 1995 ----------- ------------- (Unaudited) Revenues: Storage .................................... $ 3,143,737 $ 797,715 Services and storage material sales ........ 1,683,035 414,650 Net gain (loss) on sale of assets .......... (4,045) 738,049 --------- ----------- Total Revenues ............................ 4,822,727 1,950,414 --------- ----------- Operating expenses: Cost of sales (excluding depreciation) ..... 891,293 310,610 Selling, administrative and general expenses 2,730,013 767,702 Depreciation and amortization .............. 510,831 115,653 --------- ----------- Total operating expenses .................. 4,132,137 1,193,965 --------- ----------- Operating income ............................ 690,590 756,449 Interest expense ............................ (551,569) (121,915) Other income (expense), net ................. 611 4,664 --------- ----------- Income before provision for income taxes .... 139,632 639,198 Provision for income taxes .................. 55,589 255,678 --------- ----------- Net income .................................. 84,043 383,520 Retained earnings (deficit)--beginning ...... (3,143,978) (3,059,935) --------- ----------- Retained earnings (deficit)--ending ......... $(3,059,935) $(2,676,415) ========= =========== The accompanying notes are an integral part of these financial statements. F-35 DATA MANAGEMENT BUSINESS RECORDS STORAGE, INC. STATEMENTS OF CASH FLOWS
Three Year Ended Months Ended June 30, September 30, 1995 1995 ---------- ------------- (Unaudited) Cash Flow from Operating Activities: Cash received from customers and affiliates ........................... $ 4,769,087 $1,271,441 Cash paid for cost of sales ........................................... (873,587) (218,510) Cash paid for operating expenses ...................................... (2,693,965) (805,400) Interest expense ...................................................... (550,807) (113,677) Income taxes paid ..................................................... -- (457) Interest and dividends received ....................................... 1,082 3,691 Other income (expense) ................................................ (471) 973 -------- ----------- Net Cash from Operating Activities .................................. 651,339 138,061 -------- ----------- Cash Flow from Investing Activities: Proceeds from escrow money deposit .................................... 154,988 -- Proceeds from sale of assets and equipment ............................ 12,117 1,686,742 Payments for purchase of property and equipment ....................... (554,247) (280,623) Payments (to) from employees for advances ............................. (9,635) 9,670 Payments (to) from affiliates for advances ............................ (151,360) (67,771) Payments for investments and intangibles .............................. (3,494) (726) Payments for deposits ................................................. -- (374) -------- ----------- Net Cash from Investing Activities .................................. (551,631) 1,346,918 -------- ----------- Cash Flows from Financing Activities: Proceeds from borrowings .............................................. 272,330 -- Repayment of debt ..................................................... (276,748) (984,383) -------- ----------- Net Cash from Financing Activities .................................. (4,418) (984,383) -------- ----------- Net change in cash and cash equivalents ................................ 95,290 500,596 Cash and cash equivalents at beginning of period ....................... 30,692 125,982 -------- ----------- Cash and cash equivalents at end of period ............................. $ 125,982 $ 626,578 ======== =========== Reconciliation of net income to net cash provided by operating activities: Net income ............................................................ $ 84,043 $ 383,520 Depreciation and amortization ......................................... 510,831 115,653 Deferred compensation ................................................. 6,304 -- (Gain) loss on sale of assets ......................................... 4,045 (738,049) (Increase) decrease in accounts receivable ............................ (72,453) 59,076 (Increase) in inventory ............................................... (1,581) -- (Increase) decrease in prepayments and escrow ......................... (49,272) 104,361 Increase (decrease) in accounts payable, accrued expenses and unearned income .................................................... 114,290 (42,178) Decrease in deferred tax benefit ...................................... 55,132 255,678 -------- ----------- Net cash provided by operating activities .............................. $ 651,339 $ 138,061 ======== ===========
The accompanying notes are an integral part of these financial statements. F-36 DATA MANAGEMENT BUSINESS RECORDS STORAGE, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 NOTE 1--ORGANIZATIONAL HISTORY OF THE COMPANY Data Management Business Records Storage, Inc. ("the Company"), organized in 1985, provides data management and storage ("DMS") services in the Atlanta, Georgia market. The Company currently has 1,447,024 cubic feet of warehouse capacity. The Company is a wholly owned subsidiary of Outdoor West, Inc., a management and holding company. Outdoor West, Inc. also owns two subsidiaries which operate in the outdoor advertising business, Outdoor West, Inc. of Georgia and Outdoor West, Inc. of Tennessee. NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Method of Accounting The Company's financial statements are presented on the accrual basis. Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include money market accounts and highly liquid debt instruments purchased with a maturity of three months or less. The Company maintains cash balances at several financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. Uninsured balances held in accounts at the Company's primary lender aggregate $25,982 at June 30, 1995. Allowance for Doubtful Trade Receivables Bad debts are accounted for on the reserve method. The allowance for doubtful accounts at June 30, 1995 was $837. Materials Inventory Materials inventory is valued at cost using the first-in, first-out method. Property and Depreciation Property and equipment are recorded at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized. When items of property and equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is recognized. Major classifications of property and equipment and their respective depreciable lives are summarized below: Years ------ Buildings ........................................... 15-40 Leasehold improvements .............................. 5-40 Autos and trucks .................................... 3-6 Equipment, construction ............................. 5-12 Shelving ............................................ 12 Computer equipment .................................. 5 Office furniture and fixtures ....................... 5-10 Leased assets ....................................... 7-25 F-37 DATA MANAGEMENT BUSINESS RECORDS STORAGE, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued) Intangible Assets In acquisitions of record storage businesses, agreements not to compete and goodwill were part of the purchase price. Non-compete agreements are amortized over the lives of the agreements ranging from ten to twenty years; goodwill is amortized over forty years. Loan costs are amortized over the lives of the loans. Income Taxes The Company is included in a consolidated federal income tax return of an affiliated group. Income tax expense in the Company's statement of operations has been allocated based on the ratio that each member's separate taxable income bears to the sum of the separate taxable incomes of all members having taxable income for the year. Unused net operating losses and tax credits available for carryforward to future years are detailed in Note 4. NOTE 3--INTANGIBLE ASSETS Intangible assets as of June 30, 1995 consist of: Accumulated Cost Amortization Net --------- ----------- --------- Non-compete agreements ............ $ 698,000 $418,282 $279,718 Loan costs ........................ 257,197 166,422 90,775 Goodwill .......................... 253,781 51,716 202,065 ------- --------- ------- Total .......................... $1,208,978 $636,420 $572,558 ======= ========= ======= NOTE 4--FEDERAL INCOME TAXES The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards Number 109, "Accounting for Income Taxes". Under the provisions of Statement No. 109, a current tax liability or asset is recognized for the estimated taxes currently payable or refundable for the current year and a deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and carryforwards. Temporary differences represent the difference between the book and tax bases of assets or liabilities that will result in taxable or deductible amounts in future years when the asset or liability is recovered or settled. Summary of the provision for income tax expense (benefit) for the year ended June 30, 1995 is as follows: Currently payable ................................... $ 457 Deferred ............................................ (4,595) Utilization of operating loss carryforward .......... 59,727 ------ Provision for income tax expense .................... $55,589 ====== A reconciliation of income tax at the statutory rate to the Company's effective rate is as follows: Computed at the expected statutory rate ............. 38.0% Officer's life insurance ............................ .9 Amortization of goodwill ............................ 1.7 Deferred compensation ............................... 1.7 Other differences ................................... (2.5) ---- Effective rate ...................................... 39.8% ==== F-38 DATA MANAGEMENT BUSINESS RECORDS STORAGE, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) NOTE 4--FEDERAL INCOME TAXES -- (Continued) For the year ended June 30, 1995, the Company was included in a consolidated federal income tax return. The Company had carryovers as follows: Carryover Amount Expiration --------------------------- --------- ----------- Net operating loss ........ $2,109,000 2004-2009 Contributions ............. 5,510 1996-1999 The deferred tax benefit consisted of the following at June 30, 1995: Deferred tax benefit: Net operating loss carryforward .......... $801,420 Other temporary differences .............. 9,011 ------- 810,431 Valuation allowance ...................... -0- ------- Net deferred tax benefit ................. $810,431 ======= Even though the Company has net operating loss carryforwards from fiscal years ended June 30, 1985 through June 30, 1994, management believes that it is more likely than not that it will generate taxable income sufficient to realize the tax benefit associated with net operating loss and tax credit carryforwards. This belief is based upon, among other factors, expectations of continued growth in sales and changes in operations, as well as consideration of available tax planning strategies. Specifically, the Company has plans to consolidate operations in the DMS business by selling a warehouse and moving files to an existing leased facility. The sale of the warehouse facility is expected to result in a significant gain as the facility's best use, due to its location and structure, is other than warehouse space. Additionally, the Company has plans to sell the operating assets of the DMS business at a significant gain. Management believes that no valuation allowance is appropriate given the current estimates of future taxable income. If the Company is unable to generate sufficient taxable income in the future through operating results, or through the sales discussed in Note 14, increases in the valuation allowance will be required through a charge to income tax expense. NOTE 5--CAPITAL STOCK Common stock of the Company has a par value of $0.10 per share; 5,000 shares were authorized, issued and outstanding. NOTE 6--PROPERTIES AND FACILITIES 1995 ------------ Land ................................................ $ 364,657 Buildings ........................................... 1,831,905 Leasehold improvements .............................. 126,501 Autos and trucks .................................... 355,032 Equipment ........................................... 110,916 Shelving ............................................ 2,586,900 Computer equipment .................................. 334,018 Office furniture and fixtures ....................... 128,503 Leased assets ....................................... 313,667 ---------- 6,152,099 Less accumulated depreciation ....................... (2,818,082) ---------- $ 3,334,017 ========== F-39 DATA MANAGEMENT BUSINESS RECORDS STORAGE, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) NOTE 7--NOTES PAYABLE
Interest Balance Maturity Collateral and Repayment Terms Rate June 30, 1995 - ---------- --------------------------------------------------- ------------ -------------- 6/96 Substantially all of assets of the Company except those subject to prior liens and the outstanding stock of the Company pari passu with other major lender. Interest due monthly and principal payments of approximately $60,000 due 9/30/95; 7.62%- 12/31/95 and 3/31/96. Remaining principal balance LIBOR+ due 6/30/96. 3.25% $5,124,242 2/01-3/01 Certain assets of DMS on purchase money contracts, non-competes; due $16,667 monthly 10.00% 1,071,038 9/99 Real estate of DMS due $4,152 monthly 9.00% 384,892 9/94-4/96 Rolling stock and equipment, principal and interest of approximately $9,000 due monthly Various 102,533 ------------ $6,682,705 ============
Principal maturities of notes payable for the five years ending after June 30, 1995 are: 6/30/96 ............................................. $ 5,353,941 6/30/97 ............................................. 195,314 6/30/98 ............................................. 196,611 6/30/99 ............................................. 522,343 6/30/00 ............................................. 272,365 Maturities after 5 years ............................ 142,131 ---------- Total maturities ................................. 6,682,705 Less current maturities ............................. (5,353,941) ---------- Long term maturities ............................. $ 1,328,764 ========== At June 30, 1995, a substantial portion of the Company's notes payable were due within one year. However, as discussed in Note 14, substantially all of the operating assets of the Company were sold effective November 30, 1995. The proceeds of this sale were sufficient to pay all of the Company's notes payable. Additional Restrictions Required by Long-Term Debt The Company, its parent and affiliates entered into loan agreements with Massachusetts Mutual Life Insurance Company and National Westminster Bank USA. The affiliated group is required to comply with certain restrictive covenants which require, among other things, limitations on capital expenditures and corporate overhead and a deadline for providing audited financial statements. While the affiliated group was in violation of these agreements, the two lenders have issued waivers for the covenant violations as of June 30, 1995. NOTE 8--TRANSACTIONS WITH RELATED PARTIES The Company has various lease and management agreements with affiliates. The Company's parent, Outdoor West, Inc., charges the Company a management fee which covers executive management supervision in addition to general management services which include leasing, accounting, finance, personnel and general supervision F-40 DATA MANAGEMENT BUSINESS RECORDS STORAGE, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) NOTE 8--TRANSACTIONS WITH RELATED PARTIES -- (Continued) responsibilities. Amounts included in the statement of operations with respect to transactions with affiliates for June 30, 1995 are: Outdoor West, The Eagle Inc. Group --------- ---------- Income Land Lease ......................... $ -- $ 4,900 Expenses Management fees ..................... 398,000 -- Interest ............................ -- 13,932 Building rental ..................... -- 103,875 ------- -------- Net transactions with related parties $(398,000) $(112,907) ======= ======== Receivables from and payables to affiliates as of June 30, 1995 are: Accounts receivable from: Outdoor West, Inc. ......................... $316,551 ======= Notes payable to: Outdoor West, Inc. of Georgia .............. $ 50,000 ======= Charles H. Renfroe is Chairman of the Board of Directors of the Company. The Eagle Group is a sole proprietorship, owned by Mr. Renfroe, which operates a mini-warehouse project and leases office and warehouse space to Outdoor West, Inc. of Georgia and to the Company. In addition, the Eagle Group owns 19 parcels of land leased to Outdoor West, Inc. of Georgia and Tennessee. In the opinion of management, all of the transactions with related parties are at rates and terms equivalent to those that prevail in arm's-length transactions. NOTE 9--UNEARNED INCOME Unearned income represents primarily income billed one month in advance for record storage. Most of this was recognized as income in July, 1995. NOTE 10--OBLIGATIONS UNDER CAPITAL LEASE The Company is the lessee of property under capital leases with expirations as disclosed in the following table. Assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are depreciated over the lower of their related lease terms or their estimated productive lives. Depreciation of assets under capital leases is included in depreciation expense for 1995. Interest rates on capitalized leases vary and are imputed based on the lower of the Company's incremental borrowing rate at the inception of each lease or the lessor's implicit rate of return. General Description of Capital Leases June 30, 1995 Termination Leased Property Balance Dates --------------- ----------- ---------------- Equipment ......................... $182,457 10/05/96-12/19/99 ========= F-41 DATA MANAGEMENT BUSINESS RECORDS STORAGE, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) NOTE 10--OBLIGATIONS UNDER CAPITAL LEASE -- (Continued) Net Obligations Under Capital Leases at June 30, 1995: Capital Less: Balance Lease Imputed Sheet Balance Interest Values ------- ------- -------- Current liabilities ........... $ 84,078 $15,836 $ 68,242 ===== ===== ====== Long-term liabilities ......... $129,366 $15,150 $114,216 ===== ===== ====== Gross Assets and Accumulated Depreciation June 30, 1995 -------------- Equipment and automobiles ......... $313,667 Less accumulated depreciation ..... (68,721) ------------ $244,946 ============ Minimum Future Lease Payments Years Ended June 30 ------------------- 1996 .............................................. $ 84,078 1997 .............................................. 73,109 1998 .............................................. 30,229 1999 .............................................. 17,352 2000 .............................................. 8,676 ------ Total minimum lease payments .................... 213,444 Less imputed interest ............................... 30,986 ------ Present value of net minimum lease payments ......... $182,458 ====== NOTE 11--OBLIGATIONS UNDER OPERATING LEASES The Company leases real estate under operating leases expiring in various years through January 31, 2008. Minimum future rental payments under non-cancellable operating leases having remaining terms in excess of one year as of June 30, 1995 for each of the next five years in the aggregate are: Years Ended June 30 Amount ------------------ ---------- 1996 .............................................. $ 745,918 1997 .............................................. 528,299 1998 .............................................. 425,770 1999 .............................................. 428,208 2000 .............................................. 418,197 Subsequent to 2000 ................................ 3,373,556 -------- $5,919,948 ======== Rental expense under all operating leases for the fiscal year ended June 30, 1995: Rental Expense ...................................... $491,139 ====== The Company leases real estate from affiliates. The leases are classified as operating leases and provide for minimum annual rentals of $103,875 with expirations ranging from February 28, 1996 to January 6, 2000. See Note 8. F-42 DATA MANAGEMENT BUSINESS RECORDS STORAGE, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) NOTE 12--COMMITMENTS AND CONTINGENCIES The Company began a self-insured program for its group health plan January 1, 1990. The Company is liable for claims up to $20,000 per employee annually and aggregate claims up to $154,861 annually. Self-insurance costs are accrued based upon the aggregate of the liability for reported claims and an actuarially determined estimated liability for claims incurred but not reported. NOTE 13--PROFIT SHARING PLAN Effective January 1, 1994, the Company implemented a profit sharing plan described in Internal Revenue Code Section 401(k). All employees of the Company are eligible to participate once they meet the eligibility and participation requirements of the plan. Employees become eligible for participation in the plan after attaining age 21 and completing 12 months of service. Under the terms of the plan, participants may contribute a portion of their compensation to the plan on a tax deferred basis. Employee contributions may not exceed the annual limitations established by the Treasury. The Company matches 10% of the first 6% of compensation contributed by each participant. During the year ended June 30, 1995 the cost of the plan to the Company totaled $7,128. NOTE 14--SUBSEQUENT EVENTS On July 31, 1995 the Company sold a warehouse and distribution facility. Proceeds from the sale were $1,850,000. The transaction resulted in a gain of approximately $740,000 which will be included in net income from operations for the fiscal year ending June 30, 1996. On December 1, 1995, the Company sold, effective November 30, 1995, substantially all of its operating assets. F-43 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners Nashville Vault Company, Ltd.: We have audited the accompanying balance sheet of Nashville Vault Company, Ltd. (a Tennessee limited partnership) as of December 31, 1995, and the related statements of income, partners' capital and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audit provides 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 Nashville Vault Company, Ltd. at December 31, 1995, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. Geo. S. Olive & Co. LLC Indianapolis, Indiana January 16, 1996 F-44 NASHVILLE VAULT COMPANY, LTD. (A TENNESSEE LIMITED PARTNERSHIP) BALANCE SHEET December 31, 1995 ------------ ASSETS Current assets: Cash and cash equivalents ............... $ 275,806 Accounts receivable--trade .............. 180,609 Prepaid expenses ........................ 60 ---------- Total current assets .................. 456,475 Property and equipment: Building and improvements ............... 1,148,652 Furniture and equipment ................. 269,798 Vehicles ................................ 88,386 ---------- 1,506,836 Accumulated depreciation and amortization (833,520) ---------- $ 673,316 ---------- $1,129,791 ========== LIABILITIES Current liabilities: Accounts payable and accrued expenses ... $ 104,662 Deferred revenue ........................ 43,253 Convertible notes payable ............... 325,000 ---------- Total current liabilities ............. 472,915 PARTNERS' CAPITAL ....................... 656,876 ---------- $1,129,791 ========== The accompanying notes are an integral part of these financial statements. F-45 NASHVILLE VAULT COMPANY, LTD. (A TENNESSEE LIMITED PARTNERSHIP) STATEMENT OF INCOME Year Ended December 31, 1995 ---------------- Revenue: Storage ........................................... $ 636,302 Service and storage material sales ................ 738,338 -------------- Total revenue .................................. $1,374,640 Operating expenses: Cost of sales (excluding depreciation) ............ 499,389 Selling, general and administrative expenses ...... 326,674 Depreciation and amortization ..................... 122,021 -------------- Total operating expenses ....................... 948,084 -------------- Operating income .................................... 426,556 Other income (expense): Interest income ................................... 18,994 Interest expense .................................. (80,022) -------------- (61,028) -------------- Net income .......................................... $ 365,528 ============== STATEMENT OF PARTNERS' CAPITAL Balance, Beginning of Year .......................... $ 306,499 Net income ........................................ 365,528 Cash distributions ................................ (15,151) -------------- Balance, End of Year ................................ $ 656,876 ============== The accompanying notes are an integral part of these financial statements. F-46 NASHVILLE VAULT COMPANY, LTD. (A TENNESSEE LIMITED PARTNERSHIP) STATEMENT OF CASH FLOWS Year Ended December 31, 1995 ---------------- Operating Activities: Net income ............................................... $ 365,528 Items not affecting net cash provided by operating activities: Depreciation and amortization ......................... 122,021 Gain on disposal of property and equipment ............ (141) Changes in other items: Accounts receivable--trade ......................... (333) Prepaid expenses ................................... 16,761 Accounts payable and accrued expenses .............. 41,230 Deferred revenue ................................... (2,012) -------------- Net cash provided by operating activities .......... $ 543,054 Investing Activities: Purchase of property and equipment ....................... (30,908) Proceeds from sale of property and equipment ............. 2,300 Proceeds from sale of investments ........................ 310,000 Purchase of investments .................................. (210,000) -------------- Net cash provided by investing activities .......... 71,392 Financing Activities: Payments on debt ......................................... (489,969) Cash distribution to partners ............................ (15,151) -------------- Net cash used by financing activities .............. (505,120) -------------- Net increase in Cash and Cash Equivalents .................. 109,326 Cash and Cash Equivalents, Beginning of Year ............... 166,480 -------------- Cash and Cash Equivalents, End of Year ..................... $ 275,806 ============== Supplemental Cash Flows Information: Cash paid during the year for interest ................... $ 80,022 Equipment acquired with installment note ................. 48,854 The accompanying notes are an integral part of these financial statements. F-47 NASHVILLE VAULT COMPANY, LTD. (A TENNESSEE LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS 1. Nature of Operations Nashville Vault Company, Ltd. (the "Partnership") is a limited partnership formed pursuant to the Uniform Limited Partnership Act of Tennessee on February 21, 1985 to renovate, own and operate a maximum security facility containing safe deposit boxes and secured storage vaults in Nashville. 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 disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Summary of Significant Accounting Policies Cash Equivalents The Partnership considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 1995, cash equivalents consisted of savings accounts. From time to time during the year, the Partnership's cash accounts exceeded federally insured limits. Property and Equipment Property and equipment are carried at cost, and such cost is being recovered using straight-line and accelerated methods of depreciation, with useful lives of 15 to 31.5 years for building and improvements, 5 to 7 years for furniture and equipment, and 5 years for vehicles. Revenue Recognition Revenue is recognized when earned. Revenue billed in advance is shown as deferred revenue. Advertising Costs The Partnership expenses advertising costs as incurred. Advertising costs were $6,787 in 1995. Income Tax Status Since the entity is a partnership, it is not subject to federal and state income taxes and, accordingly, no provision for federal and state taxes on income is required. The partners include their allocable share of the net income or loss in their respective income tax returns. 3. Convertible Notes Payable The 12% convertible notes, payable to certain limited partners, are convertible into limited partnership units at a conversion price of $12,500 for one limited partnership unit. On January 1, 1996, all convertible notes were converted into 26 limited partnership units. 4. Employee Benefits On January 1, 1994, the Partnership established a 401(k) defined contribution plan for the benefit of substantially all of its employees, which allows for both employee and Partnership contributions. The Partnership contribution consists of a matching contribution of 25 percent of employee contributions, up to 3.75 percent of eligible employee compensation. The Partnership contribution to the plan was $3,924 for 1995. This plan was terminated on December 31, 1995. F-48 NASHVILLE VAULT COMPANY, LTD. (A TENNESSEE LIMITED PARTNERSHIP) -- (Continued) 5. Partnership Agreement The Agreement of Limited Partnership (as amended) specifies the allocation of profits, losses, and distributions to be allocated 1% to the General Partner and 99% to the Investor Limited Partners. Under the agreement, the limited partners are not liable for any debts of the Partnership nor are they required to make any additional capital contributions. 6. Related Party Transactions The Partnership leases the ground on which its building is located from family members of stockholders of the General Partner and pays real estate taxes and other related expenses under the lease which expires November 30, 2000. On January 1, 1996, the Partnership exercised an option to purchase the land for $250,000. Rent expense in 1995 was $29,000. The General Partner, USA Vault Corporation, is guaranteed a monthly management fee for the operation of the Partnership. The fee begins at $1,000 per month increasing to $2,000 and $3,000 monthly when annual gross revenue exceeds $200,000 and $300,000, respectively. The Partnership incurred management fees to the General Partner of $32,000 in 1995. The Partnership pays fees to a company owned by the president of USA Vault Corporation for accounting and bookkeeping services. Fees paid totaled $12,000 for 1995. 7. Major Customer Sales from a major customer approximated 10% of sales and 19% of accounts receivable at December 31, 1995. 8. Subsequent Event On January 4, 1996, the Partnership sold, effective January 1, 1996, substantially all of its operating assets for approximately $3,450,000 to Iron Mountain Record Management, Inc. F-49 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Directors and Stockholders Data Archive Services, Inc. and Data Archive Services of Miami, Inc.: We have audited the accompanying combined balance sheet of Data Archive Services, Inc. and Data Archive Services of Miami, Inc. (Florida Corporations) as of May 31, 1996, and the related combined statements of operations and retained earnings, and cash flows for the year then ended. These combined financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these combined 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 combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined 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 combined financial statements referred to above present fairly, in all material respects, the financial position of Data Archive Services, Inc. and Data Archive Services of Miami, Inc. as of May 31, 1996, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. The combined financial statements include the financial statements of Data Archive Services, Inc. and Data Archive Services of Miami, Inc., which are related through controlled ownership and management. Perless, Roth, Jonas & Hartney, CPAs, PA Miami, Florida July 30, 1996 (except for Note 11, for which the date is August 9, 1996) F-50 DATA ARCHIVE SERVICES, INC. COMBINED BALANCE SHEET MAY 31, 1996 ASSETS Current Assets: Cash ........................................ $ 155,435 Accounts Receivable ......................... 291,711 Due from Related Party ...................... 19,379 Inventories ................................. 4,061 Prepaid Expenses ............................ 45,673 Income Taxes Receivable ..................... 34,485 ------- Total Current Assets ..................... 550,774 Property, Plant and Equipment: Shelving .................................... 565,513 Office Furniture and Equipment .............. 217,686 Vaults ...................................... 110,139 Leasehold Improvements ...................... 61,914 Vehicle ..................................... 18,237 ------- 973,489 Less: Accumulated Depreciation .............. (490,025) ------- Property, Plant and Equipment, Net ....... 483,464 Other Assets ................................ 46,730 ------- Total Assets ............................. $1,080,938 ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current Portion of Long-Term Liabilities .... $ 129,407 Accounts Payable ............................ 251,207 Accrued Expenses ............................ 126,909 Loan Payable to Stockholder ................. 165,154 Deferred Revenue ............................ 170,140 Income Taxes Payable ........................ 8,365 ------- Total Current Liabilities ................ 851,182 Long-Term Liabilities: Lease Obligation Payable .................... 7,117 Installment Obligations Payable ............. 145,298 Line of Credit Payable to Bank .............. 100,000 Less: Current Portion of Long-Term Liabilities ............................... (129,407) ------- Total Long-Term Liabilities .............. 123,008 Stockholders' Equity: Capital Stock ............................... 11,000 Additional Paid-in Capital .................. 50,050 Retained Earnings ........................... 45,698 ------- Total Stockholders' Equity ............... 106,748 ------- Total Liabilities and Stockholders' Equity $1,080,938 ======= The accompanying notes are an integral part of these financial statements. F-51 DATA ARCHIVE SERVICES, INC. COMBINED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE YEAR ENDED MAY 31, 1996 Revenues: Storage ............................................. $1,106,051 Service and Storage Material Sales .................. 609,955 --------- Total Revenues .................................... 1,716,006 Operating Expenses: Cost of Sales (Excluding Depreciation) .............. 962,801 Selling, General and Administrative ................. 919,022 Depreciation and Amortization ....................... 38,285 --------- Total Operating Expenses .......................... 1,920,108 --------- Operating Loss ...................................... (204,102) Interest Expense, Net ............................... (3,177) Loss Before Income Tax Benefit ...................... (207,279) Income Tax Benefit .................................. 1,190 --------- Net Loss ............................................ (206,089) Retained Earnings--Beginning of Year ................ 251,787 --------- Retained Earnings--End of Year ...................... $ 45,698 ========= The accompanying notes are an integral part of these financial statements. F-52 DATA ARCHIVE SERVICES, INC. COMBINED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MAY 31, 1996 Cash Flows From Operating Activities: Net Loss ............................................ $(206,089) Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities: Depreciation and Amortization ...................... 38,285 Loss on Abandonment of Assets ...................... 26,725 Increase in Accounts Receivable .................... (82,260) Increase in Inventories ............................ (1,146) Increase in Prepaid Expenses ....................... (6,538) Increase in Income Taxes Receivable ................ (34,485) Decrease in Due from Related Party ................. 49,793 Decrease in Other Assets ........................... 29,875 Increase in Accounts Payable ....................... 166,391 Increase in Accrued Expenses ....................... 72,577 Increase in Deferred Revenue ....................... 52,710 Increase in Income Taxes Payable ................... 6,624 --------- Total Adjustments ................................ 318,551 --------- Net Cash Provided by Operating Activities ........ 112,462 --------- Cash Flows From Investing Activities: Property, Plant and Equipment Expenditures .......... (369,522) Cash Flows From Financing Activities: Advances from Stockholder ........................... 288,050 Repayments to Stockholder ........................... (122,896) Proceeds from Line of Credit ........................ 100,000 Proceeds from Lease and Installment Obligations ..... 150,337 Repayments on Lease and Installment Obligations ..... (48,190) --------- Net Cash Provided by Financing Activities ........ 367,301 --------- Net Increase in Cash ................................ 110,241 Cash at Beginning of Year ........................... 45,194 --------- Cash at End of Year ................................. $ 155,435 ========= Supplemental Disclosures of Cash Flow Information: Cash Paid During the Year for Interest .............. $ 7,485 ========= Cash Paid During the Year for Income Taxes .......... $ 13,443 ========= The accompanying notes are an integral part of these financial statements. F-53 DATA ARCHIVE SERVICES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS MAY 31, 1996 NOTE 1--NATURE OF BUSINESS The accompanying financial statements represent the combined accounts of Data Archive Services, Inc. and Data Archive Services of Miami, Inc. (Affiliate). Data Archive Services, Inc. and Affiliate (the Companies) are records management companies providing storage and related services primarily in Dade, Broward and Palm Beach Counties. NOTE 2--SIGNIFICANT ACCOUNTING POLICIES a. Principles of Combination The financial statements reflect the financial position and results of operations of the Companies on a combined basis. All significant intercompany balances and transactions have been eliminated. b. Property and Equipment Property and equipment are recorded at cost and depreciated using the straight-line and declining balance methods with the following useful lives: Years ------ Leasehold Improvements 14-20 Shelving 8-33 Vaults and Security Systems 8-10 Office Furniture and Equipment 5-7 Vehicle 6 Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for major renewals and betterments, which significantly extend the useful lives of existing property and equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income. c. Allowance for Doubtful Trade Receivables Bad debts are accounted for on the reserve method. As at May 31, 1996, no reserve for doubtful accounts was required. d. 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. Amounts related to future storage for customers when storage fees are billed in advance are accounted for as deferred revenue and amortized over the applicable period. These amounts are included in deferred revenue in the accompanying financial statements. e. Inventories Inventories are carried at the lower of cost using the first-in, first-out basis, or market and are comprised primarily of boxes. f. Cash and Cash Equivalents The Companies define 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. F-54 DATA ARCHIVE SERVICES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued) g. Financial Statements Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions which affect the reporting of assets and liabilities as of the dates of the financial statements and revenues and expenses during the reporting period. Actual results may differ from these estimates. h. Income Taxes The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting For Income Taxes". Under SFAS No. 109, an asset and liability approach is required. Such approach results in the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities. NOTE 3--LONG-TERM LIABILITIES
Long-Term Liabilities consist of the following: Line of Credit with Bank--$100,000 Line of Credit Secured by Substantially all of the Assets. Interest, Paid Monthly, Calculated at 1% above Published Prime. Principal Balance is due and Payable March 22, 1997 ............................ $100,000 Financing, Primarily for Shelving Principal and Interest Calculated at 12.27%, Paid in Monthly Installments of $3,184 ............................................... 140,552(A) Other Financing for Shelving, Equipment, and a Vehicle. Principal and Interest Ranging from 9.82% to 13.19%, Paid in Monthly Installments of $734 ................................................................. 11,863 ---------- Long-Term Liabilities .................................................. 252,415 Less: Current Portion .................................................. 129,407 ---------- Long-Term Liabilities, Net of Current Portion .......................... $123,008 ==========
The scheduled repayment of long-term liabilities is as follows:
Year Amount ----- --------- 1997 ............................................................... $129,407 1998 ............................................................... 27,891 1999 ............................................................... 30,144 2000 ............................................................... 32,000 2001 ............................................................... 32,973 ------- $252,415 =======
(A) This obligation is non-cancelable with no offset. Therefore the payoff amount, if Data Archive Services, Inc. cancels this agreement, is based upon the remaining payments. The cancellation amounts versus the outstanding indebtedness for the 12 months ended May 31 are as follows: Number of Remaining Outstanding Cancellation Year Payments Indebtedness Indebtedness ---------------- ------- ----------- ------------- 1996 59 $140,552 $187,856 1997 47 118,363 149,648 1998 35 93,294 111,440 1999 23 64,971 73,232 2000 11 32,971 35,024 F-55 DATA ARCHIVE SERVICES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued) NOTE 4--CONTINGENCIES AND COMMITMENTS Obligations Under Operating Leases The Companies presently lease all their facilities under various operating leases. Several of these leases have renewal options of three (3) years and have consumer price index escalation clauses. The Companies also lease computer equipment and warehouse equipment under operating leases expiring at various dates within a two (2) year period. Rent expense for the year ended May 31, 1996 is as follows: Rent--Premises ...................................... $432,742 ======= Rent--Computer and Warehouse Equipment .............. $ 91,537 ======= Minimum future lease payments for the 12 months ended May 31, are as follows: Lease Computer and Lease Warehouse Year Premises Equipment ----------------------------------- --------- ---------- 1997 .............................. $ 358,263 $ 79,658 1998 .............................. 356,291 32,840 1999 .............................. 356,291 -- 2000 .............................. 356,291 -- 2001 .............................. 356,291 -- Thereafter ........................ 3,767,123 -- ------- -------- $5,550,550 $112,498 ======= ======== Certain of the operating leases contracted for by the companies are contracted with the controlling shareholder of the Companies. This is discussed more fully in Note 7 "Transactions With Related Parties". Concentration of Credit Risk The Companies maintain their bank accounts with FDIC financial institutions. As at May 31, 1996, the cash balance in one (1) of the accounts exceeded the insured limits by approximately $42,000. NOTE 5--PROFIT SHARING PLAN Effective January 1, 1995, the Companies implemented a profit sharing plan described in Internal Revenue Code Section 401(k). All employees of the Companies are eligible to participate once they meet the eligibility and participation requirements of the plan. Employees become eligible for participation in the plan after attaining age 21 and completing 12 months of service. Under the terms of the plan, participants may contribute a portion of their compensation to the plan on a tax deferred basis. Employee contributions may be made with a maximum deferral up to 15 percent of compensation, not to exceed the annual limitations established by the Treasury. The Companies are required to make contributions to the plan, but the amount of the contribution is determined by the Companies. During the year ended May 31, 1996, the Companies contributed $12,013 to the plan. NOTE 6--CAPITAL STOCK Common stock of Data Archive Services, Inc. has a par value of $1.00 per share; 1,000 shares are authorized, issued and outstanding. Common stock of Data Archive Services of Miami, Inc. (Affiliate) has a par value of $0.01 per share; 1,000,000 shares are authorized, issued and outstanding. There have been no changes in the capital stock of both companies during the fiscal year ended May 31, 1996. F-56 DATA ARCHIVE SERVICES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued) NOTE 7--TRANSACTIONS WITH RELATED PARTIES P. Douglas McCraw, chief operating officer and controlling shareholder of the Companies has entered into certain lease and loan arrangements with the Companies. The Companies have entered into various lease and loan arrangements either through Mr. McCraw or other companies controlled by Mr. McCraw. These lease and loan arrangements are as follows:
Number of Lease Months Expense Remaining Total May 31, on Lease Lessor and Description 1996 Lease Obligation ------------------------------------------ ----------- ------- ----------- DAS Imaging Systems, Inc. Computer Equipment ..................... $73,140 17 $ 103,615 P. Douglas McCraw Ft. Lauderdale Storage Facility ........ 22,366 238 4,478,446 Galt Ocean Mile Partnership Ft. Lauderdale Storage Facility ........ 27,943 87 120,147 P. Douglas McCraw Month Lower Matecumbe Facility ............... to 10,845 Month -- P. Douglas McCraw Miami Storage Facility .................. 84,241 84 628,766 P. Douglas McCraw Miami Storage Facility ................. 28,603 160 321,221 Receivables from and Payables to Related Parties: Loan Receivable from: DAS Imaging Systems, Inc. ............. $ 19,379 ========= Loan Payble to: P. Douglas McCraw--Non-Interest Bearing Loan ......................... $ 165,154 ========= Amounts Included in Accounts Payable: P. Douglas McCraw--Lease--Miami Storage Facilities ................... $ 27,559 Galt Ocean Mile Partnership--Lease Ft. Lauderdale Storage Facility ...... 7,308 P. Douglas McCraw--Lease--Other Facilities ........................... 4,518 --------- $ 39,385 =========
NOTE 8--INCOME TAXES The income tax benefit (provision) consisted of the following: Current Federal Credit .............................. $ 24,615 Current Federal Provision ........................... (18,532) Current State Provision ............................. (4,893) ------- Total Current Credit ............................. $ 1,190 ======= At May 31, 1996, there are no temporary differences which would give rise to deferred tax assets and liabilities except as follows. Data Archive Services, Inc. has a federal operating loss carryforward of $167,621, and a state F-57 DATA ARCHIVE SERVICES, INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued) operating loss carryforward of $318,682, which will expire in 2011. Realization of the deferred tax asset of $75,000 associated with the loss carryforwards is dependent upon the future earnings of this company. Because of the uncertainty of realization of this asset, a valuation allowance has been recognized for the entire deferred tax asset. NOTE 9--FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments." These estimates have been determined by the Companies using available market information and appropriate valuation techniques based on information as of May 31, 1996. As considerable judgment is inherent in the development of these estimates, they are not necessarily indicative of the amounts that the companies could realize in the current market exchange. The recorded amounts and fair values are as follows: May 31, 1996 -------------------- Recorded Fair Amount Value ------- --------- Assets: Cash ........................................ $155,435 $155,435 Due from Related Party ...................... 19,379 19,379 Liabilities: Current Portion of Long-Term Liabilities .... 129,407 129,407 Long-Term Liabilities ....................... 123,008 123,008 NOTE 10--SIGNIFICANT COMPONENTS OF COMBINED FINANCIAL STATEMENTS The significant components of the entities, before elimination, comprising the combined financial statements are as follows: Data Archive Data Archive Services, Services of Inc. Miami, Inc. ----------- ------------ Total Assets ............................... $ 953,885 $255,729 ========= ========== Total Liabilities .......................... $1,000,747 $102,119 ========= ========== Total Stockholders' Equity (Deficit) ........................ $ (46,862) $153,610 ========= ========== Net Income (Loss) .......................... $ (276,619) $ 70,530 ========= ========== NOTE 11--SUBSEQUENT EVENTS Effective August 1, 1996, all of the outstanding capital stock of the Companies was sold to Iron Mountain Records Management, Inc. All debt of the Companies will be repaid from the proceeds of the sale. F-58 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Iron Mountain Incorporated: We have audited the accompanying balance sheet of Data Storage Systems, Inc. (a California corporation) as of December 31, 1995, and the related statements of operations, shareholders' deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audit provides 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 Data Storage Systems, Inc. as of December 31, 1995 and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. Arthur Andersen LLP San Jose, California May 17, 1996 F-59 DATA STORAGE SYSTEMS, INC. BALANCE SHEET DECEMBER 31, 1995 Assets Current Assets: Cash ......................................... $ 185,278 Accounts receivable .......................... 243,923 Prepaid expenses and other ................... 23,624 ---------- Total current assets ..................... 452,825 Property and Equipment: Equipment and improvements ................... 1,020,762 Less--Accumulated depreciation ............... 828,074 ---------- Net property and equipment ................... 192,688 Other Assets ................................. 12,297 ---------- Total assets ............................. $ 657,810 ========== Liabilities and Shareholders' Deficit Current Liabilities: Accounts payable ............................. $ 27,822 Accrued liabilities .......................... 70,876 Deferred revenue ............................. 65,504 Notes payable ................................ 993,402 Accrued interest ............................. 313,875 ---------- Total current liabilities ................ 1,471,479 ---------- Shareholders' Deficit: Series A preferred stock, no par value- Authorized--1,000,000 shares Outstanding--1,000,000 shares .............. 1,000,000 Series B preferred stock, no par value- Authorized--500,000 shares Outstanding--266,666 shares ................ 365,333 Series C preferred stock, no par value- Authorized--2,000,000 shares Outstanding--1,083,334 shares .............. 650,000 Common stock, no par value- Authorized--137,000,000 shares Outstanding--110,756,630 shares ............ 1,178,967 Accumulated deficit .......................... (4,007,969) ---------- Total shareholders' deficit .............. (813,669) ---------- Total liabilities and shareholders' deficit .................................... $ 657,810 ========== The accompanying notes are an integral part of these financial statements. F-60 DATA STORAGE SYSTEMS, INC. STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 Revenues: Storage ............................................. $ 739,177 Service and storage material sales .................. 586,673 -------- 1,325,850 -------- Operating Expenses: Cost of sales (excluding depreciation) .............. 556,092 Selling, general, and administrative ................ 316,905 Depreciation and amortization ....................... 131,314 -------- Total operating expenses ........................ 1,004,311 -------- Operating Income .................................... 321,539 Interest Expense .................................... 127,477 -------- Net income .......................................... $ 194,062 ======== STATEMENT OF SHAREHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 1995
Series Series Series A B C Total Preferred Preferred Preferred Common Accumulated Shareholders' Stock Stock Stock Stock Deficit Deficit --------- ------- ------- --------- ----------- ------------- Balance at December 31, 1994 $1,000,000 $365,333 $650,000 $ 79,333 $(4,202,031) $(2,107,365) Issuance of common stock on conversion of notes payable ................ -- -- -- 1,099,634 -- 1,099,634 Net income ............... -- -- -- -- 194,062 194,062 ------- ----- ----- ------- --------- ----------- Balance at December 31, 1995 $1,000,000 $365,333 $650,000 $1,178,967 $(4,007,969) $ (813,669) ======= ===== ===== ======= ========= ===========
F-61 DATA STORAGE SYSTEMS, INC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1995 Cash Flows from Operating Activities: Net income .................................................... $ 194,062 Adjustments to reconcile net income to net cash used in operating activities-- Depreciation and amortization ............................. 69,575 Net changes in assets and liabilities- Accounts receivable ..................................... 2,361 Inventory ............................................... (3,300) Prepaids and other ...................................... 12,337 Accounts payable ........................................ (142,056) Accrued liabilities ..................................... (179,529) -------- Net cash used in operating activities .................. (46,550) -------- Cash Flows from Financing Activities: Proceeds from notes payable ................................... 206,258 -------- Net Increase in Cash ............................................ 159,708 Cash at Beginning of Period ..................................... 25,570 -------- Cash at End of Period ........................................... $ 185,278 ======== Supplemental Disclosure of Noncash Financing Activities: The Company issued 109,963,296 shares of common stock on conversion of notes payable amounting to $1,099,634 The accompanying notes are an integral part of these financial statements. F-62 DATA STORAGE SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1995 1. ORGANIZATION OF THE COMPANY: Data Storage Systems, Inc. (a California corporation) operates a records-storage warehouse in San Jose, California. The Company entered into a merger agreement with Iron Mountain Records Management, Inc. in November 1995. The merger was effective as of February 29, 1996. Iron Mountain is the surviving entity and the Company became a wholly owned subsidiary of Iron Mountain. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Cash For purposes of the statements of cash flows, the Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. Equipment and Improvements Equipment and improvements are stated at cost and depreciated using the straight-line method over the estimated useful lives (ranging from three to seven years) or over the shorter of the estimated useful life of the asset or its lease term for leasehold improvements. Equipment and improvements consist of the following: Warehouse equipment ................................. $ 931,814 Office equipment .................................... 68,006 Improvements ........................................ 20,942 -------- $1,020,762 ======== Revenue Recognition Revenue is recognized ratably over the time that the Customer's records are in storage. Customers are billed one month in advance for storage and in arrears for service. Advance billings for storage are recorded as deferred revenue. Income Taxes The Company accounts for income taxes pursuant to the provisions of Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS 109). SFAS 109 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined using the current applicable enacted tax rate and provisions of the enacted tax law. 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. 3. NOTES PAYABLE AND RELATED PARTIES: At December 31, 1995, the Company had several notes payable totaling $993,402 to shareholders with varying interest rates ranging from 10.0% to 18.8%. These notes are payable upon demand. The fair value of the notes F-63 DATA STORAGE SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) payable does not materially differ from the carrying value. On February 29, 1996, these notes and the related accrued interest were converted to shares of common stock in connection with the acquisition of the Company by Iron Mountain Records Management, Inc. 4. PREFERRED STOCK: Series A, Series B, and Series C Convertible Preferred Stock The Convertible Preferred Stock outstanding consists of 1,000,000, 266,666, and 1,083,334 shares of Series A Convertible Preferred Stock ("Series A"), Series B Convertible Preferred Stock ("Series B"), and Series C Convertible Preferred Stock ("Series C"), respectively. The rights and preferences of the Series A, Series B and Series C Convertible Preferred Stock are as follows: Dividends The holders of the Series C shall be entitled when and if declared by the Board of Directors, to dividends at a rate of $0.05 per share, per annum, payable in preference and priority to payment of any dividend to the holders of Series A, Series B or Common Stock. The holders of the Series A shall be entitled when and if declared by the Board of Directors, to dividends at a rate of $0.09 per share, per annum, payable in preference and priority to payment of any dividend to the holders of Series B or Common Stock. The holders of the Series B shall be entitled when and if declared by the Board of Directors, to dividends at a rate of $0.12 per share, per annum, payable in preference and priority to payment of any dividend to the holders of Common Stock. After an equal amount per share has been paid on all Common and Preferred Stock, the holders of Series B shall be entitled to dividends in an amount per share equal to any further dividend on Common Stock. Dividends are not cumulative. Liquidation Preference In the event of any liquidation, dissolution, or winding up of the Company, either voluntary or involuntary, distributions to the shareholders of the Company shall be made in the following manner: The holders of the Series C shall be entitled to receive, prior and in preference to any distribution of any assets or surplus funds of the Company to the holders of the Series A, Series B or Common Stock, an amount equal to $0.60 per share for each share of Series C held by them. If the assets and funds are insufficient to permit the payment of the entire preferential amount, then the entire assets and funds legally available for distribution shall be distributed ratably among the holders of Series C. The holders of the Series A shall be entitled to receive, prior and in preference to any distribution of any assets or surplus funds of the Company to the holders of the Series B or Common Stock, an amount equal to $1.00 per share for each share of Series A held by them. If the remaining assets and funds are insufficient to permit the payment of the entire preferential amount, then the entire assets and funds legally available for distribution shall be distributed ratably among the holders of Series A. The holders of the Series B shall be entitled to receive, prior and in preference to any distribution of any assets or surplus funds of the Company to the holders of Common Stock, an amount equal to $1.37 per share for each share of Series B held by them. If the remaining assets and funds are insufficient to permit the payment of the entire preferential amount, then the entire assets and funds legally available for distribution shall be distributed ratably among the holders of Series B. After the distribution of the preferential amounts to the preferred shareholders, the holders of Common Stock shall be entitled to receive an amount equal to $0.40 per share for each share of Common Stock held by them. After the aforementioned distributions to the holders of Preferred and Common Stock, all remaining assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of Common and F-64 DATA STORAGE SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) Preferred Stock based on the number of shares of Common, Series A, B and C (on an as converted basis) then issued and outstanding. Conversion Each share of Series A, B and C shall be convertible into the number of shares of Common Stock which results from dividing $1.00 in the case of Series A and B, and $0.60 in the case of Series C by the conversion price per share applicable to such series of Preferred Stock at the time of conversion. The conversion rate is subject to adjustment for anti-dilution as defined in the Certificate of Incorporation. Each share of Series A, B and C shall automatically be converted into shares of Common Stock immediately upon the closing of the issuance of shares following the effectiveness of a registration statement under the Securities Act of 1933 when the net proceeds equal or exceed $5,000,000 and the price per share of Common Stock is not less than $4.00. Additionally, Series B shall automatically be converted into shares of Common Stock: (1) immediately upon the closing of any sale or sales of its Preferred Stock when the aggregate gross proceeds equal or exceeds $1,000,000 and the price per share of Preferred Stock is not less than $1.00, (2) the last day of any fiscal year in which the Company realizes gross revenues of at least $1,000,000 and (3) the last day of any fiscal year in which the Company realizes after-tax operating income of at least $200,000. Because of the pending merger of the Company, no conversion of the Series B took place. 5. COMMITMENTS: The Company leases its facility under an operating lease which expires in December 1997. Future minimum rental payments as of December 31, 1995 under this lease are $432,000, ($216,000 for 1996 and $216,000 for 1997). Facility rent expense for the year ended December 31, 1995 was $218,420. 6. INCOME TAXES: As of December 31, 1995, the Company had Federal net operating loss ("NOL") carryforwards for tax purposes of approximately $2,538,548 which expire in fiscal years 2004 and 2008. The Company had a net deferred tax asset at December 31, 1995 of approximately $1,057,000. Realization of the deferred tax asset is dependent upon the Company achieving adequate levels of taxable income. A valuation allowance has been recognized against the entire net deferred tax asset because of uncertainty of realization of the asset. The use of the NOL is limited to maximum amounts each year as a result of the change in control to Iron Mountain. F-65 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Iron Mountain Incorporated: I have audited the accompanying balance sheet of DataVault Corporation as of December 31, 1995 and the related statements of income and accumulated deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I 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. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of DataVault Corporation as of December 31, 1995 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Robert F. Gayton, CPA Natick, Massachusetts August 7, 1996 F-66 DATAVAULT CORPORATION BALANCE SHEET DECEMBER 31, 1995 ASSETS Current Assets: Cash ......................................... $ 115,492 Accounts receivable .......................... 315,555 Prepaid expenses and supplies ................ 45,828 --------- Total current assets ...................... 476,875 Property, Plant and Equipment (Note 2): Land ......................................... 130,000 Building and improvements .................... 1,224,857 Furniture and equipment ...................... 1,125,925 --------- 2,480,782 Less--Accumulated depreciation ............... 1,228,376 --------- Property, plant and equipment, net ........ 1,252,406 Other Assets: Customer acquisition costs ................... 45,600 Deferred financing costs ..................... 49,014 --------- Total other assets ........................ 94,614 --------- Total Assets ................................. $1,823,895 ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt ............ $ 44,450 Accounts payable ............................. 17,890 Deferred income .............................. 47,438 --------- Total current liabilities ................. 109,778 Long-Term Debt (Note 2): Mortgage note payable--bank .................. 665,076 Mortgage note payable--bank .................. 70,001 Mortgage note payable--SBA ................... 609,003 Equipment notes payable ...................... 7,558 --------- 1,351,638 Less--Current portion ........................ 44,450 --------- Total long-term debt, net of current portion .................................... 1,307,188 Notes Payable to Stockholder (Note 3) ........ 379,499 --------- Total Liabilities ......................... 1,796,465 --------- Commitments and Contingencies (Note 4) Stockholders' Equity: Common stock, no par value -- Authorized--30,000 shares Issued and outstanding--15,000 shares ...... 7,500 Additional paid-in capital ................... 50,000 Accumulated deficit .......................... (30,070) --------- Total Stockholders' Equity ................ 27,430 --------- Total Liabilities and Stockholders' Equity ... $1,823,895 ========= The accompanying notes are an integral part of these financial statements. F-67 DATAVAULT CORPORATION STATEMENT OF INCOME AND ACCUMULATED DEFICIT FOR THE YEAR ENDED DECEMBER 31, 1995 Revenue: Storage ............................................. $1,637,995 Service ............................................. 519,479 --------- Total revenue .................................... 2,157,474 Operating Expenses: Cost of sales (excluding depreciation) .............. 410,860 Selling, general and administrative ................. 1,333,609 Depreciation and amortization ....................... 198,901 --------- Total operating expenses ......................... 1,943,370 --------- Operating Income ................................. 214,104 Interest Expense .................................... 124,270 --------- Income before income tax ......................... 89,834 Provision for State Income Tax ...................... 456 --------- Net income ....................................... 89,378 Cash distribution of Subchapter S Earnings .......... (24,309) Accumulated Deficit--Beginning ...................... (95,139) --------- Accumulated Deficit--Ending ......................... $ (30,070) ========= The accompanying notes are an integral part of these financial statements. F-68 DATAVAULT CORPORATION STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1995 Cash Flows From Operating Activities: Net income .................................................... $ 89,378 Adjustments to reconcile net income to cash provided by operating activities-- Depreciation and amortization ................................ 198,901 Changes in: Accounts receivable ......................................... 28,467 Prepaid expenses and supplies ............................... 27,626 Accounts payable ............................................ (23,081) Deferred income ............................................. (1,356) -------- Cash provided by operating activities ...................... 319,935 Cash Flows From Investing Activities: Acquisition of fixed assets ................................... (43,970) Cash Flows from Financing Activities: Repayment of notes ............................................ (184,915) Repayment of shareholder loan ................................. (67,598) Distribution of Subchapter S earnings ......................... (24,309) -------- Cash used by financing activities .......................... (276,822) -------- Net decrease in cash ....................................... (857) Cash--beginning of year .................................... 116,349 -------- Cash--end of year .......................................... $ 115,492 ======== Supplemental disclosure of cash flow information: Cash paid for interest ........................................ $ 124,270 Cash paid for taxes ........................................... 456 The accompanying notes are an integral part of these financial statements. F-69 DATAVAULT CORPORATION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization--DataVault Corporation (the Company) is a Massachusetts corporation. The Company provides record storage and management services in the New England area. Use of Estimates--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition--Revenue is recognized when the services are provided. Amounts related to future storage that have been billed in advance are recorded as deferred revenue and recognized over the applicable period. Plant and Equipment--Plant and equipment are recorded at cost. Maintenance and repairs are charged to expense and major improvements are capitalized. Depreciation is computed on the straight line and declining balance methods over estimated useful lives as follows: Building and improvements .................. 15-31 years Furniture and fixtures ..................... 5 years Equipment .................................. 5 years Deferred Costs--Deferred financing costs are amortized over the life of the related debt. Customer acquisition costs related to the initial transfer of records are amortized over the term of the initial storage agreement. Income Taxes--The Company has elected to be taxed as a Small Business Corporation. Accordingly, net income and other items of Federal and state tax significance are reported on the income tax returns of the individual shareholders. NOTE 2--LONG-TERM DEBT During 1993, the Company constructed an addition to the records storage facility. The Company refinanced the existing mortgage loan in conjunction with supplemental financing for the addition. The refinanced mortgage will be paid in monthly installments over a 20 year period. The interest rate will be 9% adjustable every three years with initial monthly payments of $6,361. The additional bank mortgage note of $70,001 is due in monthly installments of $640 over 20 years at an interest rate of 8.75%, adjustable every three years. Additional financing for the records storage facility has been obtained from Bay Colony Development Corp., a Certified Development Company. This financing has been funded by debentures issued by the development company and guaranteed by the Small Business Administration. Monthly payments of $5,290 will be made over 20 years and include interest at 6.359% and a service fee. The mortgage notes are secured by land, buildings and business assets of the Corporation and the personal guaranty of the sole shareholder. The equipment notes are payable in monthly installments of approximately $2,100 over various periods up to five years at interest rates from 8% to 14%. The notes are secured by certain furniture and equipment. F-70 DATAVAULT CORPORATION NOTES TO FINANCIAL STATEMENTS -- (Continued) DECEMBER 31, 1995 Maturities of long-term debt are as follows: Year Amount ----------------------------------------------------- ---------- 1996 $ 44,450 1997 38,660 1998 40,570 1999 42,610 2000 44,800 Thereafter 1,140,548 -------- $1,351,638 ======== The fair value of the Company's assets and liabilities which qualify as financial instruments under Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments", approximates the carrying value of amounts presented in the balance sheet. NOTE 3--NOTES PAYABLE TO STOCKHOLDER Stockholder notes are due on demand, bear interest at rates varying from 7.5% to 12% and are subordinated to mortgage and term notes payable. NOTE 4--COMMITMENTS AND CONTINGENCIES In addition to the storage facility referred to in Note 2, the Company operates an additional data storage facility and maintains its corporate headquarters in premises leased through the year 2000 at an annual rental of approximately $84,000. NOTE 5--RENTALS UNDER STORAGE AGREEMENTS The following is a schedule by years of approximate minimum future rentals under non-cancellable storage agreements as of December 31, 1995: Year Amount ---- --------- 1996 ................................................ $1,345,000 1997 ................................................ 1,183,000 --------- $2,528,000 ========= NOTE 6--SUBSEQUENT EVENT Effective February 1, 1996, the Company sold all of its assets to Iron Mountain Records Management, Inc. All debt was repaid from the proceeds of the sale. F-71 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Directors Iron Mountain Incorporated: We have audited the accompanying balance sheet of International Record Storage and Retrieval Service, Inc. as of December 31, 1995 and the related statements of operations, stockholders' deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audit provides 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 International Record Storage and Retrieval Service, Inc. as of December 31, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Rothstein, Kass & Company, P.C. Roseland, New Jersey July 19, 1996 F-72 INTERNATIONAL RECORD STORAGE AND RETRIEVAL SERVICE, INC. BALANCE SHEETS
December 31, June 30, 1995 1996 ---------- ------------ (Unaudited) ASSETS Current assets: Cash ................................................... $ 134,340 $ 66,151 Accounts receivable, less allowance for doubtful accounts of $16,000 in 1995 and 1996 ................. 255,276 264,020 Inventories ............................................ 13,505 12,997 Prepaid expenses and other ............................. 24,690 33,576 -------- ---------- Total current assets ................................. 427,811 376,744 Equipment and improvements, less accumulated depreciation of $244,831 in 1995 and $277,428 in 1996 ............... 437,522 452,340 Deferred income taxes .................................... 171,000 160,000 Other assets ............................................. 21,667 21,667 -------- ---------- $ 1,058,000 $ 1,010,751 ======== ========== LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current liabilities: Current portion of long-term debt ...................... $ 13,474 $ 14,459 Accounts payable ....................................... 5,449 31,757 Accrued expenses ....................................... 62,558 69,714 Due affiliates ......................................... 617,173 513,261 Deferred income ........................................ 86,096 89,529 Deferred compensation, current portion ................. 40,401 41,940 -------- ---------- Total current liabilities ............................ 825,151 760,660 -------- ---------- Notes payable, net of current portion .................... 7,572 -- Deferred compensation, net of current portion ............ 772,518 751,156 Deferred rent ............................................ 236,035 233,254 Commitments and contingency Stockholders' deficiency: Common stock, no par value, authorized, issued and outstanding 100 shares ............................... 100 100 Additional paid-in capital ............................. 970,792 970,792 Accumulated deficit .................................... (1,754,168) (1,705,211) -------- ---------- Total stockholders' deficiency ....................... (783,276) (734,319) -------- ---------- $ 1,058,000 $ 1,010,751 ======== ==========
See independent public accountants' report and notes to financial statements. F-73 INTERNATIONAL RECORD STORAGE AND RETRIEVAL SERVICE, INC. STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
Six Months Ended June 30, --------------------------- Year Ended December 31, 1995 1995 1996 ----------- ----------- ------------ (Unaudited) (Unaudited) Revenues: Storage ............................... $ 962,463 $ 462,275 $ 528,604 Service and storage material sales .... 620,428 322,215 312,739 --------- --------- ---------- Total revenues ...................... 1,582,891 784,490 841,343 --------- --------- ---------- Operating expenses: Costs of sales (excluding depreciation) 790,127 380,347 430,969 Selling, general and administrative ... 427,748 212,704 247,085 Depreciation and amortization ......... 72,723 36,065 34,741 --------- --------- ---------- Total operating expenses ............ 1,290,598 629,116 712,795 --------- --------- ---------- Operating income ....................... 292,293 155,374 128,548 Interest expense ....................... 66,681 34,536 32,591 --------- --------- ---------- Income before provision for income taxes 225,612 120,838 95,957 Provision for income taxes ............. 21,000 13,000 11,000 --------- --------- ---------- Net income ............................. 204,612 107,838 84,957 Accumulated deficit: Beginning of period .................... (1,908,780) (1,908,780) (1,754,168) Dividends .............................. (50,000) -- (36,000) --------- --------- ---------- End of period .......................... $(1,754,168) $(1,800,942) $(1,705,211) ========= ========= ==========
See independent public accountants' report and notes to financial statements. F-74 INTERNATIONAL RECORD STORAGE AND RETRIEVAL SERVICE, INC. STATEMENTS OF CASH FLOWS
Six Months Ended June 30, ---------------------- Year Ended December 31, 1995 1995 1996 ---------- -------- ---------- (Unaudited) (Unaudited) Cash Flows from Operating Activities: Net income .......................................... $ 204,612 $107,838 $ 84,957 Adjustments to reconcile net income to net cash provided by operating activities: Provision for doubtful accounts .................... 8,000 8,000 -- Depreciation ....................................... 72,723 36,065 34,741 Provision for deferred income taxes ................ 21,000 13,000 11,000 Gain on disposal of property and equipment ......... (7,468) (7,468) -- Increase (decrease) in cash attributable to changes in assets and liabilities: Accounts receivable ............................... (102,421) (82,045) (8,744) Inventories ....................................... 1,825 (4,824) 508 Prepaid expenses and other ........................ (22,921) (33,881) (8,886) Accounts payable .................................. (8,110) 40,228 26,308 Accrued expenses .................................. 42,810 27,031 7,156 Deferred income ................................... 13,016 8,074 3,433 Deferred compensation and other liabilities ....... (50,195) (31,099) (19,823) Deferred rent ..................................... 20,452 5,281 (2,781) -------- ------ -------- Net Cash Provided by Operating Activities ............ 193,323 86,200 127,869 -------- ------ -------- Cash Flows from Investing Activities: Proceeds from the sale of property and equipment .... 17,565 17,565 -- Acquisitions of property and equipment .............. (67,810) (67,027) (49,559) -------- ------ -------- Net Cash used in Investing Activities ................ (50,245) (49,462) (49,559) -------- ------ -------- Cash Flow from Financing Activities: Repayment of notes payable .......................... (59,089) (42,814) (6,587) Advances from (repayments to) affiliates ............ 81,310 61,673 (103,912) Dividends paid ...................................... (50,000) -- (36,000) -------- ------ -------- Net Cash Provided by (used in) Financing Activities .. (27,779) 18,859 (146,499) -------- ------ -------- Increase (Decrease) in Cash .......................... 115,299 55,597 (68,189) Cash, beginning of period ............................ 19,041 19,041 134,340 -------- ------ -------- Cash, end of period .................................. $ 134,340 $ 74,638 $ 66,151 ======== ====== ======== Supplemental Disclosure of Cash Flow Information, cash $ paid during the period for interest ................ $ 66,681 34,536 $ 32,591 ======== ====== ========
See independent public accountants' report and notes to financial statements. F-75 INTERNATIONAL RECORD STORAGE AND RETRIEVAL SERVICE, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1--NATURE OF BUSINESS: The Company is engaged principally in the storage of records for customers in the New Jersey-New York area and providing ancillary services in conjunction with such records. NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. 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. The Company invoices storage charges to its customers in advance and these advanced billings are recorded as accounts receivable and the related revenues are included as deferred income in the accompanying financial statements. Inventories Inventories are carried at the lower of cost or market using the first-in first-out basis and are comprised primarily of cartons. Income Taxes The Company has elected to be treated as an "S" Corporation under the applicable sections of the Internal Revenue Code. Under these sections, corporate income or loss is allocated to the stockholders for inclusion in their personal income tax returns. Accordingly, there is no provision for federal income tax in the accompanying financial statements. State income taxes are recorded in accordance with Statement of Financial Accounting Standards No. 109. Equipment and Improvements Equipment and improvements are stated at cost and depreciated using the straight-line method with the following useful lives: Office Equipment .................................... 5 years Transportation equipment ............................ 5 to 10 years Shelving and warehouse improvements ................. 10 to 15 years Impairment of Long-Lived Assets The Company periodically assesses the recoverability of the carrying amounts of long-lived assets, including intangible assets. A loss is recognized when expected undiscounted future cash flows are less than the carrying amount of the asset. The impairment loss is the difference by which the carrying amount of the asset exceeds its fair value. Deferred Rent The Company's lease for its building used in the storage of records has fixed escalation clauses which require the normalization of rental expense over the life of the lease, resulting in deferred rent being reflected in the accompanying balance sheets. F-76 INTERNATIONAL RECORD STORAGE AND RETRIEVAL SERVICE, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): Fair Value of Financial Instruments The fair value of the Company's assets and liabilities which qualify as financial instruments under Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures about Fair Value of Financial Instruments", approximates the carrying amounts presented in the balance sheets. Unaudited Financial Statements The unaudited financial statements included herein have been prepared in accordance with generally accepted accounting principles. In the opinion of management, the unaudited financial statements include all adjustments of a normal and recurring nature which are necessary for a fair presentation. The results of operations for the six months ended June 30, 1995 and 1996 are not necessarily indicative of the results expected for the full year. NOTE 3--EQUIPMENT AND IMPROVEMENTS: Equipment and improvements consist of the following: December 31, June 30, 1995 1996 ---------- ---------- (Unaudited) Office equipment ........................... $ 97,919 $ 106,427 Transportation equipment ................... 108,217 108,217 Shelving and warehouse improvements ........ 476,217 515,124 -------- -------- 682,353 729,768 Less accumulated depreciation .............. (244,831) (277,428) -------- -------- $ 437,522 $ 452,340 ======== ======== NOTE 4--NOTES PAYABLE: Long-term debt consists of various loans payable in monthly installments of approximately $1,200 including interest at rates ranging between 8.4% and 10.2% with the final payment June 1997. The loans are collateralized by certain equipment. Aggregate principal payment requirements in each of the years subsequent to December 31, 1995 are as follows: 1996 ................................................ $13,474 1997 ................................................ 7,572 NOTE 5--RELATED PARTY TRANSACTIONS: The Company is affiliated, through common ownership, with a real estate management company, International Management Services, Inc. (IMS). IMS provides certain administrative services to the Company under agreements designed to reimburse IMS for the approximate cost of providing such services. Amounts due affiliates are non-interest bearing and have no specific repayment terms. The Company incurred charges for management fees to IMS of approximately $90,000 for the year ended December 31, 1995 and $44,000 and $50,000 for the six months ended June 30, 1995 (unaudited) and 1996 (unaudited), respectively. F-77 INTERNATIONAL RECORD STORAGE AND RETRIEVAL SERVICE, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) NOTE 6--DEFERRED COMPENSATION: The Company is obligated under an Income Continuation agreement dated October 1, 1994 with a former employee providing for a payment of $100,000 annually for the life of the employee. In 1994, the Company recorded an expense of $864,297 representing the present value of the benefits for the employee's life expectancy discounted at the rate of 7.5% per annum. Payments commenced in September 1994 and amounted to $100,000 for the year ended December 31, 1995 and $50,000 for each of the six month periods ended June 30, 1995 (unaudited) and 1996 (unaudited). NOTE 7--INCOME TAXES: The provision for income taxes in the accompanying statements of operations consists of the following: Year Ended Six Months Ended December June 30, 31, ---------------------- 1995 1995 1996 ---------- -------- ---------- (Unaudited) (Unaudited) State income taxes deferred ... $21,000 $13,000 $11,000 ======== ====== ======== A reconciliation of total income tax expense and the amount computed by applying the state income tax rate of 9% to income before income taxes is as follows: Year Ended Six Months Ended December June 30, 31, ---------------------- 1995 1995 1996 ---------- -------- ---------- (Unaudited) (Unaudited) Computed "expected" tax provision .................. $20,000 $11,000 $ 9,000 Other ....................... 1,000 2,000 2,000 -------- ------ -------- $21,000 $13,000 $11,000 ======== ====== ======== The Company has approximately $1,000,000 of net operating loss carryforwards for state income tax purposes at December 31, 1995. These carryforwards, which management expects will be fully utilized, expire through the year 2000. The components of the Company's deferred tax assets and liabilities are as follows: Year Six Ended Months December Ended 31, June 30, 1995 1996 ---------- ---------- (Unaudited) Deferred Tax Assets: Tax benefit attributable to: Net operating loss carryforwards ......... $ 89,000 $ 80,000 Deferred rent ............................ 21,000 21,000 Deferred compensation .................... 73,000 71,000 Other .................................... 2,000 2,000 Deferred tax liability, tax depreciation in excess of book depreciation .............. (14,000) (14,000) -------- -------- Net Deferred Tax Asset .................... $171,000 $160,000 ======== ======== F-78 INTERNATIONAL RECORD STORAGE AND RETRIEVAL SERVICE, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) NOTE 8--RETIREMENT PLANS: The Company maintains a 401(k) plan for the benefit of its employees. The Company contributes to the plan annually, at their discretion, up to 4% of each participant's compensation. The expense amounted to $4,311 for the year ended December 31, 1995 and $1,960 and $1,839 for the six months ended June 30, 1995 (unaudited) and 1996 (unaudited), respectively. NOTE 9--LEASE COMMITMENTS: The Company occupies general office and warehouse facilities under an operating lease expiring December 31, 2002, providing for minimum annual rentals as follows: Year ending December 31, 1996 ................................................ $ 318,000 1997 ................................................ 318,000 1998 ................................................ 318,000 1999 ................................................ 318,000 2000 ................................................ 350,000 Thereafter .......................................... 700,000 -------- $2,322,000 ======== Rent expense for facilities charged to operations was $273,791 for the year ended December 31, 1995 and $113,556 and $158,506 for the six months ended June 30, 1995 (unaudited) and 1996 (unaudited), respectively. NOTE 10--CONTINGENCY: The Company is a defendant in a legal proceeding with the lessor of its office and warehouse facilities relating to alleged damages suffered in connection with the cancellation of a proposed sale of the property to a third party. The claim does not specify an amount of damages and the Company has responded to the complaint and made a counter claim. It is management's opinion that the outcome of this litigation will not have a material effect on the Company's financial position or results of operations. F-79 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors of Iron Mountain Incorporated: We have audited the accompanying balance sheet of DKA Industries, Inc. d/b/a Systems Record Storage (a Florida corporation) as of December 31, 1995, and the related statements of operations and accumulated deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audit provides 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 DKA Industries, Inc. d/b/a Systems Record Storage as of December 31, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Arthur Andersen LLP Orlando, Florida August 30, 1996 F-80 DKA INDUSTRIES, INC. d/b/a SYSTEMS RECORD STORAGE BALANCE SHEETS--DECEMBER 31, 1995, AND JUNE 30, 1996 ASSETS
December 31, June 30, 1995 1996 -------------- ---------- (Unaudited) Current Assets: Cash $ 24,665 $ 22,083 Accounts receivable 121,064 170,858 Inventories 3,049 5,286 Prepaid expenses and other 11,695 11,320 --------- --------- Total current assets 160,473 209,547 Property and Equipment, net 150,729 141,362 Goodwill, net 20,625 20,312 --------- --------- Total assets $ 331,827 $ 371,221 ========= ========= LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities: Current maturities of notes payable $ 89,013 $ 47,411 Note payable to related party 285,000 285,000 Accounts payable and accrued expenses 10,807 21,959 Deferred income 58,617 69,074 --------- --------- Total current liabilities 443,437 423,444 Notes payable, less current maturities 218,781 215,310 Deferred income 63,401 55,167 Deferred rent 10,318 8,598 --------- --------- Total liabilities 735,937 702,519 --------- --------- Commitments and Contingencies Stockholders' Deficit: Common stock, $1 par value, 1,000 shares authorized, issued and outstanding 1,000 1,000 Accumulated deficit (405,110) (332,298) --------- --------- Total stockholders' deficit (404,110) (331,298) --------- --------- Total liabilities and stockholders' deficit $ 331,827 $ 371,221 ========= =========
The accompanying notes are an integral part of these financial statements. F-81 DKA INDUSTRIES, INC. d/b/a SYSTEMS RECORD STORAGE STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT FOR THE YEAR ENDED DECEMBER 31, 1995, AND THE SIX-MONTH PERIOD ENDED JUNE 30, 1996
Year Six Months Ended Ended December 31, June 30, 1995 1996 -------------- ---------- (Unaudited) Revenues: Storage $ 638,442 $ 358,150 Service and storage material sales 386,637 219,328 ---------- --------- Total revenues 1,025,079 577,478 ---------- --------- Operating Expenses: Costs of sales (excluding depreciation and amortization) 462,387 224,599 Selling, general and administrative 400,310 200,031 Depreciation and amortization 72,625 36,313 ---------- --------- Total operating expenses 935,322 460,943 ---------- --------- Operating Income 89,757 116,535 Interest Expense 56,387 30,023 ---------- --------- Net income 33,370 86,512 Accumulated Deficit, beginning of period (425,768) (405,110) Distributions (12,712) (13,700) ---------- --------- Accumulated Deficit, end of period $ (405,110) $(332,298) ========== =========
The accompanying notes are an integral part of these financial statements. F-82 DKA INDUSTRIES, INC. d/b/a SYSTEMS RECORD STORAGE STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1995, AND THE SIX-MONTH PERIOD ENDED JUNE 30, 1996
Year Six Months Ended Ended December 31, June 30, 1995 1996 -------------- ---------- (Unaudited) Cash Flows From Operating Activities: Net income $ 33,370 $ 86,512 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 72,625 36,313 Changes in assets and liabilities-- Accounts receivable 8,819 (49,794) Inventories (1,430) (2,237) Prepaid expenses and other -- 375 Accounts payable and accrued expenses (12,079) 11,152 Deferred income 128 2,223 Deferred rent (3,440) (1,720) --------- --------- Net cash provided by operating activities 97,993 82,824 --------- --------- Cash Flows used in Investing Activities: Acquisitions of property and equipment (75,528) (26,633) --------- --------- Cash Flow From Financing Activities: Repayment on notes payable (253,660) (45,073) Additional borrowing on notes payable 268,522 -- Distributions to shareholders (12,712) (13,700) --------- --------- Net cash provided by (used in) financing activities 2,150 (58,773) --------- --------- Net increase (decrease) in cash 24,615 (2,582) Cash, beginning of period 50 24,665 --------- --------- Cash, end of period $ 24,665 $ 22,083 ========= ========= Supplemental Disclosure of Cash Flow Information: Cash paid during the period for interest $ 56,387 $ 30,023
The accompanying notes are an integral part of these financial statements. F-83 DKA INDUSTRIES d/b/a SYSTEMS RECORD STORAGE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 1. Nature of Business DKA Industries, Inc. d/b/a Systems Record Storage (the Company) provides record storage and management services in the Orlando, Florida, area. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. 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. Amounts related to future storage for customers where storage fees are billed in advance are accounted for as deferred income and recognized in the applicable period. Inventories Inventories are carried at the lower of cost or market using the first-in, first-out basis, and are comprised primarily of cartons. Goodwill Goodwill is amortized over 40 years. For 1995, amortization was $625. As of December 31, 1995, there was $4,375 of accumulated amortization. Income Taxes The Company has elected to be treated as an S corporation under the applicable sections of the Internal Revenue Code. Under these sections, corporate income or loss is allocated to the stockholders for inclusion in their personal income tax returns. Accordingly, there is no provision for federal income taxes in the accompanying financial statements. Property and Equipment Equipment and improvements are stated at cost and depreciated or amortized using accelerated methods with the following useful lives:
Years ------ Office and computer equipment 5-7 Transportation equipment 5 Warehouse equipment and improvements 7-10
Deferred Rent The Company's lease for its building used in the storage of records has uneven rental payments which requires the normalization of rental expense over the life of the lease, resulting in deferred rent being reflected in the accompanying balance sheet. F-84 DKA INDUSTRIES d/b/a SYSTEMS RECORD STORAGE NOTES TO FINANCIAL STATEMENTS -- (Continued) Fair Value of Financial Instruments The fair value of the Company's assets and liabilities which qualify as financial instruments under Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," approximates the carrying amounts presented in the balance sheet. Unaudited Financial Statements The unaudited financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited financial statements include all adjustments of a normal and recurring nature which are necessary for a fair presentation. The results of operations for the six months ended June 30, 1996, are not necessarily indicative of the results expected for the full year. 3. Significant Customer One major customer accounted for approximately 38 percent of revenue during 1995 and 27 percent of accounts receivable at December 31, 1995. 4. Property and Equipment Property and equipment consisted of the following:
December 31, 1995 ------------ Office and computer equipment $ 68,250 Transportation equipment 60,976 Warehouse equipment and improvements 388,636 --------- 517,862 Less -- Accumulated depreciation and amortization (367,133) --------- $ 150,729 =========
5. Notes Payable Notes payable consisted of the following at December 31, 1995:
Amount --------- Line of credit agreement with maximum borrowing of $50,000, bearing interest at prime plus 1% (9.5% at December 31, 1995), collateralized by accounts receivable, inventory, equipment and improvements. The line of credit is payable upon demand and expires September 23, 1996. As of December 31, 1995, the Company had $35,000 available on the line of credit. $15,000 F-85 DKA INDUSTRIES d/b/a SYSTEMS RECORD STORAGE NOTES TO FINANCIAL STATEMENTS -- (Continued) Amount Note payable, collateralized by accounts receivable, inventory, equipment and improvements, due in monthly installments through November 29, 2000, of $3,357, plus interest at prime plus 1% (9.5% at December 31, 1995). $ 201,387 Note payable, collateralized by the purchased assets of the Company, due in monthly principal and interest payments of $2,500 through October 1998, interest at 11%. 71,686 Other notes payable, collateralized by certain transportation equipment of the Company, principal due in monthly installments of $887 through August 1998, interest at prime plus 1% (9.5% at December 31, 1995). 19,721 -------- 307,794 Less -- Current maturities (89,013) -------- $218,781 ========
Aggregate principal payment requirements in each of the years subsequent to December 31, 1995, are as follows:
Year Ending December 31, Amount - ------------- -------- 1996 $ 89,013 1997 71,751 1998 66,495 1999 40,284 2000 40,251 -------- $307,794 ========
All the notes payable were paid in full subsequent to December 31, 1995, in connection with the acquisition described in Note 9. 6. Related Party Transactions As of December 31, 1995, the Company had a $285,000 note payable to a former owner of the Company. The note payable is due on demand. The interest on the note payable is 10 percent and payable monthly. The note payable was paid in full subsequent to December 31, 1995, in connection with the acquisition described in Note 9. 7. Retirement Plans The Company maintains a 401(k) plan for the benefit of its employees. All employees who have completed 12 months of service, 1,000 hours and attained the age of 21 are eligible to enroll in the plan. Employees may contribute up to 15 percent of their pay. Employees are always 100 percent vested in their contributions. The Company matches 25 percent of employee salary deferral contribution, up to a maximum of 4 percent. Employees are 20 percent vested in employer contributions after three years of service and become an additional 20 percent vested for each subsequent year of service. The employer matching contribution expense amounted to $1,941 for the year ended December 31, 1995. Subsequent to December 31, 1995, the plan was terminated (see Note 9). F-86 DKA INDUSTRIES d/b/a SYSTEMS RECORD STORAGE NOTES TO FINANCIAL STATEMENTS -- (Continued) 8. Lease Commitments The Company occupies office and warehouse facilities and rents a vehicle under operating leases that expire during December 1998, providing for minimum annual rentals as follows:
Year Ending December 31, Amount - ------------- 1996 $238,438 1997 238,438 1998 237,940 -------- $714,816 ========
Rent expense for facilities charged to operations was $232,960 for the year ended December 31, 1995. 9. Subsequent Event Effective August 1, 1996, substantially all of the Company's assets and certain liabilities were acquired by Iron Mountain Records Management, Inc. Proceeds from the sale were used to repay all the outstanding notes payable, and the remainder was distributed to the owners. F-87 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Iron Mountain Incorporated: We have audited the accompanying balance sheet of Security Archives Corporation (a Minnesota corporation) as of December 31, 1995, and the related statements of operations and accumulated deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audit provides 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 Security Archives Corporation as of December 31, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Arthur Andersen LLP Minneapolis, Minnesota August 23, 1996 (except for Note 6, as to which the date is September 6, 1996) F-88 SECURITY ARCHIVES CORPORATION BALANCE SHEETS ASSETS
December 31, June 30, 1995 1996 -------------- ---------- (Unaudited) Current Assets: Cash and cash equivalents $ 32,819 $ 49,044 Accounts receivable, net of allowance for doubtful accounts of $49,382 and $4,408 140,950 165,006 Inventories 9,905 23,229 Prepaid expenses 33,192 31,710 --------- ----------- Total current assets 216,866 268,989 --------- ----------- Property and Equipment 997,992 1,067,355 Less -- Accumulated depreciation (358,283) (418,255) --------- ----------- Net property and equipment 639,709 649,100 --------- ----------- Other Assets: 37,818 27,410 --------- ----------- $ 894,393 $ 945,499 ========= =========== LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities: Accounts payable $ 10,992 $ 36,554 Current portion of long-term debt -- Capital leases and other debt 21,747 206,313 Related parties 59,437 611,600 Accrued expenses 44,875 31,499 --------- ----------- Total current liabilities 137,051 885,966 --------- ----------- Long-term Notes Payable 257,891 -- Long-term Notes Payable -- related parties 768,926 34,346 Commitments and Contingencies Stockholder's Equity: Capital stock 25,000 shares, $1 par 1,200 shares issued and outstanding 1,200 1,200 Paid-in capital 646,229 646,229 Accumulated deficit (916,904) (622,242) --------- ----------- Total stockholder's equity (deficit) (269,475) 25,187 --------- ----------- $ 894,393 $ 945,499 ========= ===========
The accompanying notes are an integral part of these financial statements. F-89 SECURITY ARCHIVES CORPORATION STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
Year Ended Six Months Ended June December 31, 30 ----------------------- 1995 1995 1996 --------------- --------- ---------- (Unaudited) Revenues: Storage $ 917,637 $ 459,566 $ 497,501 Service and storage materials sales 500,989 222,107 489,278 ----------- --------- --------- Total revenues 1,418,626 681,673 986,779 ----------- --------- --------- Operating Expenses: Cost of sales (excluding depreciation) 669,017 328,210 388,016 Selling, general and administrative 525,518 234,249 197,393 Depreciation and amortization 99,159 46,080 59,972 ----------- --------- --------- Total operating expenses 1,293,694 608,539 645,381 ----------- --------- --------- Income from operations 124,932 73,134 341,398 ----------- --------- --------- Interest expense 92,988 46,815 46,736 Net Income 31,944 26,319 294,662 Accumulated Deficit, beginning of period (948,848) (948,848) (916,904) ----------- --------- --------- Accumulated Deficit, end of period $ (916,904) $(922,529) $(622,242) =========== ========= =========
The accompanying notes are an integral part of these financial statements. F-90 SECURITY ARCHIVES CORPORATION STATEMENTS OF CASH FLOWS
Year Ended Six Months Ended December 31, June 30 ---------------------- 1995 1995 1996 --------------- -------- ---------- (Unaudited) Operating Activities: Net income $ 31,944 $ 26,319 $ 294,662 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 99,159 46,080 59,972 Changes in assets and liabilities: Accounts receivable (2,424) (31,408) (24,056) Inventories 1,538 (2,292) (13,324) Prepaid expenses (4,962) (4,558) 1,482 Accounts payable and accrued expenses 1,565 6,884 12,186 Other 10,068 6,958 10,408 --------- -------- --------- Net cash provided by operating activities 136,888 47,983 341,330 --------- -------- --------- Investing Activities: Purchase of property and equipment (193,797) (103,791) (69,363) --------- -------- --------- Financing Activities: Proceeds from notes payable 227,000 112,284 49,983 Principal payments on notes payable (161,606) (56,122) (305,725) --------- -------- --------- Net cash provided by (used for) financing activities 65,394 56,162 (255,742) --------- -------- --------- Net increase in Cash 8,485 354 16,225 Cash and cash equivalents, at beginning of period 24,334 24,334 32,819 --------- -------- --------- Cash and cash equivalents, at end of period $ 32,819 $ 24,688 $ 49,044 ========= ========= ========= Supplemental Disclosure: Interest paid $ 92,989 $ 46,815 $ 41,815 ========= ======== =========
The accompanying notes are an integral part of these financial statements. F-91 SECURITY ARCHIVES CORPORATION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 1. Organization of Business and Significant Accounting Policies Security Archives Corporation (the Company), a Minnesota corporation, is a full service records management company providing storage and related services for all media. The Company serves numerous legal, banking, healthcare, accounting, insurance, entertainment and retail organizations in the Los Angeles, California metropolitan area. Inventories Inventories are carried at the lower of cost (using the first-in, first-out basis) or market and are comprised primarily of cartons. Property and Equipment Depreciation and amortization of property and equipment are recorded using the straight-line and accelerated methods. Property and equipment consist of the following:
Useful December 31, Lives 1995 ------------------ ------------ Warehouse and disintegration equipment 9 years $645,326 Leasehold improvements 10 years 103,928 Transportation equipment 5 years 112,946 Office equipment 5 to 10 years 135,792 -------- $997,992 ========
Minor maintenance costs are expensed as incurred. Major improvements are capitalized and depreciated as described above. 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. The Company has two customers which accounted for 25% of revenues for the year ended December 31, 1995. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Other Assets Other assets consist of customer acquisition costs. Costs, net of revenues received for the initial transfer of records, related to the acquisition of accounts are capitalized and amortized for an appropriate period not exceeding three years, unless the customer terminates its relationship with the Company, at which time 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 unamortized customer acquisition costs. Financial Instruments Unless otherwise noted, financial instruments are stated at cost, which approximates fair value. F-92 SECURITY ARCHIVES CORPORATION NOTES TO FINANCIAL STATEMENTS -- (Continued) 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 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. These estimates relate primarily to the realizability of accounts receivable and the adequacy of certain accrued expenses. Actual results could differ from those estimates. Unaudited Financial Information The financial information as of June 30, 1996 and for the six-month periods ended June 30, 1996 and 1995 is unaudited and has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, such information reflects all normal recurring adjustments necessary for a fair presentation. Operating results for the six months ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. Included in service and storage materials sales for the six months ended June 30, 1996 is $250,000 of fees paid to the Company for removal of cartons for a large customer that transferred its business to Iron Mountain Incorporated. 2. Notes Payable Notes payable consisted of the following:
December 31, 1995 ------------ Long-term revolving note payable, providing for borrowings of up to $600,000, interest payable monthly at 8.25%, principal due May 31, 1997 $ 234,554 Obligations under capital leases, payable in various installments through 1999, 8.75-9.25% imputed interest 45,084 Long-term revolving note payable, providing for borrowings of up to $50,000, interest payable monthly at the prime rate plus 1% (9.5% at December 31, 1995), principal due May 31, 1997 -- Unsecured notes payable to stockholder, principal due in various installments through 2000, interest payable monthly at rates varying from 9.75-10% 826,695 Other related party obligations 1,668 ---------- Total notes payable 1,108,001 Less -- Current maturities (81,184) ---------- Notes payable, net of current maturities $1,026,817 ==========
F-93 SECURITY ARCHIVES CORPORATION NOTES TO FINANCIAL STATEMENTS -- (Continued) Maturities of long-term debt are as follows:
Year Amount 1996 $ 81,184 1997 904,709 1998 76,989 1999 41,778 2000 3,341 $1,108,001 ==========
3. Operating Leases Future minimum payments, by year and in the aggregate, under noncancelable operating leases with initial or remaining terms of one year or more consist of the following at December 31, 1995:
Minimum Year Payment -------- ---------- 1996 $ 367,452 1997 367,452 1998 367,452 1999 367,452 2000 367,452 Thereafter 926,022 Total $2,763,282 ==========
The Company's rent expense for operating leases was $380,832 for the year ended December 31, 1995, and $204,210 for the six month period ended June 30, 1996. 4. 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 tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (in thousands):
Deferred income tax assets $ 312 Deferred income tax liabilities (42) Valuation allowance (270) ----- $ -- =====
As of December 31, 1995, the Company has NOL carryforwards of $745,106 which expire in varying amounts through 2009. The primary deferred tax liabilities consist of tax over book depreciation. The valuation allowance relates to uncertainties surrounding the realization of the NOL carryforwards. F-94 SECURITY ARCHIVES CORPORATION NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. Related Party Transactions The Company provides management services to affiliated entities in exchange for a management fee. Management fee revenue was $92,040 for the year ended December 31, 1995 and $28,020 for the six months ended June 30, 1996. In addition, the Company has notes payable to a related party. Interest expense on related party notes payable was $58,302 for the year ended December 31, 1995 and $31,907 for the six months ended June 30, 1996. 6. Sale of Operating Assets On September 6, 1996 the Company entered into an agreement to sell substantially all of its operating assets to Iron Mountain Records Management, Inc. All debt of the Company will be repaid from the proceeds of the sale. F-95 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Iron Mountain Incorporated: We have audited the accompanying balance sheet of Mohawk Business Record Storage, Inc. (a Minnesota corporation) as of December 31, 1995, and the related statements of operations and retained earnings and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audit provides 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 Mohawk Business Record Storage, Inc. as of December 31, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Arthur Andersen LLP Minneapolis, Minnesota September 6, 1996 F-96 MOHAWK BUSINESS RECORD STORAGE, INC. BALANCE SHEETS ASSETS
December 31, June 30, 1995 1996 -------------- ------------ (Unaudited) Current Assets: Cash and cash equivalents $ 223,478 $ 112,547 Accounts receivable (less allowance for doubtful accounts of $5,000 and $9,000 in 1995 and 1996, respectively) 1,186,858 1,228,167 Notes receivable, stockholder 100,000 -- Inventories 31,548 49,009 Prepaid expenses and other 51,110 81,718 Current portion of note receivable, related company 15,996 15,996 ----------- ----------- Total current assets 1,608,990 1,487,437 ----------- ----------- Property and Equipment 9,049,148 9,160,561 Less -- Accumulated depreciation (5,013,510) (5,355,137) ----------- ----------- Net property and equipment 4,035,638 3,805,424 ----------- ----------- Other Assets: Other 15,000 15,000 Long-term note receivable, related company 222,004 216,004 ----------- ----------- 237,004 231,004 ----------- ----------- $ 5,881,632 $ 5,523,865 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 47,887 $ 64,378 Notes payable-- Bank 1,625,000 1,000,000 Related parties 333,200 2,024,100 Accrued expenses 507,450 442,461 Deferred revenue 551,947 439,255 ---------- ----------- Total current liabilities 3,065,484 3,970,194 ---------- ----------- Long-term Notes Payable, stockholders 1,400,000 -- Commitments and Contingencies (Note 4) -- -- Stockholders' Equity: Common stock, 25,000 shares, $1 par, 4,000 shares issued and outstanding 4,000 4,000 Paid-in capital 46,000 46,000 Retained earnings 1,366,148 1,503,671 ----------- ---------- Total stockholders' equity 1,416,148 1,553,671 ----------- ---------- $ 5,881,632 $5,523,865 =========== ==========
The accompanying notes are an integral part of these financial statements. F-97 MOHAWK BUSINESS RECORD STORAGE, INC. STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Year Ended December 31, Six Months Ended June 30 1995 1995 1996 --------------- --------- ----------- (Unaudited) Revenues: Storage $4,705,253 $2,310,469 $ 2,651,026 Service and storage material sales 4,094,977 2,053,952 2,085,531 ---------- ---------- ----------- Total revenues 8,800,230 4,364,421 4,736,557 ---------- ---------- ----------- Operating Expenses: Cost of sales (excluding depreciation) 4,644,836 2,387,642 2,356,940 Selling, general and administrative 2,833,687 1,535,504 1,613,978 Depreciation and amortization 657,586 218,298 358,670 ---------- ---------- ----------- Total operating expenses 8,136,109 4,141,444 4,329,588 ---------- ---------- ----------- Operating Income 664,121 222,977 406,969 Interest Expense 297,868 141,785 134,918 Interest Income 28,382 16,448 9,968 ---------- ---------- ----------- Net Income 394,635 97,640 282,019 Retained Earnings, beginning of period 1,262,433 1,262,433 1,366,148 Dividend Distributions (290,920) -- (144,496) ---------- ---------- ----------- Retained Earnings, end of period $1,366,148 $1,360,073 $ 1,503,671 ========== ========== ===========
The accompanying notes are an integral part of these financial statements. F-98 MOHAWK BUSINESS RECORD STORAGE, INC. STATEMENTS OF CASH FLOWS
Year Ended December 31, Six Months Ended June 30 1995 1995 1996 --------------- ---------- ---------- (Unaudited) Operating Activities: Net income $ 394,635 $ 97,640 $ 282,019 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 657,586 218,298 358,670 Gain (Loss) on sale of assets (6,662) 31,138 (11,955) Changes in assets and liabilities: Accounts receivable (38,848) 168,318 (41,309) Inventories (2,299) (8,245) (17,461) Prepaid expenses and other (29,817) (101,092) (30,608) Deferred revenue 69,238 (115,562) (112,692) Accounts payable and accrued expenses 233,202 97,613 (48,498) ----------- ---------- --------- Net cash provided by operating activities 1,277,035 388,108 378,166 ----------- ---------- --------- Investing Activities: Purchase of property and equipment (1,869,325) (1,251,924) (128,456) Notes receivable 12,000 (52,500) 106,000 Proceeds from sale of assets 31,143 20,500 11,955 Other (15,000) (15,000) -- ----------- ---------- --------- Net cash used for investing activities (1,841,182) (1,298,924) (10,501) ----------- ---------- --------- Financing Activities: Proceeds from notes payable 1,659,482 1,292,745 343,880 Principal payments on notes payable (744,582) (204,100) (677,980) Dividend distributions (290,920) -- (144,496) ----------- ---------- --------- Net cash provided by (used for) financing activities 623,980 1,088,645 (478,596) ----------- ---------- --------- Net Increase (Decrease) in Cash 59,833 177,829 (110,931) Cash and Cash Equivalents, beginning of period 163,645 163,645 223,478 ----------- ----------- ---------- Cash and Cash Equivalents, end of period $ 223,478 $ 341,474 $ 112,547 ========== =========== ========== Supplemental Disclosure: Interest paid $ 301,018 $ 144,935 $ 134,918 =========== =========== ==========
The accompanying notes are an integral part of these financial statements. F-99 MOHAWK BUSINESS RECORD STORAGE, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 1. Organization of Business and Significant Accounting Policies Mohawk Business Record Storage, Inc. (the Company), a Minnesota corporation, is a full-service records management company providing storage and related services for all media. The Company serves numerous legal, banking, healthcare, accounting, insurance, entertainment and retail organizations in the Minneapolis and Saint Paul, Minnesota metropolitan areas. Property and Equipment Depreciation and amortization of property and equipment are recorded using the straight-line and accelerated methods. Property and equipment consist of the following:
December 31, Useful Lives 1995 ----------------- ------------ Warehouse and disintegration equipment 7 to 10 years $ 5,585,597 Leasehold improvements 10 to 39 years 1,441,291 Transportation equipment 5 to 10 years 723,603 Office equipment 5 to 10 years 1,298,657 ---------- $9,049,148 ==========
Minor maintenance costs are expensed as incurred. Major improvements to the leased buildings are capitalized as leasehold improvements and depreciated as described above. 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. Amounts related to future storage for customers where storage fees are billed in advance are accounted for as deferred revenue and amortized over the applicable period. These amounts are included in deferred revenue in the accompanying balance sheet. The Company has one customer which accounted for 13% of revenues for the year ended December 31, 1995. Cash and Cash Equivalents The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Inventories Inventories are carried at the lower of cost (first-in, first-out basis) or market and are comprised primarily of cartons. Accrued Expenses Accrued expenses consisted of the following:
December 31, 1995 ---------------- Accrued incentive compensation $ 307,621 Accrued profit sharing 160,000 Other 39,829 -------------- Accrued expenses $507,450 ==============
F-100 MOHAWK BUSINESS RECORD STORAGE, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) Income Taxes The Company has elected to be taxed as an S corporation under the applicable Internal Revenue Code sections. The net income of the Company is included in the individual income tax returns of the stockholders. Accordingly, there is no provision for federal income taxes in the accompanying financial statements. Financial Instruments Unless otherwise noted, financial instruments are stated at cost, which approximates fair value. 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 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. These estimates relate primarily to the realizability of accounts receivable and the adequacy of certain accrued expenses. Actual results could differ from those estimates. Concentrations of Credit Risk Credit risk with respect to accounts receivable is generally spread across a large number of customers with dispersion across different businesses. As of December 31, 1995, one customer accounted for 17% of outstanding accounts receivable. Unaudited Financial Information The financial information as of June 30, 1996 and for the six-month periods ended June 30, 1995 and 1996 is unaudited and has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, such information reflects all normal recurring adjustments necessary for a fair presentation. Operating results for the six months ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. 2. Debt Notes Payable Notes payable consisted of the following:
December 31, 1995 ------------ Unsecured notes payable to stockholders, principal due February 1997, interest payable monthly at the prime rate (8.5% at December 31, 1995) $1,400,000 Unsecured notes payable to related parties, due on demand, interest payable monthly at the prime rate (8.5% at December 31, 1995) 333,200 ---------- Total notes payable 1,733,200 Less -- Current maturities (333,200) ---------- Notes payable, net of current maturities $1,400,000 ==========
F-101 MOHAWK BUSINESS RECORD STORAGE, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) Line of Credit The Company has a $2,000,000 revolving credit agreement with a bank which is payable on demand. Borrowings bear interest at the prime rate and are collateralized by property and equipment, certain intangible assets and the personal guarantees of the Company's stockholders. The line-of-credit agreement contains various covenants which require the Company to maintain certain specified financial ratios. The Company was in compliance with these covenants as of December 31, 1995. Additional information relating to the line of credit is as follows:
1995 ----------- Borrowings outstanding at year-end $1,625,000 Available borrowings at year-end 375,000 Average borrowings outstanding during the year 1,436,000 Range of interest rates during the year 8.5%-9.0%
3. Notes Receivable Stockholder The Company loaned $452,300 to one of its stockholders on May 12, 1992. Interest is being paid monthly to the Company at the prime rate. Principal is payable upon demand. The balance due to the Company under this agreement as of December 31, 1995 was $100,000 and was repaid during the six-month period ended June 30, 1996. Related Company The Company loaned $400,000 to a related partnership certain of whose partners are also stockholders of the Company. The proceeds of this loan were used to purchase a building that the Company is renting from this partnership (see Note 4). Interest is payable monthly by the partnership at the prime rate. Monthly principal payments are $1,333. Principal outstanding at December 31, 1995 was $238,000. 4. Commitments and Contingencies Operating Leases -- Related Parties The Company has lease agreements for warehouse and office space with a partnership whose partners are also stockholders of the Company. The leases are operating leases with varying terms expiring between May 1998 and November 2009. The Company pays all maintenance, insurance and utilities. Rent expense under these leases was $509,000 for 1995. The Company has another lease agreement for additional warehouse space with a partnership, certain of whose partners are also stockholders of the Company. The lease is an operating lease with a term of 10 years through July 2000. The Company pays all taxes, maintenance, insurance and utilities. Rent expense under this lease was $472,000 for 1995. F-102 MOHAWK BUSINESS RECORD STORAGE, INC. NOTES TO FINANCIAL STATEMENTS -- (Continued) Future minimum lease payments on these operating leases for each of the next five years and thereafter are as follows:
1996 $ 980,000 1997 980,000 1998 857,000 1999 769,000 2000 and thereafter 3,226,000 $6,812,000 ==========
Purchase Order Commitment In June 1996, the Company committed to purchase approximately $450,000 in additional warehouse storage racking. 5. Employee Benefits Profit-Sharing Plan The Company has a profit-sharing plan covering substantially all of its full-time employees. Contributions are determined annually by the board of directors. Benefits are provided upon retirement, disability or death on the basis of funds added to the trust accounts and earnings during periods of participation. The total contribution to this plan was $160,000 for the year ended December 31, 1995. Employee Benefit Plan The Company has adopted a salary deduction benefit plan which provides child care, medical and dental premiums, and other unreimbursed medical expenses. All regular employees who complete more than 25 hours per week of service are eligible to participate on a voluntary basis. The Company does not match employee contributions. Bonus Plans The Company has agreed to pay bonuses to each of two of its stockholders equal to 20% of the net profits of the Company, as defined. Two other stockholders and a member of senior management each are entitled to receive bonuses equal to 5% of the net profits of the Company. In addition, the vice president of one of the Company's divisions receives a bonus equal to 10% of that division's net profits, as defined. Bonus expense for the year ended December 31, 1995 was $703,000. 6. Sale of Operating Assets On September 6, 1996, the Company entered into an agreement to sell substantially all of its operating assets to Iron Mountain Records Management, Inc. F-103 No dealer, salesperson or other person has been authorized to give any information or to make any representations not contained in this Prospectus in connection with the offer made in this Prospectus, and, if given or made, such information or representations must not be relied upon as having been authorized by the Company or any of the Underwriters. This Prospectus does not constitute an offer to sell or solicitation of an offer to buy any security other than the Notes offered hereby, nor does it constitute an offer to sell, or a solicitation of an offer to buy, to any person in any jurisdiction where such an offer or solicitation would be unlawful. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that the information contained herein is correct as of any time subsequent to the date hereof. TABLE OF CONTENTS Page Prospectus Summary 3 Summary Historical and Pro Forma Information 8 Risk Factors 10 The Company 15 The Transactions 15 Recent and Pending Acquisitions 17 Use of Proceeds 18 Capitalization 18 Pro Forma Condensed Consolidated Financial Information 19 Selected Consolidated Financial and Operating Information 30 Management's Discussion and Analysis of Financial Condition and Results of Operations 32 Business 42 Management 55 Certain Transactions 60 Principal Stockholders 61 Description of the Notes 63 Description of New Credit Facility 84 Description of Capital Stock 85 Underwriting 86 Validity of Securities 86 Experts 86 Additional Information 87 Index to Financial Statements F-1 $150,000,000 [IRON MOUNTAIN LOGO] IRON MOUNTAIN INCORPORATED % Senior Subordinated Notes due 2006 ------------------- P R O S P E C T U S ------------------- Donaldson, Lufkin & Jenrette Securities Corporation Bear, Stearns & Co. Inc. Prudential Securities Incorporated , 1996 Part II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution. Securities and Exchange Commission fee $ 51,725 NASD filing fee 15,500 Blue Sky fees and expenses 15,000 Rating Agency fees and expenses 80,000 Printing and engraving fees 200,000 Accountants' fees and expenses 300,000 Legal fees and expenses 100,000 Trustee's fees and expenses 6,000 Miscellaneous 31,775 -------- Total $800,000 ======== The foregoing, except for the Securities and Exchange Commission fee and the NASD filing fee, are estimated. Item 14. Indemnification of Directors and Officers. Section 145 of the Delaware General Corporation Law (the "DGCL") provides, in effect, that any person made a party to any action by reason of the fact that he is or was a director, officer, employee or agent of the Company may and, in certain cases, must be indemnified by the Company against, in the case of a non-derivative action, judgments, fines, amounts paid in settlement and reasonable expenses (including attorney's fees) incurred by him as a result of such action, and in the case of a derivative action, against expenses (including attorney's fees), if in either type of action he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. This indemnification does not apply, in a derivative action, to matters as to which it is adjudged that the director, officer, employee or agent is liable to the Company, unless upon court order it is determined that, despite such adjudication of liability, but in view of all the circumstances of the case, he is fairly and reasonable entitled to indemnity for expenses, and, in a non-derivative action, to any criminal proceeding in which such person had reasonable cause to believe his conduct was unlawful. Article Sixth of the Company's Amended and Restated Certificate of Incorporation provides that the Company shall indemnify each person who is or was an officer or director of the Company to the fullest extent permitted by Section 145 of the DGCL. Article Seventh of the Company's Amended and Restated Certificate of Incorporation states that no director of the Company shall be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that exculpation from liability is not permitted under the Delaware General Corporation Law as in effect when such breach occurred. Reference is made to Section 7 of the Underwriting Agreement filed as Exhibit 1 hereto, pursuant to which the underwriters have agreed to indemnify officers and directors of the Company against certain liabilities. Item 15. Recent Sales of Unregistered Securities. The Company's Amended and Restated Certificate of Incorporation provides for 16,000,000 shares of authorized capital stock, each with par value $.01 per share, as follows: 13,000,000 shares of authorized Common Stock, 1,000,000 shares of authorized Nonvoting Common Stock and 2,000,000 shares of Preferred Stock. On February 6, 1996, simultaneously with the consummation of the Company's Initial Public Offering and without any action on the part of the holders thereof, all outstanding shares of the Company's Series A1 Convertible Preferred Stock, par value $0.01 per share ("Series A1 Preferred Stock"), Series A2 Convertible Preferred Stock, par value $0.01 per share, Series A3 Convertible Preferred Stock, par value $0.01 per share, and Series C Convertible Preferred Stock, par value $0.01 per share (the "Old Preferred Stock"), was automatically converted into shares II-1 of Common Stock (or, in the case of one holder, shares of Common Stock and 500,000 shares of Nonvoting Common Stock). All of the shares of Common Stock and Nonvoting Common Stock issued as a result of such conversion were issued by the Company in reliance on the exemptions provided by Sections 3(a)(9) and 4(2) of the Securities Act. No commission or other remuneration was paid or given by the Company directly or indirectly for effecting the exchange. On January 31, 1994, one shareholder of the Company exchanged 98,000 shares of Series A1 Preferred Stock for an equal number of shares of Series A2 Preferred Stock. On November 28, 1995, another shareholder of the Company exchanged 43,500 shares of Series A1 Preferred Stock for an equal number of shares of Series A3 Preferred Stock. All such shares were issued by the Company in reliance on the exemptions provided by Sections 3(a)(9) and 4(2) of the Securities Act. No commission or other remuneration was paid or given by the Company directly or indirectly for effecting the exchange. In 1995, the Company (i) issued options to acquire an aggregate of 162,184 shares of its Class A Common Stock pursuant to its stock option plan to certain of its officers and employees and (ii) issued to one employee an aggregate of 1,036 shares of Class A Common Stock pursuant to the exercise of stoock options granted under the Company's stock option plan for an aggregate purchase price of $200,984. In 1995, the Company also issued options to acquire an aggregate of 65,152 shares of its Common Stock pursuant to its stock option plan to certain of its officers and employees (which grants were conditioned on the consummation of the Initial Public Offering). In April 1996, the Company issued options to acquire an additional 361,452 shares. All securities referred to in this paragraph were issued by the Company in reliance on the exemption provided by Section 4(2) of the Securities Act or Rule 701 promulgated thereunder. Item 16. Exhibits and Financial Statement Schedules. Each exhibit marked by an asterisk (*) is incorporated by reference to the Company's Registration Statement No. 33-99950 filed with the Securities and Exchange Commission on December 1, 1995. Each exhibit marked with a double asterisk (**) is incorporated by reference to Amendment No. 2 to the Company's Registration Statement filed with the Securities and Exchange Commission on January 11, 1996. Each exhibit marked with a triple asterisk (***) is incorporated by reference to the Company's Registration Statement No. 333-10359 filed with the Securities and Exchange Commission on August 16, 1996. Each exhibit marked with a quadruple asterisk (****) is incorporated by reference to Amendment No. 1 to the Company's Registration Statement filed with the Securities and Exchange Commission on September 11, 1996. Exhibit 3.2 is incorporated by reference to the Company's Quarterly Report on Form 10-Q (File No. 0-27584) filed with the Securities and Exchange Commission on August 14, 1996. Exhibit numbers in parentheses refer to the exhibit numbers in the applicable filing. (a) Exhibits
Exhibit Number Item Exhibit - ------ ---- ------- 1 Form of Underwriting Agreement **** (1) 3.1 Amended and Restated Certificate of Incorporation of the Company * (3.1) 3.1A Certificate of Incorporation of Iron Mountain Records Management, Inc. Filed herewith as Exhibit 3.1A 3.1B Certificate of Incorporation of Metro Business Archives, Inc. Filed herewith as Exhibit 3.1B 3.1C Certificate of Incorporation of Criterion Atlantic Property, Inc. **** (3.1C) 3.1D Certificate of Incorporation of Criterion Property, Inc. **** (3.1D) 3.1E Articles of Incorporation of Hollywood Property, Inc. **** (3.1E) 3.1F Certificate of Incorporation of IM San Diego, Inc. **** (3.1F) 3.1G Certificate of Incorporation of Iron Mountain Information Partners, Inc. **** (3.1G) 3.1H Articles of Organization of Iron Mountain Data Protection Services, Inc. **** (3.1H) II-2 Exhibit Number Item Exhibit - ------ ---- ------- 3.1I Articles of Incorporation of Iron Mountain Records Management of Filed herewith as Maryland, Inc. Exhibit 3.1I 3.1J Articles of Incorporation of Iron Mountain Records Management of Ohio, Filed herewith as Inc. Exhibit 3.1J 3.1K Certificate of Incorporation of Iron Mountain Wilmington, Inc. **** (3.1K) 3.1L Articles of Incorporation of Data Storage Systems, Inc. Filed herewith as Exhibit 3.1L 3.1M Certificate of Formation of Iron Mountain Records Management of Missouri **** (3.1M) LLC 3.1N Articles of Organization of Iron Mountain Records Management of Boston, **** (3.1N) Inc. 3.1O Articles of Incorporation of Data Archive Services, Inc. Filed herewith as Exhibit 3.1O 3.1P Articles of Incorporation of Data Archives Services of Miami, Inc. **** (3.1P) 3.2 Bylaws of the Company, as amended * (3) 3.2A Bylaws of Iron Mountain Records Management, Inc. **** (3.2A) 3.2B Bylaws of Metro Business Archives, Inc. **** (3.2B) 3.2C Bylaws of Criterion Atlantic Property, Inc. **** (3.2C) 3.2D Bylaws of Criterion Property, Inc. **** (3.2D) 3.2E Bylaws of Hollywood Property, Inc. **** (3.2E) 3.2F Bylaws of IM San Diego, Inc. **** (3.2F) 3.2G Bylaws of Iron Mountain Information Partners, Inc. **** (3.2G) 3.2H Bylaws of Iron Mountain Data Protection Services, Inc. **** (3.2H) 3.2I Bylaws of Iron Mountain Records Management of Maryland, Inc. Filed herewith as Exhibit 3.2I 3.2J Bylaws of Iron Mountain Records Management of Ohio, Inc. Filed herewith as Exhibit 3.2J 3.2K Bylaws of Iron Mountain Wilmington, Inc. **** (3.2K) 3.2L Bylaws of Data Storage Systems, Inc. Filed herewith as Exhibit 3.2L 3.2M Limited Liability Company Agreement of Iron Mountain Records Management **** (3.2M) of Missouri LLC 3.2N Bylaws of Iron Mountain Records Management of Boston, Inc. **** (3.2N) 3.2O Bylaws of Data Archives Services, Inc. Filed herewith as Exhibit 3.2O 3.2P Bylaws of Data Archive Services of Miami, Inc. **** (3.2P) 4.1 Registration Rights Agreement between the Company and certain * (4.1) Stockholders, dated as of December 14, 1990 4.2 Form of Indenture for the Notes **** (4.2) 5 Opinion of Sullivan & Worcester LLP Filed herewith as Exhibit 5 10.1 Credit Agreement between the Company and Chase Manhattan Bank (N.A.) as * (10.1) Agent, dated as of December 10, 1990, amended and restated as of April 15, 1993 and further amended and restated as of January 31, 1995 10.2 Consent and Amendment No. 1 to the Credit Agreement, dated as of November * (10.2) 1, 1995 between the Company and Chase Manhattan Bank (N.A.) as Agent II-3 Exhibit Number Item Exhibit - ------ ---- ------- 10.3 Consent and Amendment No. 2 to the Credit Agreement, dated as of November * (10.3) 2, 1995 between the Company and Chase Manhattan Bank (N.A.) as Agent 10.3A Amendment No. 3 to the Credit Agreement, dated as of August 29, 1996, **** (10.3A) among the Company, the lenders party thereto and The Chase Manhattan Bank, as Agent 10.3B Draft of Credit Agreement, dated as of September 30, 1996, among Filed herewith the Company, the lenders party thereto and The as Exhibit 10.3B Chase Manhattan Bank, as Administrative Agent 10.4 Note Purchase Agreement between the Company and Chrysler Capital * (10.4) Corporation, dated as of December 14, 1990, as amended 10.4A Letter agreement, dated July 15, 1996, between the Company and Chrysler *** (10.4A) Capital Corporation 10.5 Subordinated Term Note between the Company and Schooner Capital * (10.5) Corporation, dated February 11, 1991 10.6 Iron Mountain Incorporated 1995 Stock Incentive Plan * (10.6) 10.7 Form of Iron Mountain Incorporated 1995 Stock Plan for Non-Employee ** (10.7) Directors 10.8 Asset Purchase and Sale Agreement, dated as of July 8, 1994, between Iron * (10.8) Mountain Data Protection Services, Inc. and Digital Equipment Corporation 10.9 Asset Purchase and Sale Agreement, dated as of October 31, 1994, among * (10.9) Iron Mountain Records Management of Ohio, Inc., Storage and Retrieval Concepts, Inc., Thomas Waldon and Dann Scheiferstein 10.10 Asset Purchase and Sale Agreement, dated as of February 28, 1995, among * (10.10) Iron Mountain Records Management ("IMRM"), National Business Archives, Inc., and James F. Knott 10.11 Asset Purchase Agreement, dated July 19, 1995, among IMRM, DataFile * (10.11) Services, Inc. and Cynthia and Lee Macklin 10.12 Asset Purchase and Sale Agreement, dated as of October 5, 1995, among * (10.12) IMRM, Brooks Records Center, Inc. and Forty Acres, Ltd. 10.13 Asset Purchase and Sale Agreement, dated as of November 1, 1995, among * (10.13) IMRM, Nashville Vault Company, Ltd. and USA Vault Corporation 10.14 Asset Purchase and Sale Agreement, dated November 14, 1995, among IMRM, * (10.14) Data Vault Corporation and Ralph Stoddard III 10.15 Merger Agreement, dated as of November 17, 1995, among IMRM, Temp DSSI, * (10.15) Inc. and Data Storage Systems, Inc. 10.16 Asset Purchase and Sale Agreement, dated November 17, 1995, among IMRM, * (10.16) Florida Data Bank, Inc., Carl J. Strang III, Carl J. Strang II and 6/10 Corporation 10.17 Asset Purchase and Sale Agreement, dated November 22, 1995 among IMRM, * (10.17) Data Management Business Records Storage, Inc. and Outdoor West, Inc. 10.18 Record Center Storage Services Agreement between IMRM and Resolution * (10.18) Trust Corporation, dated July 31, 1992 10.19 Lease between IMRM and IM Houston (CR) Limited Partnership, dated January * (10.19) 1, 1991 10.20 Asset Purchase and Sale Agreement, dated July 11, 1996, among IMRM, ***(10.20) The Fortress Corporation and certain subsidiaries II-4 Exhibit Number Item Exhibit - ------ ---- ------- 10.21 Stock Purchase and Sale Agreement, dated as of August 9, 1996, *** (10.21) among IMRM and the shareholders of Data Archive Services of Miami, Inc. and Data Archives Services, Inc. 10.22 Asset Purchase and Sale Agreement, dated August 13, 1996, among IMRM, *** (10.22) International Record Storage and Retrieval Service, Inc. and Laurance Winnerman, Sanford Winnerman and Penny Novak 10.23 Asset Purchase Agreement, dated as of September 6, 1996, among IMRM, **** (10.23) Mohawk Business Record Storage, Inc., Michael M. Rabin, Richard K. Rabin, Herman Ladin and Sidney Ladin 11 Statement re: computation of per share earnings *** (11) 12 Statement re: computation of ratio of earnings to fixed charges **** (12) 21 Subsidiaries of the Company Filed herewith as Exhibit 21 23.1 Consent of Sullivan & Worcester LLP Contained in Exhibit 5 filed herewith 23.2 Consent of Arthur Andersen LLP **** (23.2) 23.3 Consent of Wolpoff & Company, LLP **** (23.3) 23.4 Consent of Morrison and Smith **** (23.4) 23.5 Consent of Geo. S. Olive & Co. LLC **** (23.5) 23.6 Consent of Robert F. Gayton, CPA **** (23.6) 23.7 Consent of Perless, Roth, Jonas & Hartney, CPAs, PA **** (23.7) 23.8 Consent of Rothstein, Kass & Company, P.C. **** (23.8) 24 Powers of Attorney **** Previously filed as Exhibit 24 and on Pages II-6 and II-7 of the Registration Statement 25 Statement re eligibility of trustee **** (25)
II-5 (b) Financial Statement Schedules The following Financial Statement Schedule is filed herewith: Schedule II--Valuation and Qualifying Accounts Item 17. Undertakings Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Registrants, the Registrants have 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 a 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, such 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. The undersigned Registrants hereby undertake that: (1) For purposes of determining any liability under the Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Act, each post-effective amendment that contains a form of prospectus 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-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Iron Mountain Incorporated has duly caused this amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, Commonwealth of Massachusetts, on September 25, 1996. IRON MOUNTAIN INCORPORATED By: /s/ C. Richard Reese ----------------------------- Name: C. Richard Reese Title: Chairman of the Board of Directors and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this amendment to the Registrant's Registration Statement on Form S-1 relating to Iron Mountain Incorporated's Senior Subordinated Notes and the guarantees thereof has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ C. Richard Reese Chairman of the Board of Directors September 25, 1996 - ---------------------- and Chief Executive Officer C. Richard Reese * President, Chief Operating Officer September 25, 1996 - ---------------------- and Director David S. Wendell * Executive Vice President, Chief September 25, 1996 - ---------------------- Financial Officer and Director Eugene B. Doggett * Director September 25, 1996 - ---------------------- Constantin R. Boden * Director September 25, 1996 - ---------------------- Arthur D. Little * Director September 25, 1996 - ---------------------- Vincent J. Ryan * Vice President and Corporate September 25, 1996 - ---------------------- Controller Jean A. Bua *By: /s/ C. Richard Reese -------------------- C. Richard Reese Attorney-in-fact
II-7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, their undersigned Registrants have each duly caused this amendment to their Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, Commonwealth of Massachusetts, on September 25, 1996. IRON MOUNTAIN RECORDS MANAGEMENT, INC. METRO BUSINESS ARCHIVES, INC. CRITERION ATLANTIC PROPERTY, INC. CRITERION PROPERTY, INC. HOLLYWOOD PROPERTY, INC. IM SAN DIEGO, INC. IRON MOUNTAIN INFORMATION PARTNERS, INC. IRON MOUNTAIN DATA PROTECTION SERVICES, INC. IRON MOUNTAIN RECORDS MANAGEMENT OF MARYLAND, INC. IRON MOUNTAIN RECORDS MANAGEMENT OF OHIO, INC. IRON MOUNTAIN WILMINGTON, INC. DATA STORAGE SYSTEMS, INC. IRON MOUNTAIN RECORDS MANAGEMENT OF MISSOURI LLC IRON MOUNTAIN RECORDS MANAGEMENT OF BOSTON, INC. DATA ARCHIVE SERVICES, INC. By: /s/ C. Richard Reese -------------------- Name: C. Richard Reese Title: Chairman of the Board of Directors and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this amendment to the Registrants' Registration Statement on Form S-1 relating to Iron Mountain Incorporated's Senior Subordinated Notes and the guarantees thereof has been signed below by the following persons in the capacities and on the dates indicated and each of the undersigned officers and directors or managers of Iron Mountain Records Management of Maryland, Inc., Iron Mountain Records Management of Ohio, Inc., Data Storage Systems, Inc., and Data Archive Services Inc., hereby severally constitutes and appoints C. Richard Reese, David S. Wendell and Eugene B. Doggett, and each of them, to sign for him or her, and in his or her name in the capacity indicated below, such Registration Statement for the purpose of registering such securities under the Securities Act of 1933, as amended, and any and all amendments thereto, including without limitation any registration statement or post-effective amendment thereof filed under and meeting the requirements of Rule 462(b) under the Securities Act, hereby ratifying and confirming our signatures as they may be signed by our attorneys to such Registration Statement and any and all amendments thereto.
Signature Title Date --------- ----- ---- /s/ C. Richard Reese Chairman of the Board and Director, September 25, 1996 - --------------------- and Chief Executive Officer C. Richard Reese /s/ Eugene B. Doggett Executive Vice President and Chief September 25, 1996 - --------------------- Financial Officer, and Manager of Eugene B. Doggett Iron Mountain Records Management of Missouri, LLC /s/ Jean A. Bua Vice President and Corporate September 25, 1996 - --------------------- Controller Jean A. Bua
II-8 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Iron Mountain Incorporated: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements of Iron Mountain Incorporated for each of the three years in the period ended December 31, 1995 and have issued our report thereon dated February 26, 1996. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The accompanying supplemental schedule is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and regulations under the Securities and Exchange Act of 1934 and is not a required part of the basic financial statements. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Los Angeles, California February 26, 1996 S-1 SCHEDULE II IRON MOUNTAIN INCORPORATED VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1993, 1994 and 1995 (In thousands)
Balance at Balance beginning Charged to at end of year expense Deductions of year ---------- ---------- ---------- ------- Year ended December 31, 1993 Allowance for doubtful accounts $424 $581 $(503) $502 Year ended December 31, 1994 Allowance for doubtful accounts $502 $356 $(327) $531 Year ended December 31, 1995 Allowance for doubtful accounts $531 $630 $(510) $651
S-2 Exhibit Index
Exhibit Number Item Exhibit - ------- ---- ------- 1 Form of Underwriting Agreement **** (1) 3.1 Amended and Restated Certificate of Incorporation of the Company * (3.1) 3.1A Certificate of Incorporation of Iron Mountain Records Management, Inc. Filed herewith as Exhibit 3.1A 3.1B Certificate of Incorporation of Metro Business Archives, Inc. Filed herewith as Exhibit 3.2B 3.1C Certificate of Incorporation of Criterion Atlantic Property, Inc. **** (3.1C) 3.1D Certificate of Incorporation of Criterion Property, Inc. **** (3.1D) 3.1E Articles of Incorporation of Hollywood Property, Inc. **** (3.1E) 3.1F Certificate of Incorporation of IM San Diego, Inc. **** (3.1F) 3.1G Certificate of Incorporation of Iron Mountain Information Partners, Inc. **** (3.1G) 3.1H Articles of Organization of Iron Mountain Data Protection Services, Inc. **** (3.1H) 3.1I Articles of Incorporation of Iron Mountain Records Management of Filed herewith as Maryland, Inc. Exhibit 3.1I 3.1J Articles of Incorporation of Iron Mountain Records Management of Ohio, Filed herewith as Inc. Exhibit 3.1J 3.1K Certificate of Incorporation of Iron Mountain Wilmington, Inc. **** (3.1K) 3.1L Articles of Incorporation of Data Storage Systems, Inc. Filed herewith as Exhibit 3.1L 3.1M Certificate of Formation of Iron Mountain Records Management of Missouri **** (3.1M) LLC 3.1N Articles of Organization of Iron Mountain Records Management of Boston, **** (3.1N) Inc. 3.1O Articles of Incorporation of Data Archive Services, Inc. Filed herewith as Exhibit 3.1O 3.1P Articles of Incorporation of Data Archives Services of Miami, Inc. **** (3.1P) 3.2 Bylaws of the Company, as amended * (3) 3.2A Bylaws of Iron Mountain Records Management, Inc. **** (3.2A) 3.2B Bylaws of Metro Business Archives, Inc. **** (3.2B) 3.2C Bylaws of Criterion Atlantic Property, Inc. **** (3.2C) 3.2D Bylaws of Criterion Property, Inc. **** (3.2D) 3.2E Bylaws of Hollywood Property, Inc. **** (3.2E) 3.2F Bylaws of IM San Diego, Inc. **** (3.2F) 3.2G Bylaws of Iron Mountain Information Partners, Inc. **** (3.2G) 3.2H Bylaws of Iron Mountain Data Protection Services, Inc. **** (3.2H) 3.2I Bylaws of Iron Mountain Records Management of Maryland, Inc. Filed herewith as Exhibit 3.2I 3.2J Bylaws of Iron Mountain Records Management of Ohio, Inc. Filed herewith as Exhibit 3.2J 3.2K Bylaws of Iron Mountain Wilmington, Inc. **** (3.2K) 3.2L Bylaws of Data Storage Systems, Inc. Filed herewith as Exhibit 3.2L 3.2M Limited Liability Company Agreement of Iron Mountain Records Management **** (3.2M) of Missouri LLC 3.2N Bylaws of Iron Mountain Records Management of Boston, Inc. **** (3.2N) 3.2O Bylaws of Data Archives Services, Inc. Filed herewith as Exhibit 3.2O 3.2P Bylaws of Data Archive Services of Miami, Inc. **** (3.2P) 4.1 Registration Rights Agreement between the Company and certain * (4.1) Stockholders, dated as of December 14, 1990 4.2 Form of Indenture for the Notes **** (4.2) Exhibit Number Item Exhibit - ------- ---- ------- 5 Opinion of Sullivan & Worcester LLP Filed herewith as Exhibit 5 10.1 Credit Agreement between the Company and Chase Manhattan Bank (N.A.) as * (10.1) Agent, dated as of December 10, 1990, amended and restated as of April 15, 1993 and further amended and restated as of January 31, 1995 10.2 Consent and Amendment No. 1 to the Credit Agreement, dated as of November * (10.2) 1, 1995 between the Company and Chase Manhattan Bank (N.A.) as Agent 10.3 Consent and Amendment No. 2 to the Credit Agreement, dated as of November * (10.3) 2, 1995 between the Company and Chase Manhattan Bank (N.A.) as Agent 10.3A Amendment No. 3 to the Credit Agreement, dated as of August 29, 1996, **** (10.3A) among the Company, the lenders party thereto and The Chase Manhattan Bank, as Agent 10.3B Draft of Credit Agreement, dated as of September 30, 1996, among the Filed herewith as Company, the parties lender thereto and The Chase Manhattan Bank, as Exhibit 10.3B Administrative Agent 10.4 Note Purchase Agreement between the Company and Chrysler Capital * (10.4) Corporation, dated as of December 14, 1990, as amended 10.4A Letter agreement, dated July 15, 1996, between the Company and Chrysler *** (10.4A) Capital Corporation 10.5 Subordinated Term Note between the Company and Schooner Capital * (10.5) Corporation, dated February 11, 1991 10.6 Iron Mountain Incorporated 1995 Stock Incentive Plan * (10.6) 10.7 Form of Iron Mountain Incorporated 1995 Stock Plan for Non-Employee ** (10.7) Directors 10.8 Asset Purchase and Sale Agreement, dated as of July 8, 1994, between Iron * (10.8) Mountain Data Protection Services, Inc. and Digital Equipment Corporation 10.9 Asset Purchase and Sale Agreement, dated as of October 31, 1994, among * (10.9) Iron Mountain Records Management of Ohio, Inc., Storage and Retrieval Concepts, Inc., Thomas Waldon and Dann Scheiferstein 10.10 Asset Purchase and Sale Agreement, dated as of February 28, 1995, among * (10.10) Iron Mountain Records Management ("IMRM"), National Business Archives, Inc., and James F. Knott 10.11 Asset Purchase Agreement, dated July 19, 1995, among IMRM, DataFile * (10.11) Services, Inc. and Cynthia and Lee Macklin 10.12 Asset Purchase and Sale Agreement, dated as of October 5, 1995, among * (10.12) IMRM, Brooks Records Center, Inc. and Forty Acres, Ltd. 10.13 Asset Purchase and Sale Agreement, dated as of November 1, 1995, among * (10.13) IMRM, Nashville Vault Company, Ltd. and USA Vault Corporation 10.14 Asset Purchase and Sale Agreement, dated November 14, 1995, among IMRM, * (10.14) Data Vault Corporation and Ralph Stoddard III 10.15 Merger Agreement, dated as of November 17, 1995, among IMRM, Temp DSSI, * (10.15) Inc. and Data Storage Systems, Inc. 10.16 Asset Purchase and Sale Agreement, dated November 17, 1995, among IMRM, * (10.16) Florida Data Bank, Inc., Carl J. Strang III, Carl J. Strang II and 6/10 Corporation 10.17 Asset Purchase and Sale Agreement, dated November 22, 1995 among IMRM, * (10.17) Data Management Business Records Storage, Inc. and Outdoor West, Inc. 10.18 Record Center Storage Services Agreement between IMRM and Resolution * (10.18) Trust Corporation, dated July 31, 1992 10.19 Lease between IMRM and IM Houston (CR) Limited Partnership, dated January * (10.19) 1, 1991 Exhibit Number Item Exhibit - ------- ---- ------- 10.20 Asset Purchase and Sale Agreement, dated July 11, 1996, among IMRM, ***(10.20) The Fortress Corporation and certain subsidiaries 10.21 Stock Purchase and Sale Agreement, dated as of August 9, 1996, *** (10.21) among IMRM and the shareholders of Data Archive Services of Miami, Inc. and Data Archives Services, Inc. 10.22 Asset Purchase and Sale Agreement, dated August 13, 1996, among IMRM, *** (10.22) International Record Storage and Retrieval Service, Inc. and Laurance Winnerman, Sanford Winnerman and Penny Novak 10.23 Asset Purchase Agreement, dated as of September 6, 1996, among IMRM, **** (10.23) Mohawk Business Record Storage, Inc., Michael M. Rabin, Richard K. Rabin, Herman Ladin and Sidney Ladin 11 Statement re: computation of per share earnings *** (11) 12 Statement re: computation of ratio of earnings to fixed charges **** (12) 21 Subsidiaries of the Company Filed herewith as Exhibit 21 23.1 Consent of Sullivan & Worcester LLP Contained in Exhibit 5 filed herewith 23.2 Consent of Arthur Andersen LLP **** (23.2) 23.3 Consent of Wolpoff & Company, LLP **** (23.3) 23.4 Consent of Morrison and Smith **** (23.4) 23.5 Consent of Geo. S. Olive & Co. LLC **** (23.5) 23.6 Consent of Robert F. Gayton, CPA **** (23.6) 23.7 Consent of Perless, Roth, Jonas & Hartney, CPAs, PA **** (23.7) 23.8 Consent of Rothstein, Kass & Company, P.C. **** (23.8) 24 Powers of Attorney **** Previously filed as Exhibit 24 and on Pages II-6 and II-7 of the Registration Statement 25 Statement re eligibility of trustee **** (25)
Each exhibit marked by an asterisk (*) is incorporated by reference to the Company's Registration Statement No. 33-99950 filed with the Securities and Exchange Commission on December 1, 1995. Each exhibit marked with a double asterisk (**) is incorporated by reference to Amendment No. 2 to the Company's Registration Statement filed with the Securities and Exchange Commission on January 11, 1996. Each exhibit marked with a triple asterisk (***) is incorporated by reference to the Company's Registration Statement No. 333-10359 filed with the Securities and Exchange Commission on August 16, 1996. Each exhibit marked with a quadruple asterisk (****) is incorporated by reference to Amendment No. 1 to the Company's Registration Statement filed with the Securities and Exchange Commission on September 11, 1996. Exhibit 3.2 is incorporated by reference to the Company's Quarterly Report on Form 10-Q (File No. 0-27584) filed with the Securities and Exchange Commission on August 14, 1996. Exhibit numbers in parentheses refer to the exhibit numbers in the applicable filing. EX-3.1A 2 ARTICLES OF INCORPORATION CERTIFICATE OF OWNERSHIP AND MERGER OF IRON MOUNTAIN DATA PROTECTION SERVICES, INC. (a Delaware corporation) INTO IRON MOUNTAIN RECORDS MANAGEMENT, INC. (a Delaware corporation) It is hereby certified that: 1. Iron Mountain Records Management, Inc. (hereinafter sometimes referred to as the "Corporation") is a business corporation of the State of Delaware. 2. The Corporation is the owner of all of the outstanding shares of each class of the stock of Iron Mountain Data Protection Services, Inc. ("IMDPS"), which is also a business corporation of the State of Delaware. 3. On December 18, 1995, the Board of Directors of the Corporation adopted the following resolutions to merger IMDPS into the Corporation: RESOLVED: That IMDPS be merged into this Corporation, and that all of the estate, property, rights, privileges, powers and franchises of IMDPS be vested in and held and enjoyed by this Corporation as fully and entirely and without change or diminution as the same were before held and enjoyed by IMDPS in its name. RESOLVED: That this Corporation shall assume all of the obligations of IMDPS. RESOLVED: That this Corporation shall cause to be executed and filed and/or recorded the documents prescribed by the laws of the State of Delaware and by the laws of any other appropriate jurisdiction and will cause to be performed all necessary acts within the State of Delaware and within any other appropriate jurisdiction. RESOLVED: That the effective time of the Certificate of Ownership and Merger setting forth a copy of these resolutions, and the time when the merger therein provided for shall become effective, shall be 11:59 p.m., December 31, 1995. Executed on December 19, 1995. IRON MOUNTAIN RECORDS MANAGEMENT, INC. By:/s/ Eugene B. Doggett ----------------------------- Eugene B. Doggett Executive Vice President Attest: /s/ Garry B. Watzke - --------------------------- Garry B. Watzke Secretary -2- CERTIFICATE OF OWNERSHIP AND MERGER OF METRO RECORDS MANAGEMENT, INC. (a California corporation) into IRON MOUNTAIN RECORDS MANAGEMENT, INC. (a Delaware corporation) It is hereby certified that: 1. Iron Mountain Records Management, Inc. (hereinafter sometimes referred to as the "Corporation") is a business corporation of the State of Delaware. 2. The Corporation is the owner of all of the outstanding shares of stock of Metro Records Management, Inc., which is a business corporation of the State of California. 3. The laws of the State of California, the jurisdiction of organization of Metro Records Management, Inc., permit the merger of a business corporation of that jurisdiction with a business corporation of another jurisdiction. 4. The laws of the State of Delaware, the jurisdiction of organization of Iron Mountain Records Management, Inc., permit the merger of a business corporation of that jurisdiction with a business corporation of another jurisdiction. 5. The Corporation hereby merges Metro Records Management, Inc. into the Corporation. 6. The following is a copy of the resolutions adopted on December 23, 1993 by the Board of Directors of the Corporation to merge the said Metro Records Management, Inc. into the Corporation: RESOLVED: That Metro Records Management, Inc. be merged into this Corporation, and that all of the estate, property, rights, privileges, powers, and franchises of Metro Records Management, Inc. be vested in and held and enjoyed by this Corporation as fully and entirely and without change or diminution as the same were before held and enjoyed by Metro Records Management, Inc. in its name. RESOLVED: That this Corporation assume all of the obligations of Metro Records Management, Inc. RESOLVED: That this Corporation shall cause to be executed and filed and/or recorded the documents prescribed by the laws of the State of Delaware, by the laws of the State of California, and by the laws of any other appropriate jurisdiction and will cause to be performed all necessary acts within the jurisdiction of organization of Metro Records Management, Inc. and of this Corporation and in any other appropriate jurisdiction. RESOLVED: That the effective time of the Certificate of Ownership and Merger setting forth a copy of these resolutions shall be 11:59 p.m. on December 31, 1993, and that, insofar as the General Corporation Law of the State of Delaware or the General Corporation Law of the State of California shall govern the same, said time shall be the effective merger time. Executed on December 23, 1993. IRON MOUNTAIN RECORDS MANAGEMENT, INC. By: /s/E.B. Doggett ---------------------------- Its Executive Vice President Attest: /s/ Garry B. Watzke - ---------------------------- Its Secretary -2- CERTIFICATE OF OWNERSHIP AND MERGER OF IRON MOUNTAIN/PACIFIC RECORDS MANAGEMENT, INC. (a Delaware corporation) INTO IRON MOUNTAIN RECORDS MANAGEMENT, INC. (a Delaware corporation) It is hereby certified that: 1. Iron Mountain Records Management, Inc. (hereinafter sometimes referred to as the "Corporation") is a business corporation of the State of Delaware. 2. The Corporation is the owner of all of the outstanding shares of each class of the stock of Iron Mountain/Pacific Records Management, Inc. ("IM/PAC"), which is also a business corporation of the State of Delaware. 3. On December 26, 1990, the Board of Directors of the Corporation adopted the following resolutions to merge IM/PAC into the Corporation: RESOLVED: That IM/PAC be merged into this Corporation, and that all of the estate, property, rights, privileges, powers and franchises of IM/PAC be vested in and held and enjoyed by this Corporation as fully and entirely and without change or diminution as the same were before held and enjoyed by IM/PAC in its name. RESOLVED: That this Corporation shall assume all of the obligations of IM/PAC. RESOLVED: That this Corporation shall cause to be executed and filed and/or recorded the documents prescribed by the laws of the State of Delaware and by the laws of any other appropriate jurisdiction and will cause to be performed all necessary acts within the State of Delaware and within any other appropriate jurisdiction. RESOLVED: That the effective time of the Certificate of Ownership and Merger setting forth a copy of these resolutions, and the time when the merger therein provided for shall become effective, shall be 12:01 a.m., January 1, 1991. Executed on December 26, 1990 IRON MOUNTAIN RECORDS MANAGEMENT, INC. By:/s/Eugene B. Doggett --------------------------- Eugene B. Doggett Executive Vice President Attest: /s/Garry B. Watzke - --------------------- Garry B. Watzke Assistant Secretary -2- CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF IRON MOUNTAIN INFORMATION SERVICES, INC. Pursuant to Section 242 of the Corporation Law of the State of Delaware Iron Mountain Information Services, Inc. (hereinafter called the "Corporation"), organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows: By written consent of the Board of Directors of the Corporation a resolution was duly adopted, pursuant to Sections 141(f) and 242 of the General Corporation Law of the State of Delaware, setting forth an amendment to the Restated Certificate of Incorporation of the Corporation and declaring said amendment to be advisable. All the stockholders of the Corporation duly approved said proposed amendment by written consent in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware. The resolution setting forth the amendment is as follows: RESOLVED: That Article FIRST of the Certificate of Incorporation be, and it hereby is, amended to read in its entirety as follows: "FIRST: The name of the Corporation is Iron Mountain Records Management, Inc." IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed hereto and this Certificate of Amendment to be signed by its Executive Vice President and attested by its Assistant Secretary as of this 9th day of November, 1990. ATTEST: IRON MOUNTAIN INFORMATION SERVICES, INC. By:/s/Garry B. Watzke By:/s/Eugene B. Doggett ------------------------- --------------------------- Garry B. Watzke Eugene B. Doggett Assistant Secretary Executive Vice President -2- CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF FRIGATE, LTD. Pursuant to Section 242 of the Corporation Law of the State of Delaware Frigate, Ltd. (hereinafter called the "Corporation"), organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows: By written consent of the Board of Directors of the Corporation a resolution was duly adopted, pursuant to Sections 141(f) and 242 of the General Corporation Law of the State of Delaware, setting forth an amendment to the Restated Certificate of Incorporation of the Corporation and declaring said amendment to be advisable. The sole stockholder of the Corporation duly approved said proposed amendment by written consent in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware. The resolution setting forth the amendment is as follows: RESOLVED: That Article FIRST of the Certificate of Incorporation be, and it hereby is, amended to read in its entirety as follows: "FIRST: The name of the Corporation is Iron Mountain Information Services, Inc." IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed hereto and this Certificate of Amendment to be signed by its Vice President and attested by its Assistant Secretary as of this 9th day of November, 1989. ATTEST: CRITERION RECORDS MANAGEMENT CORPORATION By:/s/Garry B. Watzke By:/s/Eugene B. Doggett ----------------------- ------------------------ Garry B. Watzke Eugene B. Doggett Assistant Secretary Vice President -2- Certificate of Incorporation of FRIGATE, LTD. FIRST: The name of the corporation is Frigate, Ltd. SECOND: The address of its registered office in the State of Delaware is No. 229 South State Street in the City of Dover, County of Kent. The name of its registered agent at such address is The Prentice-Hall Corporation System, Inc. THIRD: The nature of the business or purposes to be conducted or promoted is to carry on and to engage in any lawful business, act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware; and to possess and exercise all the powers and privileges granted by the General Corporation Law of the State of Delaware or by any other law of the State of Delaware or by this Certificate of Incorporation together with any powers incidental thereto. FOURTH: The total number of shares of all classes of stock which the corporation shall have authority to issue is (i) 25,000 shares of Common Stock, $.01 par value (the "Common Stock"), and (ii) 25,000 shares of Preferred Stock, $.01 par value (the "Preferred Stock"). The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the corporation. -1- 4.1 COMMON STOCK. ------------ 4.1.1 General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock. 4.1.2 Voting. The holders of shares of Common Stock are entitled to one vote for each share held at all meetings of stockholders (and written actions in lieu of meetings). There shall be no cumulative voting. 4.1.3 Dividends. Dividends may be declared and paid on the Common Stock from funds lawfully available therefor when and as determined by the Board of Directors and subject to any preferential dividend rights of any then-outstanding Preferred Stock. 4.1.4 Liquidation. Upon the dissolution or liquidation of the corporation, whether voluntary or involuntary, holders of Common Stock will be entitled to receive the net assets of the corporation available for distribution to its stockholders, subject to any preferential rights of any then-outstanding Preferred Stock. 4.2 PREFERRED STOCK. --------------- 4.2.1 General. The rights, preferences, powers and privileges and the restrictions, qualifications and limitations of the Preferred Stock are set forth below. Authority is hereby expressly granted to the Board of Directors to issue the Preferred Stock. As used herein, the term "Junior Stock" shall mean, with respect to the Preferred Stock, the Common Stock or any other equity security of the corporation ranking junior to the Preferred Stock as to dividends or assets. 4.2.2 No Voting Rights. Except as otherwise required by the laws of the State of Delaware, holders of shares of the Preferred Stock shall have no voting rights. -2- 4.2.3 Dividends. The holders of the then-outstanding Preferred Stock shall be entitled to receive, when and as declared by the Board, out of any funds legally available therefor, dividends at the annual rate of $165.00 per share payable quarterly in cash on the first day of January, April, July and October of each year. To the extent that dividends are not paid in cash, dividends may, at the election of the Board of Directors of the corporation, be paid in additional shares of Preferred Stock in lieu of cash. Dividends on the Preferred Stock shall be cumulative and shall accrue on each share of Preferred Stock from the date of issue thereof. Dividends payable on the Preferred Stock for any period less than a full quarter shall be computed on the basis of a 360-day year. So long as any shares of the Preferred Stock are outstanding, the corporation shall not declare, pay or set apart any dividend on any Junior Stock (other than dividends payable in shares of Common Stock) or declare, make or set apart any distribution on any Junior Stock unless concurrently therewith all accrued dividends or distributions on the Preferred Stock, through the date of such declaration, payment, making or setting apart of any dividend or distribution on the Junior Stock, are declared, paid, made or set apart, as the case may be. 4.2.4 Liquidation. In the event of any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, the holders of the Preferred Stock (including any shares of Preferred Stock issued as a dividend upon the Preferred Stock pursuant to Section 4.2.3 hereof) shall be entitled, before any distribution or payment is made upon any shares of any Junior Stock, to be paid an amount per share equal to $1,000.00 plus an amount equal to all unpaid dividends thereon, if any, through the date of such payment to the holders of the Preferred Stock before any payment shall be made to the -3- holders of the Junior Stock, and the holders of the Preferred Stock shall not be entitled to any further distribution of assets. If, upon any dissolution, liquidation or winding up of the corporation, the net assets available for distribution to the corporation's stockholders shall be insufficient to permit payment to the holders of the Preferred Stock of the amount distributable as aforesaid, the entire assets of the corporation to be so distributed shall be distributed pro rata among the holders of the Preferred Stock. Upon any such liquidation, dissolution or winding up, after the holders of the Preferred Stock shall have been paid in full the amount to which they shall be entitled hereunder, the remaining net assets of the corporation may be distributed to the holders of the Junior Stock. Written notice of such liquidation, dissolution or winding up, setting a payment date, the amount of the payment to holders of the Preferred Stock, and the place where said amount shall be payable shall be given not less than thirty (30) days prior to the payment date stated therein, to each holder of record of the Preferred Stock. The liquidation preference provided for herein with respect to the Preferred Stock shall be equitably adjusted to reflect any combination or split-up with respect to the Preferred Stock. 4.2.5 Redemption. ---------- (a) Redemption of Preferred Stock. Shares of the Preferred Stock shall be subject to redemption, at the option of the corporation exercised by vote of the Board of Directors, at any time and from time to time, upon notice given as hereinafter provided, at a price equal to $1,000.00 per share (the "Redemption Price"), together with all accrued but unpaid dividends thereon. Any amounts required to be paid pursuant to this Section 4.2.5 shall be paid by delivery of cash or certified or official bank check. -4- (b) Redemption Procedure. Not less than sixty (60) days' prior written notice shall be given by mail, postage prepaid to the holders of record of the Preferred Stock to be redeemed, addressed to each such holder at his post office address as shown by the records of the corporation. Said notice shall specify the manner of payment for the shares of Preferred Stock called for redemption and the place at which and the date, which date shall not be a legal holiday in Boston, Massachusetts, on which such shares will be redeemed and shall specify the shares called for redemption. If such notice of redemption shall have been duly given and if on or before the redemption date specified in such notice the funds necessary for such redemption shall have been set aside so as to be and continue to be available therefor, then, notwithstanding that any certificate for shares so called for redemption shall not have been surrendered for cancellation, after the close of business on such redemption date, the shares so called for redemption shall no longer be deemed outstanding, the dividends thereon shall cease to accrue, and all rights with respect to shares so called for redemption, including the rights, if any, to receive notice and to vote, shall forthwith after the close of business on such redemption date cease and determine, except only the right of the holders thereof to receive the amount payable upon redemption thereof. Subject to the provisions hereof, the Board of Directors shall have authority to prescribe the manner in which the Preferred Stock shall be redeemed from time to time. (c) Redeemed or Otherwise Acquired Shares to be Retired. Any shares of the Preferred Stock redeemed pursuant to this Section 4.2.5 or otherwise acquired by the corporation in any manner whatsoever shall be permanently retired and shall not under any -5- circumstances be reissued; and the corporation may from time to time take such appropriate corporate action as may be necessary to reduce the authorized Preferred Stock accordingly. (d) Shares to be Redeemed. All shares of Preferred Stock to be redeemed shall be selected pro rata, and there shall be so redeemed from each registered holder in whole shares, as nearly as practicable to the nearest share, that proportion of all of the shares to be redeemed which the number of shares held of record by such holder bears to the total number of the shares of Preferred Stock at the time outstanding. (e) All Past Dividends Must Be Paid Prior to Redemption. Except with the consent of the holders of not less than 66-2/3% of the shares of Preferred Stock at the time outstanding scheduled to be redeemed pursuant to this Section 4.2.5, the corporation shall not purchase or redeem shares of Preferred Stock at the time outstanding unless all dividends on such Preferred Stock for all past dividend periods shall have been paid or declared and a sum sufficient for the payment thereof set apart. FIFTH: The name and mailing address of the incorporator are as follows: NAME MAILING ADDRESS ---- --------------- Bryan G. Tyson Sullivan & Worcester One Post Office Square Boston, Massachusetts 02109 SIXTH: The names and mailing addresses of the persons who are to serve as directors until the first annual meeting of stockholders, or until their successors are elected and qualify, are: -6- NAME MAILING ADDRESS ---- --------------- C. Richard Reese Schooner Capital Corporation 99 Bedford Street Boston, Massachusetts 02111 Eugene B. Doggett Schooner Capital Corporation 99 Bedford Street Boston, Massachusetts 02111 Jas. Murray Howe Sullivan & Worcester One Post Office Square Boston, Massachusetts 02109 SEVENTH: The corporation is to have perpetual existence. EIGHTH: The stockholders of the corporation shall not be personally liable for the payment of the corporation's debts to any extent whatever. NINTH: The following additional provisions are inserted for the management of the business and the conduct of the affairs of the corporation. 9.1 Except as otherwise provided in the Certificate of Incorporation or by the By-Laws of the corporation as from time to time amended, the business and affairs of the corporation shall be managed by its Board of Directors, and, without limitation, the Board of Directors of the corporation is hereby specifically authorized and empowered from time to time in its discretion: (a) to make, alter, amend and repeal the By-Laws of the corporation; and (b) to determine for any purpose and in any manner not inconsistent with the other provisions of this Certificate of Incorporation the amount of the gross assets, of the liabilities, of the net assets or of the net profits of the corporation as the same exist or shall have existed at any time or for any period or periods, and to create, increase, abolish or -7- reduce any reserve or reserves for accrued, accruing or contingent liabilities or expenses, including taxes and other charges. 9.2 The Board of Directors in its discretion may submit any contract, transaction or act for approval or ratification at any annual meeting of the stockholders or at any meeting of the stockholders called for the purpose of considering any such contract, transaction or act, and any contract, transaction or act that shall be approved or be ratified by the vote of the holders of a majority of the stock of the corporation which is represented in person or by proxy at such meeting and entitled to vote thereat (provided that a lawful quorum of stockholders be there represented in person or by proxy) shall be as valid and as binding upon the corporation and upon all of the stockholders of the corporation as though it had been approved or ratified by every stockholder of the corporation. 9.3 Meetings of the stockholders may be held without the State of Delaware, if the By-Laws so provide. The books of the corporation may be kept (subject to any statutory provision) outside the State of Delaware at such place or places as may be from time to time designated by the Board of Directors or in the By-Laws of the corporation. Elections of directors need not be by ballot unless the By-Laws shall otherwise provide. 9.4 The corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, trustee, employee or agent of another corporation, partnership, joint venture, trust or other entity to the fullest extent permitted by law or any agreement, vote of stockholders or -8- directors or otherwise, or by any By-Law of this corporation, but the adoption of any such By-Law shall not be deemed to be exclusive of any other rights to indemnification any such person may be entitled to under any law, agreement, vote of stockholders or directors or otherwise. TENTH: Whenever a compromise or arrangement is proposed between the corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. -9- ELEVENTH: No director shall be personally liable to the corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except, in addition to any and all other requirements for such liability, (i) for any breach of such director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) to the extent provided under Section 174 of Title 8 of the Delaware Code (relating to the General Corporation Law of the State of Delaware) or any amendment thereto or successor provision thereto, or (iv) for any transaction for which such director derived an improper personal benefit. Neither the amendment nor repeal of this Article ELEVENTH, nor the adoption of any provision of this certificate of incorporation inconsistent with this Article ELEVENTH, shall eliminate or reduce the effect of this Article ELEVENTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article ELEVENTH, would accrue or arise, prior to such amendment, repeal, or adoption of an inconsistent provision. TWELFTH: The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this Certificate hereby declaring and certifying that this is my act and deed and the -10- facts herein stated are true, and accordingly have hereunto set my hand this fourth day of November, 1988. /s/Bryan G. Tyson -------------------------- Bryan G. Tyson -11- EX-3.1B 3 ARTICLES OF INCORPORATION CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CRITERION RECORDS MANAGEMENT (NY) INC. ---------------------- Under Section 805 of the Business Corporation Law ---------------------- Pursuant to the provisions of Section 805 of the Business Corporation Law, the undersigned E. B. Doggett, Vice President, and Garry B. Watzke, Assistant Secretary, of CRITERION RECORDS MANAGEMENT (NY) INC., hereby certify: FIRST: The name of the corporation is CRITERION RECORDS MANAGEMENT (NY) INC. SECOND: That the Certificate of Incorporation of the corporation was filed by the Department of State, Albany, New York, on the 10th day of September, 1971 under the original name BEKINS ARCHIVAL SERVICES, INC. THIRD: That the amendment to the Certificate of Incorporation effected by this Certificate is as follows: Article FIRST of the Certificate of Incorporation, relating to the corporate name, is hereby amended to read as follows: "FIRST: The name of the corporation is METRO BUSINESS ARCHIVES, INC." FOURTH: That the amendment of the Certificate of Incorporation was authorized by a vote of the Board of Directors followed by the unanimous written consent of the holders of all outstanding shares entitled to vote on an amendment to the Certificate of Incorporation. IN WITNESS WHEREOF, we hereunto sign our names and affirm that the statements made herein are true under the penalties of perjury, this 9th day of February, 1989. CRITERION RECORDS MANAGEMENT (NY) INC. /s/Eugene B. Doggett ------------------------------------------ E. B. Doggett, Vice President /s/Garry B. Watzke ------------------------------------------ Garry B. Watzke, Assistant Secretary -2- Certificate of Amendment of the Certificate of Incorporation of Bell & Howell Records Management Company, Inc. (a New York corporation) Under Section 805 of the Business Corporation Law ------------------------- It is hereby certified that: FIRST: The name of the corporation is Bell & Howell Records Management Company, Inc. SECOND: The certificate of incorporation of the corporation was filed by the Department of State on September 10, 1971, under the original name of BEKINS ARCHIVAL SERVICES, INC. THIRD: The amendment of the certificate of incorporation of the corporation effected by this certificate of amendment is as follows: To change the name of the corporation. FOURTH: To accomplish the foregoing amendment, Article FIRST of the certificate of incorporation of the corporation, relating to the name of the corporation, is hereby amended to read as follows: "FIRST: The name of the corporation is CRITERION RECORDS MANAGEMENT (NY) INC." FIFTH: The foregoing amendment of the certificate of incorporation of the corporation was authorized by the consent in writing of all the members of the Board of Directors of the corporation, followed by the unanimous written consent of the holder of all of the outstanding shares of the corporation entitled to vote on the said amendment of the certificate of incorporation. IN WITNESS WHEREOF, I have subscribed this document on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained therein have been examined by us and are true and correct. Date: as of November 10, 1988 CRITERION RECORDS MANAGEMENT CORPORATION, Shareholder /s/E.B. Doggett -------------------------------------------------------- By: E. B. Doggett, a corporate officer of Criterion Records Management Corporation, the holder of all of the outstanding shares entitled to vote on the amendment of the certificate of incorporation of the corporation. -2- * * * * * * * * * * * * * * * Verification of Signer of Certificate of Amendment ------------------------------ VOTING CORPORATE SHAREHOLDER STATE OF ) ) SS.: COUNTY OF ) E. B. Doggett, being duly sworn deposes and says that he is the Vice President of Criterion Records Management Corporation, the corporation which signed the foregoing certificate of amendment in the capacity of a shareholder; that he signed said certificate in the corporate name; that he has read the said certificate and knows the contents thereof; and that the statements contained therein are true to his own knowledge. /s/E.B. Doggett ------------------------------------------ E. B. Doggett, Vice President of Criterion Records Management Corporation Subscribed and sworn to before me on November 9, 1988 /s/Deborah Ruegger Wilson - --------------------------- Notary Public CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF BEKINS RECORD STORAGE CO., INC. Under Section 805 of the Business Corporation Law It is hereby certified that: FIRST: The name of the corporation is BEKINS RECORD STORAGE, INC., the name under which it was formed was BEKINS ARCHIVAL SERVICES, INC. SECOND: The certificate of incorporation of the corporation was filed by the Department of State on September 10, 1971. THIRD: An amendment to the certificate of incorporation was filed on March 31, 1977. The subject matter of said amendment was to change the name of the corporation from BEKINS ARCHIVAL SERVICES, INC. to BEKINS RECORD STORAGE CO., INC. The amendment was effected by changing Article FIRST of the certificate of incorporation to read, "FIRST; The name of the corporation is BEKINS RECORDS MANAGEMENT CO., INC. FOURTH: The amendment of the certificate of incorporation of the corporation effected by this certificate of amendment is as follows: To change the name of the corporation. FIFTH: To accomplish the foregoing amendment, Article FIRST of the certificate of incorporation of the corporation, relating to the name of the corporation, is hereby amended to read as follows: "FIRST: The name of the corporation is BEKINS RECORDS MANAGEMENT CO., INC." SIXTH: The foregoing amendment of the certificate of incorporation of the corporation was authorized by the unanimous written consent of the holders of all of the outstanding shares of the corporation entitled to vote on the said amendment of the certificate of incorporation. IN WITNESS WHEREOF, WE have subscribed this document on January 29, 1981, and do hereby affirm, under the penalties of perjury, that the statements contained therein have been examined by us and are true and correct. /s/Lee Waters ------------------------------ Lee Waters, President /s/Ronald L. Hartman ------------------------------ Ronald L. Hartman, Secretary County of Los Angeles ) ) ss: State of California ) Lee Waters and Ronald L. Hartman, being duly sworn, state that they are the President and Secretary, respectively, of BEKINS RECORD STORAGE CO., INC.; that they are authorized by said respondent to execute and file with the Department of State of the State of -2- New York this report and to verify the facts and statements contained in said report and schedules attached; that they have carefully examined all of such statements contained in the report and schedules; that they have knowledge of such matters set forth therein and that all such statements made and such matters set forth therein are true and correct to the best of his knowledge, information, and belief. Subscribed and sworn to before me, a Notary Public in and for the State and county above named, this 29th day of January, 1981. /s/Geri Williams ------------------------------ Geri Williams My commission expires: October 8, 1983 -3- Certificate of Amendment of the Certificate of Incorporation of BEKINS ARCHIVAL SERVICES, INC. Under Section 805 of the Business Corporation Law ------------------------- FIRST: The name of the corporation is BEKINS ARCHIVAL SERVICES, INC. SECOND: The certificate of incorporation of the corporation was filed by the Department of State on September 10, 1971. THIRD: The amendment of the certificate of incorporation of the corporation effected by this certificate of amendment is as follows: To change the name of the corporation. FOURTH: To accomplish the foregoing amendment, Article FIRST of the certificate of incorporation of the corporation, relating to the name of the corporation, is hereby amended to read as follows: "FIRST: The name of the corporation is BEKINS RECORD STORAGE CO., INC." FIFTH: The foregoing amendment of the certificate of incorporation of the corporation was authorized by the unanimous written consent of the holders of all of the outstanding shares of the corporation entitled to vote on the said amendment of the certificate of incorporation. IN WITNESS WHEREOF, WE have subscribed this document on March 28, 1977 and do hereby affirm, under the penalties of perjury, that the statements contained therein have been examined by us and are true and correct. /s/Lawrence A. Weinsheimer -------------------------------- Lawrence A. Weinsheimer Vice President and /s/Norman S. Marshall ------------------------------ Norman S. Marshall Secretary -2- CERTIFICATE OF INCORPORATION OF BEKINS ARCHIVAL SERVICES, INC. (UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW) The undersigned, for the purpose of forming a corporation pursuant to Section 402 of the Business Corporation Law of the State of New York, certify: 1. The name of the corporation shall be BEKINS ARCHIVAL SERVICES, INC. 2. The corporation shall engage in the business of storage, warehousing, transportation, hauling and delivery of personal property and business records and to all other transactions and businesses incidental thereto, and do make all contracts, and to do all things proper, incidental and conducive to the complete attainment of such purposes. 3. The office of the corporation shall be located in the County, City and State of New York. 4. The aggregate number of shares which the corporation shall have authority to issue shall be 200, all of which shall be common stock of one class and without par value. 5. The Secretary of State of the State of New York is designated as the agent of the corporation upon whom process in any action or proceeding against it may be served. The address to which the Secretary of State shall mail a copy of process in any action or proceeding against the corporation which may be served upon him is c/o The Corporation Trust Company, 277 Park Avenue, New York, New York 10017. 6. The name and address of the Registered Agent, which is to be the agent of the corporation upon whom process against it may be served is The Corporation Trust Company, 227 Park Avenue, New York, New York 10017. 7. Each of the Incorporators is a natural person over the age of twenty- one years. IN WITNESS WHEREOF we have signed this Certificate of Incorporation on August 30, 1971. /s/Marvin S. Maltzman ------------------------------ Marvin S. Maltzman 1335 South Figueroa Street Los Angeles, California /s/Lloyd C. Ownbey, Jr. ------------------------------ Lloyd C. Ownbey, Jr. 1335 South Figueroa Street Los Angeles, California /s/Don Creighton Jack ------------------------------ Don Creighton Jack 1335 South Figueroa Street Los Angeles, California In witness whereof, we have made, signed and acknowledged this Certificate of Incorporation this 30th day of August 1971. -2- STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES ) On the 30th day of August, 1971, before me personally came Marvin S. Maltzman, Lloyd C. Ownbey, Jr., and Don Creighton Jack, to me known and known to me to be the individuals described in and who executed the foregoing certificate and they acknowledge to me that they executed the same. /s/Jeanetta F. Behrens ------------------------------ Notary Public My Commission Expires September 11, 1971 -3- EX-3.1I 4 ARTICLES OF INCORPORATION CERTIFICATE OF INCORPORATION OF IRON MOUNTAIN RECORDS MANAGEMENT OF MARYLAND, INC. FIRST: The name of the Corporation is Iron Mountain Records Management of Maryland, Inc. SECOND: The address of the Corporation's registered office in the State of Delaware is 1013 Centre Road in the City of Wilmington, County of New Castle. The name of the Corporation's registered agent at such address is The Prentice-Hall Corporation System, Inc. THIRD: The nature of the business and purposes to be conducted or promoted by the Corporation are as follows: To engage in any lawful business, act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware; and to possess and exercise all the powers and privileges granted by the General Corporation Law of the State of Delaware or by any other law of the State of Delaware or by this Certificate of Incorporation together with any powers incidental thereto. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is one thousand (1,000) shares of Common Stock with par value $0.01 per share. FIFTH: The name and mailing address of the sole incorporator is as follows: Name Mailing Address Beth-Jean McCurdy Sullivan & Worcester LLP One Post Office Square Boston, Massachusetts 02109 SIXTH: The name and mailing address of the person who is to serve as sole director until the first meeting of stockholders, or until his successor is elected and qualified, which ever first occurs, are as follows: Name Mailing Address C. Richard Reese 745 Atlantic Avenue, Boston, MA 02111 Certificate of Incorporation of Iron Mountian Records Management of Maryland, Inc. Page 2 SEVENTH: For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of its directors and stockholders, it is further provided: 1. The number of directors of the Corporation shall be as prescribed in the By-laws of the Corporation but such number may from time to time be increased or decreased in such manner as may be prescribed by the By-laws. 2. In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized and empowered: (a) Subject to the applicable provisions of the By-laws then in effect, to determine, from time to time, whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any account or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation. (b) Without the assent or vote of the stockholders to authorize and issue obligations of the Corporation, secured or unsecured, to include therein such provisions as to redeemability, convertibility or otherwise, as the Board of Directors, in its sole discretion, may determine, and to authorize the mortgaging or pledging, as security therefor, of any property of the Corporation, real or personal, including after-acquired property. (c) To establish a bonus, profit-sharing or other types of incentive or compensation plans for the employees (including officers and Directors) of the Corporation and to fix the amount of profits to be distributed or shared and to determine the persons to participate in any such plans and the amounts their respective participants. (d) To make, alter, amend or repeal the By-laws of the Corporation. (e) To determine for any purpose and in any manner not inconsistent with the other provisions of this Certificate of Incorporation the amount of the gross assets, of the liabilities, of the net assets or of the net profits of the Corporation as the same may exist or shall have existed at any time or for any period or periods, and to create, increase, abolish or reduce any reserve or reserves for accrued, accruing or contingent liabilities or expenses, including taxes and other charges. Certificate of Incorporation of Iron Mountian Records Management of Maryland, Inc. Page 3 In addition to the powers and authorities hereinbefore or by statute expressly conferred upon it, the Board of Directors may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the laws of the State of Delaware, of the Certificate of Incorporation and of the By-laws of the Corporation. 3. Any Director or any officer elected or appointed by the stockholders or by the Board of Directors may be removed at any time in such manner as shall be provided in the By-laws of the Corporation. 4. In the absence of fraud, no contract or other transaction between the Corporation and any other corporation, and no act of the Corporation, shall in any way be affected or invalidated by the fact that any of the Directors of the Corporation are pecuniarily or otherwise interested in, or are directors or officer of, such other corporation and, in the absence of fraud, any Director may be a member, may be a party to, or may be pecuniarily or otherwise interested in, any contract or transaction of the Corporation; provided, in any case, that the fact that -------- he or such firm is so interested shall be disclosed or shall have been known to the Board of Directors or a majority thereof; and any Director of the Corporation who is also a director or officer of any such other corporation, or who is also interested, may be counted in determining the existence of a quorum at any meeting of the Board of Directors of the Corporation which shall authorize any such contract, act or transaction and may vote thereat to authorize any such contract, act or transaction, with like force and effect as if he were not such director or officer of such corporation, or not so interested. 5. Any contract, act or transaction of the Corporation or of the Directors may be ratified by vote of a majority of the shares having voting powers at any meeting of stockholders, or at any special meeting called for such purpose, and such ratification shall, so far as permitted by law and by this Certificate of Incorporation, be as valid and as binding as though ratified by every stockholder of the Corporation. 6. No Director of the Corporation shall be liable to any person on account of any action undertaken by him as such director in reliance in good faith upon the existence of any fact or circumstance reported or certified to the Board of Directors by any officer of the Corporation or by any independent auditor, engineer, or consultant retained or employed as such by the Board of Directors. 7. Meetings of the stockholders may be held without the State of Delaware, if the By-laws so provide. The books of the Corporation may be kept (subject to any statutory provision) outside the State of Certificate of Incorporation of Iron Mountian Records Management of Maryland, Inc. Page 4 Delaware at such place or places as may be from time to time designated by the Board of Directors or in the By-laws of the Corporation. Elections of directors need not be by ballot unless the By-laws shall otherwise provide. EIGHTH: No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that a director of the Corporation shall be liable for (i) breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, (iii) under section 174 of Title 8 of the Delaware Code relating to the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is hereafter amended to permit further limitation on or elimination of the personal liability of the Corporation's directors for breach of fiduciary duty, then a director of the Corporation shall be exempt from such liability for any such breach to the full extent permitted by the General Corporation Law of the State of Delaware as so amended from time to time. Any repeal or modification of the foregoing provisions of this Article, or the adoption of any provision inconsistent herewith, shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission of such director occurring prior to such repeal, modification or adoption of an inconsistent provision. NINTH: The stockholders of the Corporation shall not be personally liable for the payment of the Corporation's debts. TENTH: Each person who is or was or had agreed to become a director or officer of the Corporation or who is or was serving or who had agreed to serve at the request of the Board of Directors or an officer of the Corporation as an employee or agent of the Corporation or as a director, officer, partner, member, trustee, administrator, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise (including without limitation any employee benefit plan or any trust associated therewith), shall be indemnified by the Corporation to the full extent permitted from time to time by the Delaware General Corporation Law or any other applicable laws as presently or hereafter in effect. This Article shall inure to the benefit of each such person and his or her heirs, executors, administrators and estate. Without limiting the generality or the effect of the foregoing, the Corporation may enter into one or more agreements with any person which provide for indemnification greater or different than that provided in this Article. Neither the amendment nor repeal of this Article nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article shall reduce, eliminate or adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the effectiveness of such amendment, repeal or adoption. ELEVENTH: From time to time any of the provisions of this Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the Certificate of Incorporation of Iron Mountian Records Management of Maryland, Inc. Page 5 laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Certificate of Incorporation are granted subject to the provisions of this Article ELEVENTH. IN WITNESS WHEREOF, I have hereunto set my hand on September 12, 1996. /s/ Beth-Jean McCurdy Beth-Jean McCurdy Sole Incorporator EX-3.1J 5 ARTICLES OF INCORPORATION CERTIFICATE OF INCORPORATION OF IRON MOUNTAIN RECORDS MANAGEMENT OF OHIO, INC. FIRST: The name of the Corporation is Iron Mountain Records Management of Ohio, Inc. SECOND: The address of the Corporation's registered office in the State of Delaware is 1013 Centre Road in the City of Wilmington, County of New Castle. The name of the Corporation's registered agent at such address is The Prentice-Hall Corporation System, Inc.. THIRD: The nature of the business and purposes to be conducted or promoted by the Corporation are as follows: To engage in any lawful business, act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware; and to possess and exercise all the powers and privileges granted by the General Corporation Law of the State of Delaware or by any other law of the State of Delaware or by this Certificate of Incorporation together with any powers incidental thereto. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is one thousand (1,000) shares of Common Stock with par value $0.01 per share. FIFTH: The name and mailing address of the sole incorporator is as follows: Name Mailing Address Beth-Jean McCurdy Sullivan & Worcester LLP One Post Office Square Boston, Massachusetts 02109 SIXTH: The name and mailing address of the person who is to serve as sole director until the first meeting of stockholders, or until his successor is elected and qualified, which ever first occurs, are as follows: Name Mailing Address C. Richard Reese 745 Atlantic Avenue, Boston, MA 02111 Certificate of Incorporation of Iron Mountain Records Management of Ohio, Inc. Page 2 SEVENTH: For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of its directors and stockholders, it is further provided: 1. The number of directors of the Corporation shall be as prescribed in the By-laws of the Corporation but such number may from time to time be increased or decreased in such manner as may be prescribed by the By-laws. 2. In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized and empowered: (a) Subject to the applicable provisions of the By-laws then in effect, to determine, from time to time, whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any account or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation. (b) Without the assent or vote of the stockholders to authorize and issue obligations of the Corporation, secured or unsecured, to include therein such provisions as to redeemability, convertibility or otherwise, as the Board of Directors, in its sole discretion, may determine, and to authorize the mortgaging or pledging, as security therefor, of any property of the Corporation, real or personal, including after-acquired property. (c) To establish a bonus, profit-sharing or other types of incentive or compensation plans for the employees (including officers and Directors) of the Corporation and to fix the amount of profits to be distributed or shared and to determine the persons to participate in any such plans and the amounts their respective participants. (d) To make, alter, amend or repeal the By-laws of the Corporation. (e) To determine for any purpose and in any manner not inconsistent with the other provisions of this Certificate of Incorporation the amount of the gross assets, of the liabilities, of the net assets or of the net profits of the Corporation as the same may exist or shall have existed at any time or for any period or periods, and to create, increase, abolish or reduce any reserve or reserves for accrued, accruing or contingent liabilities or expenses, including taxes and other charges. Certificate of Incorporation of Iron Mountain Records Management of Ohio, Inc. Page 3 In addition to the powers and authorities hereinbefore or by statute expressly conferred upon it, the Board of Directors may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the laws of the State of Delaware, of the Certificate of Incorporation and of the By-laws of the Corporation. 3. Any Director or any officer elected or appointed by the stockholders or by the Board of Directors may be removed at any time in such manner as shall be provided in the By-laws of the Corporation. 4. In the absence of fraud, no contract or other transaction between the Corporation and any other corporation, and no act of the Corporation, shall in any way be affected or invalidated by the fact that any of the Directors of the Corporation are pecuniarily or otherwise interested in, or are directors or officer of, such other corporation and, in the absence of fraud, any Director may be a member, may be a party to, or may be pecuniarily or otherwise interested in, any contract or transaction of the Corporation; provided, in any case, that the fact that -------- he or such firm is so interested shall be disclosed or shall have been known to the Board of Directors or a majority thereof; and any Director of the Corporation who is also a director or officer of any such other corporation, or who is also interested, may be counted in determining the existence of a quorum at any meeting of the Board of Directors of the Corporation which shall authorize any such contract, act or transaction and may vote thereat to authorize any such contract, act or transaction, with like force and effect as if he were not such director or officer of such corporation, or not so interested. 5. Any contract, act or transaction of the Corporation or of the Directors may be ratified by vote of a majority of the shares having voting powers at any meeting of stockholders, or at any special meeting called for such purpose, and such ratification shall, so far as permitted by law and by this Certificate of Incorporation, be as valid and as binding as though ratified by every stockholder of the Corporation. 6. No Director of the Corporation shall be liable to any person on account of any action undertaken by him as such director in reliance in good faith upon the existence of any fact or circumstance reported or certified to the Board of Directors by any officer of the Corporation or by any independent auditor, engineer, or consultant retained or employed as such by the Board of Directors. 7. Meetings of the stockholders may be held without the State of Delaware, if the By-laws so provide. The books of the Corporation may be kept (subject to any statutory provision) outside the State of Certificate of Incorporation of Iron Mountain Records Management of Ohio, Inc. Page 4 Delaware at such place or places as may be from time to time designated by the Board of Directors or in the By-laws of the Corporation. Elections of directors need not be by ballot unless the By-laws shall otherwise provide. EIGHTH: No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that a director of the Corporation shall be liable for (i) breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, (iii) under section 174 of Title 8 of the Delaware Code relating to the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is hereafter amended to permit further limitation on or elimination of the personal liability of the Corporation's directors for breach of fiduciary duty, then a director of the Corporation shall be exempt from such liability for any such breach to the full extent permitted by the General Corporation Law of the State of Delaware as so amended from time to time. Any repeal or modification of the foregoing provisions of this Article, or the adoption of any provision inconsistent herewith, shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission of such director occurring prior to such repeal, modification or adoption of an inconsistent provision. NINTH: The stockholders of the Corporation shall not be personally liable for the payment of the Corporation's debts. TENTH: Each person who is or was or had agreed to become a director or officer of the Corporation or who is or was serving or who had agreed to serve at the request of the Board of Directors or an officer of the Corporation as an employee or agent of the Corporation or as a director, officer, partner, member, trustee, administrator, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise (including without limitation any employee benefit plan or any trust associated therewith), shall be indemnified by the Corporation to the full extent permitted from time to time by the Delaware General Corporation Law or any other applicable laws as presently or hereafter in effect. This Article shall inure to the benefit of each such person and his or her heirs, executors, administrators and estate. Without limiting the generality or the effect of the foregoing, the Corporation may enter into one or more agreements with any person which provide for indemnification greater or different than that provided in this Article. Neither the amendment nor repeal of this Article nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article shall reduce, eliminate or adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the effectiveness of such amendment, repeal or adoption. ELEVENTH: From time to time any of the provisions of this Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the Certificate of Incorporation of Iron Mountain Records Management of Ohio, Inc. Page 5 laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Certificate of Incorporation are granted subject to the provisions of this Article ELEVENTH. IN WITNESS WHEREOF, I have hereunto set my hand on September 12, 1996. /s/ Beth-Jean McCurdy Beth-Jean McCurdy Sole Incorporator EX-3.1L 6 ARTICLES OF INCORPORATION CERTIFICATE OF INCORPORATION OF DATA STORAGE SYSTEMS, INC. FIRST: The name of the Corporation is Data Storage Systems, Inc. SECOND: The address of the Corporation's registered office in the State of Delaware is 1013 Centre Road in the City of Wilmington, County of New Castle. The name of the Corporation's registered agent at such address is The Prentice-Hall Corporation System, Inc. THIRD: The nature of the business and purposes to be conducted or promoted by the Corporation are as follows: To engage in any lawful business, act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware; and to possess and exercise all the powers and privileges granted by the General Corporation Law of the State of Delaware or by any other law of the State of Delaware or by this Certificate of Incorporation together with any powers incidental thereto. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is one thousand (1,000) shares of Common Stock with par value $0.01 per share. FIFTH: The name and mailing address of the sole incorporator is as follows: Name Mailing Address Nicole M. Belytschko Sullivan & Worcester LLP One Post Office Square Boston, Massachusetts 02109 SIXTH: The name and mailing address of the person who is to serve as sole director until the first meeting of stockholders, or until his successor is elected and qualified, which ever first occurs, are as follows: Name Mailing Address C. Richard Reese 745 Atlantic Avenue Boston, Massachusetts 02111 -1- SEVENTH: For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of its directors and stockholders, it is further provided: 1. The number of directors of the Corporation shall be as prescribed in the By-laws of the Corporation but such number may from time to time be increased or decreased in such manner as may be prescribed by the By-laws. 2. In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized and empowered: (a) Subject to the applicable provisions of the By-laws then in effect, to determine, from time to time, whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any account or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation. (b) Without the assent or vote of the stockholders to authorize and issue obligations of the Corporation, secured or unsecured, to include therein such provisions as to redeemability, convertibility or otherwise, as the Board of Directors, in its sole discretion, may determine, and to authorize the mortgaging or pledging, as security therefor, of any property of the Corporation, real or personal, including after-acquired property. (c) To establish a bonus, profit-sharing or other types of incentive or compensation plans for the employees (including officers and Directors) of the Corporation and to fix the amount of profits to be distributed or shared and to determine the persons to participate in any such plans and the amounts their respective participants. (d) To make, alter, amend or repeal the By-laws of the Corporation. (e) To determine for any purpose and in any manner not inconsistent with the other provisions of this Certificate of Incorporation the amount of the gross assets, of the liabilities, of the net assets or of the net profits of the Corporation as the same may exist or shall have existed at any time or for any period or periods, and to create, increase, abolish or reduce any reserve or reserves for accrued, accruing or contingent liabilities or expenses, including taxes and other charges. -2- In addition to the powers and authorities hereinbefore or by statute expressly conferred upon it, the Board of Directors may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the laws of the State of Delaware, of the Certificate of Incorporation and of the By-laws of the Corporation. 3. Any Director or any officer elected or appointed by the stockholders or by the Board of Directors may be removed at any time in such manner as shall be provided in the By-laws of the Corporation. 4. In the absence of fraud, no contract or other transaction between the Corporation and any other corporation, and no act of the Corporation, shall in any way be affected or invalidated by the fact that any of the Directors of the Corporation are pecuniarily or otherwise interested in, or are directors or officer of, such other corporation and, in the absence of fraud, any Director may be a member, may be a party to, or may be pecuniarily or otherwise interested in, any contract or transaction of the Corporation; provided, in any case, that the fact that he or such firm is so interested shall be disclosed or shall have been known to the Board of Directors or a majority thereof; and any Director of the Corporation who is also a director or officer of any such other corporation, or who is also interested, may be counted in determining the existence of a quorum at any meeting of the Board of Directors of the Corporation which shall authorize any such contract, act or transaction and may vote thereat to authorize any such contract, act or transaction, with like force and effect as if he were not such director or officer of such corporation, or not so interested. 5. Any contract, act or transaction of the Corporation or of the Directors may be ratified by vote of a majority of the shares having voting powers at any meeting of stockholders, or at any special meeting called for such purpose, and such ratification shall, so far as permitted by law and by this Certificate of Incorporation, be as valid and as binding as though ratified by every stockholder of the Corporation. 6. No Director of the Corporation shall be liable to any person on account of any action undertaken by him as such director in reliance in good faith upon the existence of any fact or circumstance reported or certified to the Board of Directors by any officer of the Corporation or by any independent auditor, engineer, or consultant retained or employed as such by the Board of Directors. 7. Meetings of the stockholders may be held without the State of Delaware, if the Bylaws so provide. The books of the Corporation may be kept (subject to any statutory provision) outside the State of Delaware at such place or places as may be from time to time designated by the Board of Directors or in the By-laws of the -3- Corporation. Elections of directors need not be by ballot unless the By-laws shall otherwise provide. EIGHTH: No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that a director of the Corporation shall be liable for (i) breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, (iii) under section 174 of Title 8 of the Delaware Code relating to the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is hereafter amended to permit further limitation on or elimination of the personal liability of the Corporation's directors for breach of fiduciary duty, then a director of the Corporation shall be exempt from such liability for any such breach to the full extent permitted by the General Corporation Law of the State of Delaware as so amended from time to time. Any repeal or modification of the foregoing provisions of this Article, or the adoption of any provision inconsistent herewith, shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission of such director occurring prior to such repeal, modification or adoption of an inconsistent provision. NINTH: The stockholders of the Corporation shall not be personally liable for the payment of the Corporation's debts. TENTH: Each person who is or was or had agreed to become a director or officer of the Corporation or who is or was serving or who had agreed to serve at the request of the Board of Directors or an officer of the Corporation as an employee or agent of the Corporation or as a director, officer, partner, member, trustee, administrator, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise (including without limitation any employee benefit plan or any trust associated therewith), shall be indemnified by the Corporation to the full extent permitted from time to time by the Delaware General Corporation Law or any other applicable laws as presently or hereafter in effect. This Article shall inure to the benefit of each such person and his or her heirs, executors, administrators and estate. Without limiting the generality or the effect of the foregoing, the Corporation may enter into one or more agreements with any person which provide for indemnification greater or different than that provided in this Article. Neither the amendment nor repeal of this Article nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article shall reduce, eliminate or adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the effectiveness of such amendment, repeal or adoption. ELEVENTH: From time to time any of the provisions of this Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time -4- prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Certificate of Incorporation are granted subject to the provisions of this Article ELEVENTH. IN WITNESS WHEREOF, I have hereunto set my hand on September 13, 1996. /s/ Nicole M. Belytschko Nicole M. Belytschko Sole Incorporator -5- EX-3.1O 7 ARTICLES OF INCORPORATION CERTIFICATE OF INCORPORATION OF DATA ARCHIVE SERVICES, INC. FIRST: The name of the Corporation is Data Archive Services, Inc. SECOND: The address of the Corporation's registered office in the State of Delaware is 1013 Centre Road in the City of Wilmington, County of New Castle. The name of the Corporation's registered agent at such address is The Prentice-Hall Corporation System, Inc. THIRD: The nature of the business and purposes to be conducted or promoted by the Corporation are as follows: To engage in any lawful business, act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware; and to possess and exercise all the powers and privileges granted by the General Corporation Law of the State of Delaware or by any other law of the State of Delaware or by this Certificate of Incorporation together with any powers incidental thereto. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is one thousand (1,000) shares of Common Stock with par value $0.01 per share. FIFTH: The name and mailing address of the sole incorporator is as follows: Name Mailing Address Beth-Jean McCurdy Sullivan & Worcester LLP One Post Office Square Boston, Massachusetts 02109 SIXTH: The name and mailing address of the person who is to serve as sole director until the first meeting of stockholders, or until his successor is elected and qualified, which ever first occurs, are as follows: Name Mailing Address C. Richard Reese 745 Atlantic Avenue, Boston, MA 02111 Certificate of Incorporation of Data Archive Services, Inc. Page 2 SEVENTH: For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of its directors and stockholders, it is further provided: 1. The number of directors of the Corporation shall be as prescribed in the By-laws of the Corporation but such number may from time to time be increased or decreased in such manner as may be prescribed by the By-laws. 2. In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized and empowered: (a) Subject to the applicable provisions of the By-laws then in effect, to determine, from time to time, whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any account or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation. (b) Without the assent or vote of the stockholders to authorize and issue obligations of the Corporation, secured or unsecured, to include therein such provisions as to redeemability, convertibility or otherwise, as the Board of Directors, in its sole discretion, may determine, and to authorize the mortgaging or pledging, as security therefor, of any property of the Corporation, real or personal, including after-acquired property. (c) To establish a bonus, profit-sharing or other types of incentive or compensation plans for the employees (including officers and Directors) of the Corporation and to fix the amount of profits to be distributed or shared and to determine the persons to participate in any such plans and the amounts their respective participants. (d) To make, alter, amend or repeal the By-laws of the Corporation. (e) To determine for any purpose and in any manner not inconsistent with the other provisions of this Certificate of Incorporation the amount of the gross assets, of the liabilities, of the net assets or of the net profits of the Corporation as the same may exist or shall have existed at any time or for any period or periods, and to create, increase, abolish or reduce any reserve or reserves for accrued, accruing or contingent liabilities or expenses, including taxes and other charges. Certificate of Incorporation of Data Archive Services, Inc. Page 3 In addition to the powers and authorities hereinbefore or by statute expressly conferred upon it, the Board of Directors may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the laws of the State of Delaware, of the Certificate of Incorporation and of the By-laws of the Corporation. 3. Any Director or any officer elected or appointed by the stockholders or by the Board of Directors may be removed at any time in such manner as shall be provided in the By-laws of the Corporation. 4. In the absence of fraud, no contract or other transaction between the Corporation and any other corporation, and no act of the Corporation, shall in any way be affected or invalidated by the fact that any of the Directors of the Corporation are pecuniarily or otherwise interested in, or are directors or officer of, such other corporation and, in the absence of fraud, any Director may be a member, may be a party to, or may be pecuniarily or otherwise interested in, any contract or transaction of the Corporation; provided, in any case, that the fact that -------- he or such firm is so interested shall be disclosed or shall have been known to the Board of Directors or a majority thereof; and any Director of the Corporation who is also a director or officer of any such other corporation, or who is also interested, may be counted in determining the existence of a quorum at any meeting of the Board of Directors of the Corporation which shall authorize any such contract, act or transaction and may vote thereat to authorize any such contract, act or transaction, with like force and effect as if he were not such director or officer of such corporation, or not so interested. 5. Any contract, act or transaction of the Corporation or of the Directors may be ratified by vote of a majority of the shares having voting powers at any meeting of stockholders, or at any special meeting called for such purpose, and such ratification shall, so far as permitted by law and by this Certificate of Incorporation, be as valid and as binding as though ratified by every stockholder of the Corporation. 6. No Director of the Corporation shall be liable to any person on account of any action undertaken by him as such director in reliance in good faith upon the existence of any fact or circumstance reported or certified to the Board of Directors by any officer of the Corporation or by any independent auditor, engineer, or consultant retained or employed as such by the Board of Directors. 7. Meetings of the stockholders may be held without the State of Delaware, if the By-laws so provide. The books of the Corporation may be kept (subject to any statutory provision) outside the State of Certificate of Incorporation of Data Archive Services, Inc. Page 4 Delaware at such place or places as may be from time to time designated by the Board of Directors or in the By-laws of the Corporation. Elections of directors need not be by ballot unless the By-laws shall otherwise provide. EIGHTH: No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that a director of the Corporation shall be liable for (i) breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, (iii) under section 174 of Title 8 of the Delaware Code relating to the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is hereafter amended to permit further limitation on or elimination of the personal liability of the Corporation's directors for breach of fiduciary duty, then a director of the Corporation shall be exempt from such liability for any such breach to the full extent permitted by the General Corporation Law of the State of Delaware as so amended from time to time. Any repeal or modification of the foregoing provisions of this Article, or the adoption of any provision inconsistent herewith, shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission of such director occurring prior to such repeal, modification or adoption of an inconsistent provision. NINTH: The stockholders of the Corporation shall not be personally liable for the payment of the Corporation's debts. TENTH: Each person who is or was or had agreed to become a director or officer of the Corporation or who is or was serving or who had agreed to serve at the request of the Board of Directors or an officer of the Corporation as an employee or agent of the Corporation or as a director, officer, partner, member, trustee, administrator, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise (including without limitation any employee benefit plan or any trust associated therewith), shall be indemnified by the Corporation to the full extent permitted from time to time by the Delaware General Corporation Law or any other applicable laws as presently or hereafter in effect. This Article shall inure to the benefit of each such person and his or her heirs, executors, administrators and estate. Without limiting the generality or the effect of the foregoing, the Corporation may enter into one or more agreements with any person which provide for indemnification greater or different than that provided in this Article. Neither the amendment nor repeal of this Article nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article shall reduce, eliminate or adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the effectiveness of such amendment, repeal or adoption. ELEVENTH: From time to time any of the provisions of this Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the Certificate of Incorporation of Data Archive Services, Inc. Page 5 laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Certificate of Incorporation are granted subject to the provisions of this Article ELEVENTH. IN WITNESS WHEREOF, I have hereunto set my hand on September 12, 1996. /s/ Beth-Jean McCurdy Beth-Jean McCurdy Sole Incorporator EX-3.2I 8 BY-LAWS BY - LAWS of IRON MOUNTAIN RECORDS MANAGEMENT OF MARYLAND, INC. (a Delaware Corporation) IRON MOUNTAIN RECORDS MANAGEMENT OF MARYLAND, INC. (a Delaware Corporation) BY-LAWS TABLE OF CONTENTS ARTICLE I OFFICES...........................................................1 SECTION 1. Registered Office.....................................1 ARTICLE II SEAL.............................................................1 ARTICLE III MEETING OF STOCKHOLDERS.........................................1 SECTION 1. Place of Meeting......................................1 SECTION 3. Special Meetings......................................1 SECTION 4. Notice................................................2 SECTION 5. Quorum and Adjournments...............................2 SECTION 6. Votes; Proxies........................................3 SECTION 7. Organization..........................................4 SECTION 8. Consent of Stockholders in Lieu of Meeting............4 ARTICLE IV DIRECTORS........................................................5 SECTION 1. Number................................................5 SECTION 2. Term of Office........................................5 SECTION 3. Vacancies.............................................5 SECTION 4. Removal by Stockholders...............................6 SECTION 5. Meetings..............................................6 SECTION 6. Votes.................................................6 SECTION 7. Quorum and Adjournment................................7 SECTION 8. Compensation..........................................7 SECTION 9. Action By Consent of Directors........................7 ARTICLE V COMMITTEES OF DIRECTORS...........................................7 SECTION 1. Executive Committee...................................7 SECTION 2. Audit Committee.......................................8 SECTION 3. Other Committees......................................9 SECTION 4. Term of Office.......................................10 ARTICLE VI OFFICERS........................................................10 SECTION 1. Officers.............................................10 SECTION 2. Vacancies............................................11 SECTION 3. Chairman of the Board................................11 SECTION 4. President............................................11 SECTION 5. Executive Vice Presidents and Vice Presidents .....................................................11 SECTION 6. Secretary............................................11 SECTION 7. Assistant Secretaries................................11 SECTION 8. Treasurer............................................12 SECTION 9. Assistant Treasurers.................................12 SECTION 10. Controller...........................................12 SECTION 11. Assistant Controllers................................12 SECTION 12. Subordinate Officers.................................13 SECTION 13. Compensation.........................................13 SECTION 14. Removal..............................................13 SECTION 15. Bonds................................................13 ARTICLE VII CERTIFICATES OF STOCK..........................................13 SECTION 1. Form and Execution of Certificates...................13 SECTION 2. Transfer of Shares...................................14 SECTION 3. Closing of Transfer Books............................15 SECTION 4. Fixing Date for Determination of Stockholders of Record............................................15 SECTION 5. Lost or Destroyed Certificates.......................16 SECTION 6. Uncertificated Shares................................17 ARTICLE VIII EXECUTION OF DOCUMENTS........................................17 SECTION 1. Execution of Checks, Notes, etc......................17 SECTION 2. Execution of Contracts, Assignments, etc.............17 SECTION 3. Execution of Proxies.................................17 ARTICLE IX INSPECTION OF BOOKS.............................................17 ARTICLE X FISCAL YEAR......................................................18 ARTICLE XI AMENDMENTS......................................................18 ARTICLE XII INDEMNIFICATION................................................18 SECTION 1. Indemnification......................................18 SECTION 2. Authorization........................................20 SECTION 3. Expense Advance......................................21 SECTION 4. Nonexclusivity.......................................21 SECTION 5. Insurance............................................21 SECTION 6. "The Corporation"....................................21 SECTION 7. Other Indemnification................................22 SECTION 8. Other Definitions....................................22 SECTION 9. Continuation of Indemnification......................22 SECTION 10. Amendment or Repeal..................................22 IRON MOUNTAIN RECORDS MANAGEMENT OF MARYLAND, INC. (a Delaware Corporation) BY-LAWS ARTICLE I OFFICES ------------------- SECTION 1. Registered Office. The registered office of the Corporation shall be located in Wilmington, County of New Castle, State of Delaware, and the name of the resident agent in charge thereof shall be Corporation Service Company. SECTION 2. Other Offices. The Corporation may also have offices at such other places, within or without the State of Delaware, as the Board of Directors may from time to time appoint or the business of the Corporation may require. ARTICLE II SEAL ----------------- The seal of the Corporation shall, subject to alteration by the Board of Directors, consist of a flat-faced circular die with the word "Delaware", together with the name of the Corporation and the year of incorporation, cut or engraved thereon. ARTICLE III MEETING OF STOCKHOLDERS ------------------------------------- SECTION 1. Place of Meeting. Meetings of the stockholders shall be held either within or without the State of Delaware at such place as the Board of Directors may fix from time to time. SECTION 2. Annual Meetings. The annual meeting of stockholders shall be held for the election of directors on such date and at such time as the Board of Directors may fix from time to time. Any other proper business may be transacted at the annual meeting. SECTION 3. Special Meetings. Special meetings of the stockholders for any purpose or purposes may be called by the Chairman of the Board of Directors, if there be one, the President or by the directors (either by written instrument signed by a majority or by resolution adopted by a vote of the majority), and special meetings shall be called by the President or the Secretary whenever stockholders owning at least a majority of the capital stock issued, outstanding and entitled to vote so By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 2 request in writing. Such request of stockholders shall state the purpose or purposes of the proposed meeting. SECTION 4. Notice. Written or printed notice of every meeting of stockholders, annual or special, stating the hour, date and place thereof, and the purpose or purposes in general terms for which the meeting is called shall, not less than ten (10) days, or such longer period as shall be provided by law, the Certificate of Incorporation, these By-Laws, or otherwise, and not more than sixty (60) days before such meeting, be served upon or mailed to each stockholder entitled to vote thereat, at the address of such stockholder as it appears upon the stock records of the Corporation or, if such stockholder shall have filed with the Secretary of the Corporation a written request that notices be mailed to some other address, then to the address designated in such request. Notice of the hour, date, place and purpose of any meeting of stockholders may be dispensed with if every stockholder entitled to vote thereat shall attend either in person or by proxy and shall not, at the beginning of the meeting, object to the holding of such meeting because the meeting has not been lawfully called or convened, or if every absent stockholder entitled to such notice shall in writing, filed with the records of the meeting, either before or after the holding thereof, waive such notice. SECTION 5. Quorum and Adjournments. Except as otherwise provided by law or by the Certificate of Incorporation, the presence in person or by proxy at any meeting of stockholders of the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote thereat, shall be requisite and shall constitute a quorum. If two or more classes of stock are entitled to vote as separate classes upon any question, then, in the case of each such class, a quorum for the consideration of such question shall, except as otherwise provided by law or by the Certificate of Incorporation, consist of *** of all stock of that class issued, outstanding and entitled to vote. If a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote thereat or, where a larger quorum is required, such quorum, shall not be represented at any meeting of the stockholders regularly called, the holders of *** of the shares present or represented by proxy and entitled to vote thereat shall have power to adjourn the meeting to another time, or to another time and place, without notice other than announcement of adjournment at the meeting, and there may be successive adjournments for like cause and in like manner until the requisite amount of shares entitled to vote at such meeting shall be represented; provided, however, that if the adjournment is for more than thirty (30) days, notice of the hour, date and place of the adjourned meeting shall be given to each stockholder entitled to vote thereat. Subject to the requirements of law and the Certificate of Incorporation, on By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 3 any issue on which two or more classes of stock are entitled to vote separately, no adjournment shall be taken with respect to any class for which a quorum is present unless the Chairman of the meeting otherwise directs. At any meeting held to consider matters which were subject to adjournment for want of a quorum at which the requisite amount of shares entitled to vote thereat shall be represented, any business may be transated which might have been transacted at the meeting as originally noticed. SECTION 6. Votes; Proxies. Except as otherwise provided in the Certificate of Incorporation, at each meeting of stockholders, every stockholder of record at the closing of the transfer books, if closed, or on the date set by the Board of Directors for the determination of stockholders entitled to vote at such meeting, shall have one vote for each share of stock entitled to vote which is registered in such stockholder's name on the books of the Corporation, and, in the election of directors, may vote cumulatively to the extent, if any, and in the manner authorized in the Certificate of Incorporation. At each such meeting every stockholder entitled to vote shall be entitled to do so in person, or by proxy appointed by an instrument in writing or as otherwise permitted by law subscribed by such stockholder and bearing a date not more than three (3) years prior to the meeting in question, unless said instrument provides for a longer period during which it is to remain in force. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or any interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing with the Secretary of the Corporation an instrument in writing or as otherwise permitted by law revoking the proxy or another duly executed proxy bearing a later date. Voting at meetings of stockholders need not be by written ballot and, except as otherwise provided by law, need not be conducted by inspectors of election unless so determined by the Chairman of the meeting or by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or represented by proxy at such meeting. If it is required or determined that inspectors of election be appointed, the Chairman shall appoint two inspectors of election, who shall first take and subscribe an oath or affirmation faithfully to execute the duties of inspectors at such meeting with strict impartiality and according to the best of their ability. The inspectors so appointed shall take charge of the polls and, after the balloting, shall make a certificate of the By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 4 result of the vote taken. No director or candidate for the office of director shall be appointed as such inspector. At any meeting at which a quorum is present, a plurality of the votes properly cast for election to fill any vacancy on the Board of Directors shall be sufficient to elect a candidate to fill such vacancy, and a majority of the votes properly cast upon any other question shall decide the question, except in any case where a larger vote is required by law, the Certificate of Incorporation, these By-Laws, or otherwise. SECTION 7. Organization. The Chairman of the Board, if there be one, or in his or her absence the Vice Chairman, or in the absence of a Vice Chairman, the President, or in the absence of the President, a Vice President, shall call meetings of the stockholders to order and shall act as chairman thereof. The Secretary of the Corporation, if present, shall act as secretary of all meetings of stockholders, and, in his or her absence, the presiding officer may appoint a secretary. SECTION 8. Consent of Stockholders in Lieu of Meeting. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted by the Delaware General Corporation Law to be taken at any annual or special meeting of the stockholders of the Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered in the manner required by this section to the Corporation, written consents signed by a sufficient number of stockholders to take action are delivered to the corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 5 Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. In the event that the action which is consented to is such as would have required the filing of a certificate under any section of the Delaware General Corporation Law other than Section 228 thereof, if such action had been voted on by stockholders at a meeting thereof, the certificate filed under such other section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the Delaware General Corporation Law, and that written notice has been given as provided in such Section 228. ARTICLE IV DIRECTORS --------------------- SECTION 1. Number. The business and affairs of the Corporation shall be conducted and managed by a Board of Directors consisting of not less than one director, none of whom needs to be a stockholder. The number of directors for each year shall be fixed at each annual meeting of stockholders, but if the number is not so fixed, the number shall remain as it stood immediately prior to such meeting. At each annual meeting of stockholders, the stockholders shall elect directors. Each director so elected shall hold office, subject to the provisions of law, the Certificate of Incorporation, these By-Laws, or otherwise, until the next annual meeting of stockholders or until his or her successor is elected and qualified. At any time during any year, except as otherwise provided by law, the Certificate of Incorporation, these By-Laws, or otherwise, the number of directors may be increased or reduced, in each case by vote of a majority of the stock issued and outstanding and present in person or represented by proxy and entitled to vote for the election of directors or a majority of the directors in office at the time of such increase or decrease, regardless of whether such majority constitutes a quorum. SECTION 2. Term of Office. Each director shall hold office until the next annual meeting of stockholders and until his or her successor is duly elected and qualified or until his or her earlier death or resignation, subject to the right of the stockholders at any time to remove any director or directors as provided in Section 4 of this Article. SECTION 3. Vacancies. If any vacancy shall occur among the directors, or if the number of directors shall at any time be increased, the directors then in office, although less than a quorum, by a majority vote may fill the vacancies or newly- By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 6 created directorships, or any such vacancies or newly-created directorships may be filled by the stockholders at any meeting. SECTION 4. Removal by Stockholders. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, the holders of record of the capital stock of the Corporation entitled to vote for the election of directors may, by a majority vote, remove any director or directors, with or without cause, and, in their discretion, elect a new director or directors in place thereof. SECTION 5. Meetings. Meetings of the Board of Directors shall be held at such place, within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors or by the Chairman of the Board, if there be one, or by the President, and as may be specified in the notice or waiver of notice of any meeting. Meetings may be held at any time upon the call of the Chairman of the Board, if there be one, or the President or any two (2) of the directors in office by oral, telegraphic, telex, telecopy or other form of electronic transmission, or written notice, duly served or sent or mailed to each director not less than twenty-four (24) hours before such meeting, except that, if mailed, not less than *** (***) hours before such meeting. Meetings may be held at any time and place without notice if all the directors are present and do not object to the holding of such meeting for lack of proper notice or if those not present shall, in writing or by telegram, telex, telecopy or other form of electronic transmission, waive notice thereof. A regular meeting of the Board may be held without notice immediately following the annual meeting of stockholders at the place where such meeting is held. Regular meetings of the Board may also be held without notice at such time and place as shall from time to time be determined by resolution of the Board. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors or any committee thereof need be specified in any written waiver of notice. Members of the Board of Directors or any committee thereof may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting pursuant to the foregoing provisions shall constitute presence in person at the meeting. SECTION 6. Votes. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, the vote of the By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 7 majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 7. Quorum and Adjournment. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, a majority of the directors shall constitute a quorum for the transaction of business. If at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time without notice other than announcement of the adjournment at the meeting, and at such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally noticed. SECTION 8. Compensation. Directors shall receive compensation for their services, as such, and for service on any Committee of the Board of Directors, as fixed by resolution of the Board of Directors and for expenses of attendance at each regular or special meeting of the Board or any Committee thereof. Nothing in this Section shall be construed to preclude a director from serving the Corporation in any other capacity and receiving compensation therefor. SECTION 9. Action By Consent of Directors. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Such consent shall be treated as a vote adopted at a meeting for all purposes. Such consents may be executed in one or more counterparts and not every Director or committee member need sign the same counterpart. ARTICLE V COMMITTEES OF DIRECTORS ----------------------------------- SECTION 1. Executive Committee. The Board of Directors may, by resolution passed by a majority of the whole Board, appoint an Executive Committee of one (1) or more members, to serve during the pleasure of the Board, to consist of such directors as the Board may from time to time designate. The Board of Directors shall designate the Chairman of the Executive Committee. a. Procedure. The Executive Committee shall, by a vote of a majority of its members, fix its own times and places of meeting, determine the number of its members constituting a quorum for the transaction of business, and prescribe its own rules of procedure, no change in which shall be made save by a majority vote of its members. By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 8 b. Responsibilities. During the intervals between the ---------------- meetings of the Board of Directors, except as otherwise provided by the Board of Directors in establishing such Committee or otherwise, the Executive Committee shall possess and may exercise all the powers of the Board in the management and direction of the business and affairs of the Corporation; provided, however, that the Executive Committee shall not, except to the extent the Certificate of Incorporation or the resolution providing for the issuance of shares of stock adopted by the Board of Directors as provided in Section 151(a) of the Delaware General Business Corporation Law, have the power: (1) to amend or authorize the amendment of the Certificate of Incorporation or these By-Laws; (2) to authorize the issuance of stock; (3) to authorize the payment of any dividend; (4) to adopt an agreement of merger or consolidation of the Corporation or to recommend to the stockholders the sale, lease or exchange of all or substantially all the property and business of the Corporation; (5) to recommend to the stockholders a dissolution, or a revocation of a dissolution, of the Corporation; or (6) to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware Business Corporation Law. c. Reports. The Executive Committee shall keep regular minutes of its proceedings, and all action by the Executive Committee shall be reported promptly to the Board of Directors. Such action shall be subject to review, amendment and repeal by the Board, provided that no rights of third parties shall be adversely affected by such review, amendment or repeal. d. Appointment of Additional Members. In the absence or disqualification of any member of the Executive Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. SECTION 2. Audit Committee. The Board of Directors may, by resolution passed by a majority of the whole Board, appoint an Audit Committee of *** (***) or more members to serve during the By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 9 pleasure of the Board. The Board of Directors shall designate the Chairman of the Audit Committee. a. Procedure. The Audit Committee, by a vote of a majority of its members, shall fix its own times and places of meeting, shall determine the number of its members constituting a quorum for the transaction of business, and shall prescribe its own rules of procedure, no change in which shall be made save by a majority vote of its members. b. Responsibilities. The Audit Committee shall review the annual financial statements of the Corporation prior to their submission to the Board of Directors, shall consult with the Corporation's independent auditors, and may examine and consider such other matters in relation to the internal and external audit of the Corporation's accounts and in relation to the financial affairs of the Corporation and its accounts, including the selection and retention of independent auditors, as the Audit Committee may, in its discretion, determine to be desirable. c. Reports. The Audit Committee shall keep regular minutes of its proceedings, and all action by the Audit Committee shall, from time to time, be reported to the Board of Directors as it shall direct. Such action shall be subject to review, amendment and repeal by the Board, provided that no rights of third parties shall be adversely affected by such review, amendment or repeal. d. Appointment of Additional Members. In the absence or disqualification of any member of the Audit Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. SECTION 3. Other Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, at any time appoint one or more other committees from and outside of its own number. Every such committee must include at least one member of the Board of Directors. The Board may from time to time designate or alter, within the limits permitted by law, the Certificate of Incorporation and this Article, if applicable, the duties, powers and number of members of such other committees or change their membership, and may at any time abolish such other committees or any of them. a. Procedure. Each committee, appointed pursuant to this Section, shall, by a vote of a majority of its members, By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 10 fix its own times and places of meeting, determine the number of its members constituting a quorum for the transaction of business, and prescribe its own rules of procedure, no change in which shall be made save by a majority vote of its members. b. Responsibilities. Each committee, appointed pursuant to this Section, shall exercise the powers assigned to it by the Board of Directors in its discretion. c. Reports. Each committee appointed pursuant to this Section shall keep regular minutes of proceedings, and all action by each such committee shall, from time to time, be reported to the Board of Directors as it shall direct. Such action shall be subject to review, amendment and repeal by the Board, provided that no rights of third parties shall be adversely affected by such review, amendment or repeal. d. Appointment of Additional Members. In the absence or disqualification of any member of each committee, appointed pursuant to this Section, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors (or, to the extent permitted, another person) to act at the meeting in place of any such absent or disqualified member. SECTION 4. Term of Office. Each member of a committee shall hold office until the first meeting of the Board of Directors following the annual meeting of stockholders (or until such other time as the Board of Directors may determine, either in the vote establishing the committee or at the election of such member or otherwise) and until his or her successor is elected and qualified, or until he or she sooner dies, resigns, is removed, is replaced by change of membership or becomes disqualified by ceasing to be a director (where membership on the Board is required), or until the committee is sooner abolished by the Board of Directors. ARTICLE VI OFFICERS --------------------- SECTION 1. Officers. The Board of Directors shall elect a President, a Secretary and a Treasurer, and, in their discretion, may elect a Chairman of the Board, a Vice Chairman of the Board, a Controller, and one or more Executive Vice Presidents, Vice Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controllers as deemed necessary or appropriate. Such officers shall be elected annually by the Board of Directors at its first meeting following the annual By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 11 meeting of stockholders (or at such other meeting as the Board of Directors determines), and each shall hold office for the term provided by the vote of the Board, except that each will be subject to removal from office in the discretion of the Board as provided herein. The powers and duties of more than one office may be exercised and performed by the same person. SECTION 2. Vacancies. Any vacancy in any office may be filled for the unexpired portion of the term by the Board of Directors, at any regular or special meeting. SECTION 3. Chairman of the Board. The Chairman of the Board of Directors, if elected, shall be a member of the Board of Directors and shall preside at its meetings. The Chairman, if other than the President, shall advise and counsel with the President, and shall perform such duties as from time to time may be assigned to him or her by the Board of Directors. SECTION 4. President. The President shall be the chief executive officer of the Corporation. Subject to the directions of the Board of Directors, the President shall have and exercise direct charge of and general supervision over the business and affairs of the Corporation and shall perform all duties incident to the office of the chief executive officer of a corporation and such other duties as from time to time may be assigned to him or her by the Board of Directors. The President may but need not be a member of the Board of Directors. SECTION 5. Executive Vice Presidents and Vice Presidents. Each Executive Vice President and Vice President shall have and exercise such powers and shall perform such duties as from time to time may be assigned to him or to her by the Board of Directors or the President. SECTION 6. Secretary. The Secretary shall keep the minutes of all meetings of the stockholders and of the Board of Directors in books provided for the purpose; shall see that all notices are duly given in accordance with the provisions of law and these By-Laws; the Secretary shall be custodian of the records and of the corporate seal or seals of the Corporation; shall see that the corporate seal is affixed to all documents the execution of which, on behalf of the Corporation under its seal, is duly authorized, and, when the seal is so affixed, he or she may attest the same; the Secretary may sign, with the President, an Executive Vice President or a Vice President, certificates of stock of the Corporation; and, in general, the Secretary shall perform all duties incident to the office of secretary of a corporation, and such other duties as from time to time may be assigned to him or her by the Board of Directors. SECTION 7. Assistant Secretaries. The Assistant Secretaries in order of their seniority shall, in the absence or By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 12 disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Secretary. SECTION 8. Treasurer. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation, and shall deposit, or cause to be deposited, in the name of the Corporation, all monies or other valuable effects in such banks, trust companies or other depositaries as shall, from time to time, be selected by the Board of Directors; may endorse for collection on behalf of the Corporation checks, notes and other obligations; may sign receipts and vouchers for payments made to the Corporation; may sign checks of the Corporation, singly or jointly with another person as the Board of Directors may authorize, and pay out and dispose of the proceeds under the direction of the Board; the Treasurer shall render to the President and to the Board of Directors, whenever requested, an account of the financial condition of the Corporation; the Treasurer may sign, with the President, or an Executive Vice President or a Vice President, certificates of stock of the Corporation; and in general, shall perform all the duties incident to the office of treasurer of a corporation, and such other duties as from time to time may be assigned by the Board of Directors. Unless the Board of Directors shall otherwise determine, the Treasurer shall be the chief financial officer of the Corporation. SECTION 9. Assistant Treasurers. The Assistant Treasurers in order of their seniority shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Treasurer. SECTION 10. Controller. The Controller, if elected, shall be the chief accounting officer of the Corporation and shall perform all duties incident to the office of a controller of a corporation, and, in the absence of or disability of the Treasurer or any Assistant Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the President or the Treasurer. SECTION 11. Assistant Controllers. The Assistant Controllers in order of their seniority shall, in the absence or disability of the Controller, perform the duties and exercise the powers of the Controller and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Controller. By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 13 SECTION 12. Subordinate Officers. The Board of Directors may appoint such subordinate officers as it may deem desirable. Each such officer shall hold office for such period, have such authority and perform such duties as the Board of Directors may prescribe. The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers and to prescribe the powers and duties thereof. SECTION 13. Compensation. The Board of Directors shall fix the compensation of all officers of the Corporation. It may authorize any officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers. SECTION 14. Removal. Any officer of the Corporation may be removed, with or without cause, by action of the Board of Directors. SECTION 15. Bonds. The Board of Directors may require any officer of the Corporation to give a bond to the Corporation, conditional upon the faithful performance of his or her duties, with one or more sureties and in such amount as may be satisfactory to the Board of Directors. ARTICLE VII CERTIFICATES OF STOCK ----------------------------------- SECTION 1. Form and Execution of Certificates. The interest of each stockholder of the Corporation shall be evidenced by a certificate or certificates for shares of stock in such form as the Board of Directors may from time to time prescribe. The certificates of stock of each class shall be consecutively numbered and signed by the Chairman or Vice Chairman of the Board, if any, the President, an Executive Vice President or a Vice President and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of the Corporation, and may be countersigned and registered in such manner as the Board of Directors may by resolution prescribe, and shall bear the corporate seal or a printed or engraved facsimile thereof. Where any such certificate is signed by a transfer agent or transfer clerk acting on behalf of the Corporation, the signatures of any such Chairman, Vice Chairman, President, Executive Vice President, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be facsimiles, engraved or printed. In case any officer or officers, who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates, shall cease to be such officer or officers, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered by the Corporation as though the person or persons who signed such By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 14 certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers. 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. Every certificate for shares of stock which are subject to any restriction on transfer pursuant to law, the Certificate of Incorporation, these By-Laws, or any agreement to which the Corporation is a party, shall have the restriction noted conspicuously on the certificate, and shall also set forth, on the face or back, either the full text of the restriction or a statement of the existence of such restriction and (except if such restriction is imposed by law) a statement that the Corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. Every certificate issued when the Corporation is authorized to issue more than one class or series of stock shall set forth on its face or back either the full text of the preferences, voting powers, qualifications, and special and relative rights of the shares of each class and series authorized to be issued, or a statement of the existence of such preferences, powers, qualifications and rights, and a statement that the Corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. SECTION 2. Transfer of Shares. The shares of the stock of the Corporation shall be transferred on the books of the Corporation by the holder thereof in person or by his or her attorney lawfully constituted, upon surrender for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof or guaranty of the authenticity of the signature as the Corporation or its agents may reasonably require. 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 provided by law or by the Certificate of Incorporation. It shall be the duty of each stockholder to notify the Corporation of his or her post office address. By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 15 SECTION 3. 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 may determine, preceding the date of any meeting of stockholders 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 4. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of directors and which record date: (a) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, the Certificate of Incorporation or otherwise, not be more than sixty (60) nor less than ten (10) days before the date of such meeting; (b) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall, unless otherwise required by law, the Certificate of Incorporation or otherwise, not be more than ten (10) days from the date upon which the resolution fixing the record date is adopted by the Board of Directors; and (c) in the case of any other action, shall not be more than sixty (60) days prior to such other action. If no record date is fixed: (a) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders 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 next preceding the day on which the meeting is held; (b) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action take or proposed to be taken is delivered to the Corporation in accordance with applicable law, or, if prior action by the Board of Directors is required by law, shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action; and (c) the record date for determining stockholders 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. A determination of stockholders of By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 16 record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5. Lost or Destroyed Certificates. In case of the loss or destruction of any certificate of stock, a new certificate may be issued under the following conditions: a. The owner of said certificate shall file with the Secretary or any Assistant Secretary of the Corporation an affidavit giving the facts in relation to the ownership, and in relation to the loss or destruction of said certificate, stating its number and the number of shares represented thereby; such affidavit shall be in such form and contain such statements as shall satisfy the President, any Executive Vice President, Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer, that said certificate has been accidentally destroyed or lost, and that a new certificate ought to be issued in lieu thereof. Upon being so satisfied, any such officer may require such owner to furnish the Corporation a bond in such penal sum and in such form as he or she may deem advisable, and with a surety or sureties approved by him or her, to indemnify and save harmless the Corporation from any claim, loss, damage or liability which may be occasioned by the issuance of a new certificate in lieu thereof. Upon such bond being so filed, if so required, a new certificate for the same number of shares shall be issued to the owner of the certificate so lost or destroyed; and the transfer agent and registrar, if any, of stock shall countersign and register such new certificate upon receipt of a written order signed by any such officer, and thereupon the Corporation will save harmless said transfer agent and registrar in the premises. In case of the surrender of the original certificate, in lieu of which a new certificate has been issued, or the surrender of such new certificate, for cancellation, the bond of indemnity given as a condition of the issue of such new certificate may be surrendered; or b. The Board of Directors of the Corporation may by resolution authorize and direct any transfer agent or registrar of stock of the Corporation to issue and register respectively from time to time without further action or approval by or on behalf of the Corporation new certificates of stock to replace certificates reported lost, stolen or destroyed upon receipt of an affidavit of loss and bond of indemnity in form and amount and with surety satisfactory to such transfer By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 17 agent or registrar in each instance or upon such terms and conditions as the Board of Directors may determine. SECTION 6. Uncertificated Shares. The Board of Directors of the Corporation may by resolution provide that one or more of any or all classes or series of the stock of the Corporation shall be uncertificated shares, subject to the provisions of Section 158 of the Delaware General Corporation Law. ARTICLE VIII EXECUTION OF DOCUMENTS ------------------------------------- SECTION 1. Execution of Checks, Notes, etc. All checks and drafts on the Corporation's bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, shall be signed by such officer or officers, or agent or agents, as shall be thereunto authorized from time to time by the Board of Directors, which may in its discretion authorize any such signatures to be facsimile. SECTION 2. Execution of Contracts, Assignments, etc. Unless the Board of Directors shall have otherwise provided generally or in a specific instance, all contracts, agreements, endorsements, assignments, transfers, stock powers, or other instruments shall be signed by the President, any Executive Vice President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer. The Board of Directors may, however, in its discretion, require any or all such instruments to be signed by any two or more of such officers, or may permit any or all of such instruments to be signed by such other officer or officers, agent or agents, as it shall be thereunto authorize from time to time. SECTION 3. Execution of Proxies. The President, any Executive Vice President or any Vice President, and the Secretary, the Treasurer, any Assistant Secretary or any Assistant Treasurer, or any other officer designated by the Board of Directors, may sign on behalf of the Corporation proxies to vote upon shares of stock of other companies standing in the name of the Corporation. ARTICLE IX INSPECTION OF BOOKS -------------------------------- The Board of Directors shall determine from time to time whether, and if allowed, to what extent and at what time and places and under what conditions and regulations, the accounts and books of the Corporation (except such as may by law be specifically open to inspection) or any of them, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any account or book or document of the By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 18 Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation. ARTICLE X FISCAL YEAR ----------------------- The fiscal year of the Corporation shall be determined from time to time by vote of the Board of Directors. By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 19 ARTICLE XI AMENDMENTS ----------------------- These By-Laws may be altered, amended, changed or repealed and new By-Laws adopted by the stockholders or, to the extent provided in the Certificate of Incorporation, by the Board of Directors, in either case at any meeting called for that purpose at which a quorum shall be present. Any by-law, whether made, altered, amended, changed or repealed by the stockholders or the Board of Directors may be repealed, amended, changed, further amended, changed, repealed or reinstated, as the case may be, either by the stockholders or by the Board of Directors, as herein provided; except that this Article may be altered, amended, changed or repealed only by vote of the stockholders. ARTICLE XII INDEMNIFICATION ----------------------------- SECTION 1. Indemnification. a. Action By Third Party. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is a party or is threatened to be made a party or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he, or a person for whom he or she is the legal representative, is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity against all liability, losses, expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 20 action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. b. Action By Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, trustee, partner, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper. c. To the extent that any person referred to in paragraphs a. or b. above has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to therein, or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith. SECTION 2. Authorization. Any indemnification under Section 1 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, partner, member, trustee, employee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 1 of this Article. Such determination shall be made: a. by the Board of Directors by a majority vote of a quorum consisting of directors who were not By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 21 parties to such action, suit or proceeding, or b. if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in written opinion, or c. by the stockholders. SECTION 3. Expense Advance. Expenses (including attorneys' fees) incurred by an officer or director of the Corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the manner provided in Section 2 of this Article upon receipt of an undertaking by or on behalf of such officer or director to repay such amount, unless it shall ultimately be determined that such person is entitled to be indemnified by the Corporation as authorized in this Article. Such expenses (including attorneys' fees) incurred by other employees or agents of the Corporation may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. SECTION 4. Nonexclusivity. The indemnification and advancement of expenses provided by, or granted pursuant to, the other Sections of this Article shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, partner, member, trustee, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 5. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity against any liability asserted against and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article or Section 145 of Title 8 of the Delaware Code relating to the General Corporation Law of the State of Delaware. SECTION 6. "The Corporation". For the purposes of this Article, references to "the Corporation" shall include the resulting corporation and, to the extent that the Board of Directors of the resulting corporation so decides, all constituent corporations (including any constituent of a By-laws of Iron Mountain Records Managment of Maryland, Inc. A Delaware Corporation Page 22 constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents so that any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or non-profit entity shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation if its separate existence had continued. SECTION 7. Other Indemnification. The Corporation's obligation, if any, to indemnify any person who was or is serving at its request as a director, trustee, partner, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust or other enterprise or non-profit entity or from insurance. SECTION 8. Other Definitions. For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, trustee, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, trustee, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article. SECTION 9. Continuation of Indemnification. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, trustee, partner, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 10. Amendment or Repeal. Neither the amendment nor repeal of this Article nor the adoption of any provision of these By-Laws inconsistent with this Article shall reduce, eliminate or adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the effectiveness of such amendment, repeal or adoption. EX-3.2J 9 BY-LAWS BY - LAWS of IRON MOUNTAIN RECORDS MANAGEMENT OF OHIO, INC. (a Delaware Corporation) IRON MOUNTAIN RECORDS MANAGEMENT OF OHIO, INC. (a Delaware Corporation) BY-LAWS TABLE OF CONTENTS ARTICLE I OFFICES...........................................................1 SECTION 1. Registered Office.....................................1 ARTICLE II SEAL.............................................................1 ARTICLE III MEETING OF STOCKHOLDERS.........................................1 SECTION 1. Place of Meeting......................................1 SECTION 3. Special Meetings......................................1 SECTION 4. Notice................................................2 SECTION 5. Quorum and Adjournments...............................2 SECTION 6. Votes; Proxies........................................3 SECTION 7. Organization..........................................4 SECTION 8. Consent of Stockholders in Lieu of Meeting............4 ARTICLE IV DIRECTORS........................................................5 SECTION 1. Number................................................5 SECTION 2. Term of Office........................................5 SECTION 3. Vacancies.............................................5 SECTION 4. Removal by Stockholders...............................6 SECTION 5. Meetings..............................................6 SECTION 6. Votes.................................................6 SECTION 7. Quorum and Adjournment................................7 SECTION 8. Compensation..........................................7 SECTION 9. Action By Consent of Directors........................7 ARTICLE V COMMITTEES OF DIRECTORS...........................................7 SECTION 1. Executive Committee...................................7 SECTION 2. Audit Committee.......................................8 SECTION 3. Other Committees......................................9 SECTION 4. Term of Office.......................................10 ARTICLE VI OFFICERS........................................................10 SECTION 1. Officers.............................................10 SECTION 2. Vacancies............................................11 SECTION 3. Chairman of the Board................................11 SECTION 4. President............................................11 SECTION 5. Executive Vice Presidents and Vice Presidents .....................................................11 SECTION 6. Secretary............................................11 SECTION 7. Assistant Secretaries................................11 SECTION 8. Treasurer............................................12 SECTION 9. Assistant Treasurers.................................12 SECTION 10. Controller...........................................12 SECTION 11. Assistant Controllers................................12 SECTION 12. Subordinate Officers.................................13 SECTION 13. Compensation.........................................13 SECTION 14. Removal..............................................13 SECTION 15. Bonds................................................13 ARTICLE VII CERTIFICATES OF STOCK..........................................13 SECTION 1. Form and Execution of Certificates...................13 SECTION 2. Transfer of Shares...................................14 SECTION 3. Closing of Transfer Books............................15 SECTION 4. Fixing Date for Determination of Stockholders of Record............................................15 SECTION 5. Lost or Destroyed Certificates.......................16 SECTION 6. Uncertificated Shares................................17 ARTICLE VIII EXECUTION OF DOCUMENTS........................................17 SECTION 1. Execution of Checks, Notes, etc......................17 SECTION 2. Execution of Contracts, Assignments, etc.............17 SECTION 3. Execution of Proxies.................................17 ARTICLE IX INSPECTION OF BOOKS.............................................17 ARTICLE X FISCAL YEAR......................................................18 ARTICLE XI AMENDMENTS......................................................18 ARTICLE XII INDEMNIFICATION................................................18 SECTION 1. Indemnification......................................18 SECTION 2. Authorization........................................20 SECTION 3. Expense Advance......................................21 SECTION 4. Nonexclusivity.......................................21 SECTION 5. Insurance............................................21 SECTION 6. "The Corporation"....................................21 SECTION 7. Other Indemnification................................22 SECTION 8. Other Definitions....................................22 SECTION 9. Continuation of Indemnification......................22 SECTION 10. Amendment or Repeal..................................22 IRON MOUNTAIN RECORDS MANAGEMENT OF OHIO, INC. (a Delaware Corporation) BY-LAWS ARTICLE I OFFICES ------------------- SECTION 1. Registered Office. The registered office of the Corporation shall be located in Wilmington, County of New Castle, State of Delaware, and the name of the resident agent in charge thereof shall be Corporation Service Company. SECTION 2. Other Offices. The Corporation may also have offices at such other places, within or without the State of Delaware, as the Board of Directors may from time to time appoint or the business of the Corporation may require. ARTICLE II SEAL ----------------- The seal of the Corporation shall, subject to alteration by the Board of Directors, consist of a flat-faced circular die with the word "Delaware", together with the name of the Corporation and the year of incorporation, cut or engraved thereon. ARTICLE III MEETING OF STOCKHOLDERS ------------------------------------- SECTION 1. Place of Meeting. Meetings of the stockholders shall be held either within or without the State of Delaware at such place as the Board of Directors may fix from time to time. SECTION 2. Annual Meetings. The annual meeting of stockholders shall be held for the election of directors on such date and at such time as the Board of Directors may fix from time to time. Any other proper business may be transacted at the annual meeting. SECTION 3. Special Meetings. Special meetings of the stockholders for any purpose or purposes may be called by the Chairman of the Board of Directors, if there be one, the President or by the directors (either by written instrument signed by a majority or by resolution adopted by a vote of the majority), and special meetings shall be called by the President or the Secretary whenever stockholders owning at least a majority of the capital stock issued, outstanding and entitled to vote so By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 2 request in writing. Such request of stockholders shall state the purpose or purposes of the proposed meeting. SECTION 4. Notice. Written or printed notice of every meeting of stockholders, annual or special, stating the hour, date and place thereof, and the purpose or purposes in general terms for which the meeting is called shall, not less than ten (10) days, or such longer period as shall be provided by law, the Certificate of Incorporation, these By-Laws, or otherwise, and not more than sixty (60) days before such meeting, be served upon or mailed to each stockholder entitled to vote thereat, at the address of such stockholder as it appears upon the stock records of the Corporation or, if such stockholder shall have filed with the Secretary of the Corporation a written request that notices be mailed to some other address, then to the address designated in such request. Notice of the hour, date, place and purpose of any meeting of stockholders may be dispensed with if every stockholder entitled to vote thereat shall attend either in person or by proxy and shall not, at the beginning of the meeting, object to the holding of such meeting because the meeting has not been lawfully called or convened, or if every absent stockholder entitled to such notice shall in writing, filed with the records of the meeting, either before or after the holding thereof, waive such notice. SECTION 5. Quorum and Adjournments. Except as otherwise provided by law or by the Certificate of Incorporation, the presence in person or by proxy at any meeting of stockholders of the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote thereat, shall be requisite and shall constitute a quorum. If two or more classes of stock are entitled to vote as separate classes upon any question, then, in the case of each such class, a quorum for the consideration of such question shall, except as otherwise provided by law or by the Certificate of Incorporation, consist of *** of all stock of that class issued, outstanding and entitled to vote. If a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote thereat or, where a larger quorum is required, such quorum, shall not be represented at any meeting of the stockholders regularly called, the holders of *** of the shares present or represented by proxy and entitled to vote thereat shall have power to adjourn the meeting to another time, or to another time and place, without notice other than announcement of adjournment at the meeting, and there may be successive adjournments for like cause and in like manner until the requisite amount of shares entitled to vote at such meeting shall be represented; provided, however, that if the adjournment is for more than thirty (30) days, notice of the hour, date and place of the adjourned meeting shall be given to each stockholder entitled to vote thereat. Subject to the requirements of law and the Certificate of Incorporation, on By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 3 any issue on which two or more classes of stock are entitled to vote separately, no adjournment shall be taken with respect to any class for which a quorum is present unless the Chairman of the meeting otherwise directs. At any meeting held to consider matters which were subject to adjournment for want of a quorum at which the requisite amount of shares entitled to vote thereat shall be represented, any business may be transated which might have been transacted at the meeting as originally noticed. SECTION 6. Votes; Proxies. Except as otherwise provided in the Certificate of Incorporation, at each meeting of stockholders, every stockholder of record at the closing of the transfer books, if closed, or on the date set by the Board of Directors for the determination of stockholders entitled to vote at such meeting, shall have one vote for each share of stock entitled to vote which is registered in such stockholder's name on the books of the Corporation, and, in the election of directors, may vote cumulatively to the extent, if any, and in the manner authorized in the Certificate of Incorporation. At each such meeting every stockholder entitled to vote shall be entitled to do so in person, or by proxy appointed by an instrument in writing or as otherwise permitted by law subscribed by such stockholder and bearing a date not more than three (3) years prior to the meeting in question, unless said instrument provides for a longer period during which it is to remain in force. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or any interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing with the Secretary of the Corporation an instrument in writing or as otherwise permitted by law revoking the proxy or another duly executed proxy bearing a later date. Voting at meetings of stockholders need not be by written ballot and, except as otherwise provided by law, need not be conducted by inspectors of election unless so determined by the Chairman of the meeting or by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or represented by proxy at such meeting. If it is required or determined that inspectors of election be appointed, the Chairman shall appoint two inspectors of election, who shall first take and subscribe an oath or affirmation faithfully to execute the duties of inspectors at such meeting with strict impartiality and according to the best of their ability. The inspectors so appointed shall take charge of the polls and, after the balloting, shall make a certificate of the By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 4 result of the vote taken. No director or candidate for the office of director shall be appointed as such inspector. At any meeting at which a quorum is present, a plurality of the votes properly cast for election to fill any vacancy on the Board of Directors shall be sufficient to elect a candidate to fill such vacancy, and a majority of the votes properly cast upon any other question shall decide the question, except in any case where a larger vote is required by law, the Certificate of Incorporation, these By-Laws, or otherwise. SECTION 7. Organization. The Chairman of the Board, if there be one, or in his or her absence the Vice Chairman, or in the absence of a Vice Chairman, the President, or in the absence of the President, a Vice President, shall call meetings of the stockholders to order and shall act as chairman thereof. The Secretary of the Corporation, if present, shall act as secretary of all meetings of stockholders, and, in his or her absence, the presiding officer may appoint a secretary. SECTION 8. Consent of Stockholders in Lieu of Meeting. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted by the Delaware General Corporation Law to be taken at any annual or special meeting of the stockholders of the Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered in the manner required by this section to the Corporation, written consents signed by a sufficient number of stockholders to take action are delivered to the corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 5 Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. In the event that the action which is consented to is such as would have required the filing of a certificate under any section of the Delaware General Corporation Law other than Section 228 thereof, if such action had been voted on by stockholders at a meeting thereof, the certificate filed under such other section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the Delaware General Corporation Law, and that written notice has been given as provided in such Section 228. ARTICLE IV DIRECTORS --------------------- SECTION 1. Number. The business and affairs of the Corporation shall be conducted and managed by a Board of Directors consisting of not less than one director, none of whom needs to be a stockholder. The number of directors for each year shall be fixed at each annual meeting of stockholders, but if the number is not so fixed, the number shall remain as it stood immediately prior to such meeting. At each annual meeting of stockholders, the stockholders shall elect directors. Each director so elected shall hold office, subject to the provisions of law, the Certificate of Incorporation, these By-Laws, or otherwise, until the next annual meeting of stockholders or until his or her successor is elected and qualified. At any time during any year, except as otherwise provided by law, the Certificate of Incorporation, these By-Laws, or otherwise, the number of directors may be increased or reduced, in each case by vote of a majority of the stock issued and outstanding and present in person or represented by proxy and entitled to vote for the election of directors or a majority of the directors in office at the time of such increase or decrease, regardless of whether such majority constitutes a quorum. SECTION 2. Term of Office. Each director shall hold office until the next annual meeting of stockholders and until his or her successor is duly elected and qualified or until his or her earlier death or resignation, subject to the right of the stockholders at any time to remove any director or directors as provided in Section 4 of this Article. SECTION 3. Vacancies. If any vacancy shall occur among the directors, or if the number of directors shall at any time be increased, the directors then in office, although less than a quorum, by a majority vote may fill the vacancies or newly- By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 6 created directorships, or any such vacancies or newly-created directorships may be filled by the stockholders at any meeting. SECTION 4. Removal by Stockholders. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, the holders of record of the capital stock of the Corporation entitled to vote for the election of directors may, by a majority vote, remove any director or directors, with or without cause, and, in their discretion, elect a new director or directors in place thereof. SECTION 5. Meetings. Meetings of the Board of Directors shall be held at such place, within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors or by the Chairman of the Board, if there be one, or by the President, and as may be specified in the notice or waiver of notice of any meeting. Meetings may be held at any time upon the call of the Chairman of the Board, if there be one, or the President or any two (2) of the directors in office by oral, telegraphic, telex, telecopy or other form of electronic transmission, or written notice, duly served or sent or mailed to each director not less than twenty-four (24) hours before such meeting, except that, if mailed, not less than *** (***) hours before such meeting. Meetings may be held at any time and place without notice if all the directors are present and do not object to the holding of such meeting for lack of proper notice or if those not present shall, in writing or by telegram, telex, telecopy or other form of electronic transmission, waive notice thereof. A regular meeting of the Board may be held without notice immediately following the annual meeting of stockholders at the place where such meeting is held. Regular meetings of the Board may also be held without notice at such time and place as shall from time to time be determined by resolution of the Board. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors or any committee thereof need be specified in any written waiver of notice. Members of the Board of Directors or any committee thereof may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting pursuant to the foregoing provisions shall constitute presence in person at the meeting. SECTION 6. Votes. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, the vote of the By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 7 majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 7. Quorum and Adjournment. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, a majority of the directors shall constitute a quorum for the transaction of business. If at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time without notice other than announcement of the adjournment at the meeting, and at such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally noticed. SECTION 8. Compensation. Directors shall receive compensation for their services, as such, and for service on any Committee of the Board of Directors, as fixed by resolution of the Board of Directors and for expenses of attendance at each regular or special meeting of the Board or any Committee thereof. Nothing in this Section shall be construed to preclude a director from serving the Corporation in any other capacity and receiving compensation therefor. SECTION 9. Action By Consent of Directors. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Such consent shall be treated as a vote adopted at a meeting for all purposes. Such consents may be executed in one or more counterparts and not every Director or committee member need sign the same counterpart. ARTICLE V COMMITTEES OF DIRECTORS ----------------------------------- SECTION 1. Executive Committee. The Board of Directors may, by resolution passed by a majority of the whole Board, appoint an Executive Committee of one (1) or more members, to serve during the pleasure of the Board, to consist of such directors as the Board may from time to time designate. The Board of Directors shall designate the Chairman of the Executive Committee. a. Procedure. The Executive Committee shall, by a vote of a majority of its members, fix its own times and places of meeting, determine the number of its members constituting a quorum for the transaction of business, and prescribe its own rules of procedure, no change in which shall be made save by a majority vote of its members. By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 8 b. Responsibilities. During the intervals between the meetings of the Board of Directors, except as otherwise provided by the Board of Directors in establishing such Committee or otherwise, the Executive Committee shall possess and may exercise all the powers of the Board in the management and direction of the business and affairs of the Corporation; provided, however, that the Executive Committee shall not, except to the extent the Certificate of Incorporation or the resolution providing for the issuance of shares of stock adopted by the Board of Directors as provided in Section 151(a) of the Delaware General Business Corporation Law, have the power: (1) to amend or authorize the amendment of the Certificate of Incorporation or these By-Laws; (2) to authorize the issuance of stock; (3) to authorize the payment of any dividend; (4) to adopt an agreement of merger or consolidation of the Corporation or to recommend to the stockholders the sale, lease or exchange of all or substantially all the property and business of the Corporation; (5) to recommend to the stockholders a dissolution, or a revocation of a dissolution, of the Corporation; or (6) to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware Business Corporation Law. c. Reports. The Executive Committee shall keep regular minutes of its proceedings, and all action by the Executive Committee shall be reported promptly to the Board of Directors. Such action shall be subject to review, amendment and repeal by the Board, provided that no rights of third parties shall be adversely affected by such review, amendment or repeal. d. Appointment of Additional Members. In the absence or disqualification of any member of the Executive Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. SECTION 2. Audit Committee. The Board of Directors may, by resolution passed by a majority of the whole Board, appoint an Audit Committee of *** (***) or more members to serve during the By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 9 pleasure of the Board. The Board of Directors shall designate the Chairman of the Audit Committee. a. Procedure. The Audit Committee, by a vote of a majority of its members, shall fix its own times and places of meeting, shall determine the number of its members constituting a quorum for the transaction of business, and shall prescribe its own rules of procedure, no change in which shall be made save by a majority vote of its members. b. Responsibilities. The Audit Committee shall review the annual financial statements of the Corporation prior to their submission to the Board of Directors, shall consult with the Corporation's independent auditors, and may examine and consider such other matters in relation to the internal and external audit of the Corporation's accounts and in relation to the financial affairs of the Corporation and its accounts, including the selection and retention of independent auditors, as the Audit Committee may, in its discretion, determine to be desirable. c. Reports. The Audit Committee shall keep regular minutes of its proceedings, and all action by the Audit Committee shall, from time to time, be reported to the Board of Directors as it shall direct. Such action shall be subject to review, amendment and repeal by the Board, provided that no rights of third parties shall be adversely affected by such review, amendment or repeal. d. Appointment of Additional Members. In the absence or disqualification of any member of the Audit Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. SECTION 3. Other Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, at any time appoint one or more other committees from and outside of its own number. Every such committee must include at least one member of the Board of Directors. The Board may from time to time designate or alter, within the limits permitted by law, the Certificate of Incorporation and this Article, if applicable, the duties, powers and number of members of such other committees or change their membership, and may at any time abolish such other committees or any of them. a. Procedure. Each committee, appointed pursuant to this Section, shall, by a vote of a majority of its members, By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 10 fix its own times and places of meeting, determine the number of its members constituting a quorum for the transaction of business, and prescribe its own rules of procedure, no change in which shall be made save by a majority vote of its members. b. Responsibilities. Each committee, appointed pursuant to this Section, shall exercise the powers assigned to it by the Board of Directors in its discretion. c. Reports. Each committee appointed pursuant to this Section shall keep regular minutes of proceedings, and all action by each such committee shall, from time to time, be reported to the Board of Directors as it shall direct. Such action shall be subject to review, amendment and repeal by the Board, provided that no rights of third parties shall be adversely affected by such review, amendment or repeal. d. Appointment of Additional Members. In the absence or disqualification of any member of each committee, appointed pursuant to this Section, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors (or, to the extent permitted, another person) to act at the meeting in place of any such absent or disqualified member. SECTION 4. Term of Office. Each member of a committee shall hold office until the first meeting of the Board of Directors following the annual meeting of stockholders (or until such other time as the Board of Directors may determine, either in the vote establishing the committee or at the election of such member or otherwise) and until his or her successor is elected and qualified, or until he or she sooner dies, resigns, is removed, is replaced by change of membership or becomes disqualified by ceasing to be a director (where membership on the Board is required), or until the committee is sooner abolished by the Board of Directors. ARTICLE VI OFFICERS --------------------- SECTION 1. Officers. The Board of Directors shall elect a President, a Secretary and a Treasurer, and, in their discretion, may elect a Chairman of the Board, a Vice Chairman of the Board, a Controller, and one or more Executive Vice Presidents, Vice Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controllers as deemed necessary or appropriate. Such officers shall be elected annually by the Board of Directors at its first meeting following the annual By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 10 meeting of stockholders (or at such other meeting as the Board of Directors determines), and each shall hold office for the term provided by the vote of the Board, except that each will be subject to removal from office in the discretion of the Board as provided herein. The powers and duties of more than one office may be exercised and performed by the same person. SECTION 2. Vacancies. Any vacancy in any office may be filled for the unexpired portion of the term by the Board of Directors, at any regular or special meeting. SECTION 3. Chairman of the Board. The Chairman of the Board of Directors, if elected, shall be a member of the Board of Directors and shall preside at its meetings. The Chairman, if other than the President, shall advise and counsel with the President, and shall perform such duties as from time to time may be assigned to him or her by the Board of Directors. SECTION 4. President. The President shall be the chief executive officer of the Corporation. Subject to the directions of the Board of Directors, the President shall have and exercise direct charge of and general supervision over the business and affairs of the Corporation and shall perform all duties incident to the office of the chief executive officer of a corporation and such other duties as from time to time may be assigned to him or her by the Board of Directors. The President may but need not be a member of the Board of Directors. SECTION 5. Executive Vice Presidents and Vice Presidents. Each Executive Vice President and Vice President shall have and exercise such powers and shall perform such duties as from time to time may be assigned to him or to her by the Board of Directors or the President. SECTION 6. Secretary. The Secretary shall keep the minutes of all meetings of the stockholders and of the Board of Directors in books provided for the purpose; shall see that all notices are duly given in accordance with the provisions of law and these By-Laws; the Secretary shall be custodian of the records and of the corporate seal or seals of the Corporation; shall see that the corporate seal is affixed to all documents the execution of which, on behalf of the Corporation under its seal, is duly authorized, and, when the seal is so affixed, he or she may attest the same; the Secretary may sign, with the President, an Executive Vice President or a Vice President, certificates of stock of the Corporation; and, in general, the Secretary shall perform all duties incident to the office of secretary of a corporation, and such other duties as from time to time may be assigned to him or her by the Board of Directors. SECTION 7. Assistant Secretaries. The Assistant Secretaries in order of their seniority shall, in the absence or By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 12 disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Secretary. SECTION 8. Treasurer. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation, and shall deposit, or cause to be deposited, in the name of the Corporation, all monies or other valuable effects in such banks, trust companies or other depositaries as shall, from time to time, be selected by the Board of Directors; may endorse for collection on behalf of the Corporation checks, notes and other obligations; may sign receipts and vouchers for payments made to the Corporation; may sign checks of the Corporation, singly or jointly with another person as the Board of Directors may authorize, and pay out and dispose of the proceeds under the direction of the Board; the Treasurer shall render to the President and to the Board of Directors, whenever requested, an account of the financial condition of the Corporation; the Treasurer may sign, with the President, or an Executive Vice President or a Vice President, certificates of stock of the Corporation; and in general, shall perform all the duties incident to the office of treasurer of a corporation, and such other duties as from time to time may be assigned by the Board of Directors. Unless the Board of Directors shall otherwise determine, the Treasurer shall be the chief financial officer of the Corporation. SECTION 9. Assistant Treasurers. The Assistant Treasurers in order of their seniority shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Treasurer. SECTION 10. Controller. The Controller, if elected, shall be the chief accounting officer of the Corporation and shall perform all duties incident to the office of a controller of a corporation, and, in the absence of or disability of the Treasurer or any Assistant Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the President or the Treasurer. SECTION 11. Assistant Controllers. The Assistant Controllers in order of their seniority shall, in the absence or disability of the Controller, perform the duties and exercise the powers of the Controller and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Controller. By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 13 SECTION 12. Subordinate Officers. The Board of Directors may appoint such subordinate officers as it may deem desirable. Each such officer shall hold office for such period, have such authority and perform such duties as the Board of Directors may prescribe. The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers and to prescribe the powers and duties thereof. SECTION 13. Compensation. The Board of Directors shall fix the compensation of all officers of the Corporation. It may authorize any officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers. SECTION 14. Removal. Any officer of the Corporation may be removed, with or without cause, by action of the Board of Directors. SECTION 15. Bonds. The Board of Directors may require any officer of the Corporation to give a bond to the Corporation, conditional upon the faithful performance of his or her duties, with one or more sureties and in such amount as may be satisfactory to the Board of Directors. ARTICLE VII CERTIFICATES OF STOCK ----------------------------------- SECTION 1. Form and Execution of Certificates. The interest of each stockholder of the Corporation shall be evidenced by a certificate or certificates for shares of stock in such form as the Board of Directors may from time to time prescribe. The certificates of stock of each class shall be consecutively numbered and signed by the Chairman or Vice Chairman of the Board, if any, the President, an Executive Vice President or a Vice President and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of the Corporation, and may be countersigned and registered in such manner as the Board of Directors may by resolution prescribe, and shall bear the corporate seal or a printed or engraved facsimile thereof. Where any such certificate is signed by a transfer agent or transfer clerk acting on behalf of the Corporation, the signatures of any such Chairman, Vice Chairman, President, Executive Vice President, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be facsimiles, engraved or printed. In case any officer or officers, who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates, shall cease to be such officer or officers, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered by the Corporation as though the person or persons who signed such By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 14 certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers. 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. Every certificate for shares of stock which are subject to any restriction on transfer pursuant to law, the Certificate of Incorporation, these By-Laws, or any agreement to which the Corporation is a party, shall have the restriction noted conspicuously on the certificate, and shall also set forth, on the face or back, either the full text of the restriction or a statement of the existence of such restriction and (except if such restriction is imposed by law) a statement that the Corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. Every certificate issued when the Corporation is authorized to issue more than one class or series of stock shall set forth on its face or back either the full text of the preferences, voting powers, qualifications, and special and relative rights of the shares of each class and series authorized to be issued, or a statement of the existence of such preferences, powers, qualifications and rights, and a statement that the Corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. SECTION 2. Transfer of Shares. The shares of the stock of the Corporation shall be transferred on the books of the Corporation by the holder thereof in person or by his or her attorney lawfully constituted, upon surrender for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof or guaranty of the authenticity of the signature as the Corporation or its agents may reasonably require. 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 provided by law or by the Certificate of Incorporation. It shall be the duty of each stockholder to notify the Corporation of his or her post office address. By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 14 SECTION 3. 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 may determine, preceding the date of any meeting of stockholders 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 4. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of directors and which record date: (a) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, the Certificate of Incorporation or otherwise, not be more than sixty (60) nor less than ten (10) days before the date of such meeting; (b) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall, unless otherwise required by law, the Certificate of Incorporation or otherwise, not be more than ten (10) days from the date upon which the resolution fixing the record date is adopted by the Board of Directors; and (c) in the case of any other action, shall not be more than sixty (60) days prior to such other action. If no record date is fixed: (a) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders 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 next preceding the day on which the meeting is held; (b) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action take or proposed to be taken is delivered to the Corporation in accordance with applicable law, or, if prior action by the Board of Directors is required by law, shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action; and (c) the record date for determining stockholders 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. A determination of stockholders of By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 16 record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5. Lost or Destroyed Certificates. In case of the loss or destruction of any certificate of stock, a new certificate may be issued under the following conditions: a. The owner of said certificate shall file with the Secretary or any Assistant Secretary of the Corporation an affidavit giving the facts in relation to the ownership, and in relation to the loss or destruction of said certificate, stating its number and the number of shares represented thereby; such affidavit shall be in such form and contain such statements as shall satisfy the President, any Executive Vice President, Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer, that said certificate has been accidentally destroyed or lost, and that a new certificate ought to be issued in lieu thereof. Upon being so satisfied, any such officer may require such owner to furnish the Corporation a bond in such penal sum and in such form as he or she may deem advisable, and with a surety or sureties approved by him or her, to indemnify and save harmless the Corporation from any claim, loss, damage or liability which may be occasioned by the issuance of a new certificate in lieu thereof. Upon such bond being so filed, if so required, a new certificate for the same number of shares shall be issued to the owner of the certificate so lost or destroyed; and the transfer agent and registrar, if any, of stock shall countersign and register such new certificate upon receipt of a written order signed by any such officer, and thereupon the Corporation will save harmless said transfer agent and registrar in the premises. In case of the surrender of the original certificate, in lieu of which a new certificate has been issued, or the surrender of such new certificate, for cancellation, the bond of indemnity given as a condition of the issue of such new certificate may be surrendered; or b. The Board of Directors of the Corporation may by resolution authorize and direct any transfer agent or registrar of stock of the Corporation to issue and register respectively from time to time without further action or approval by or on behalf of the Corporation new certificates of stock to replace certificates reported lost, stolen or destroyed upon receipt of an affidavit of loss and bond of indemnity in form and amount and with surety satisfactory to such transfer By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 17 agent or registrar in each instance or upon such terms and conditions as the Board of Directors may determine. SECTION 6. Uncertificated Shares. The Board of Directors of the Corporation may by resolution provide that one or more of any or all classes or series of the stock of the Corporation shall be uncertificated shares, subject to the provisions of Section 158 of the Delaware General Corporation Law. ARTICLE VIII EXECUTION OF DOCUMENTS ------------------------------------- SECTION 1. Execution of Checks, Notes, etc. All checks and drafts on the Corporation's bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, shall be signed by such officer or officers, or agent or agents, as shall be thereunto authorized from time to time by the Board of Directors, which may in its discretion authorize any such signatures to be facsimile. SECTION 2. Execution of Contracts, Assignments, etc. Unless the Board of Directors shall have otherwise provided generally or in a specific instance, all contracts, agreements, endorsements, assignments, transfers, stock powers, or other instruments shall be signed by the President, any Executive Vice President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer. The Board of Directors may, however, in its discretion, require any or all such instruments to be signed by any two or more of such officers, or may permit any or all of such instruments to be signed by such other officer or officers, agent or agents, as it shall be thereunto authorize from time to time. SECTION 3. Execution of Proxies. The President, any Executive Vice President or any Vice President, and the Secretary, the Treasurer, any Assistant Secretary or any Assistant Treasurer, or any other officer designated by the Board of Directors, may sign on behalf of the Corporation proxies to vote upon shares of stock of other companies standing in the name of the Corporation. ARTICLE IX INSPECTION OF BOOKS -------------------------------- The Board of Directors shall determine from time to time whether, and if allowed, to what extent and at what time and places and under what conditions and regulations, the accounts and books of the Corporation (except such as may by law be specifically open to inspection) or any of them, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any account or book or document of the By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 18 Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation. ARTICLE X FISCAL YEAR ----------------------- The fiscal year of the Corporation shall be determined from time to time by vote of the Board of Directors. By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 19 ARTICLE XI AMENDMENTS ----------------------- These By-Laws may be altered, amended, changed or repealed and new By-Laws adopted by the stockholders or, to the extent provided in the Certificate of Incorporation, by the Board of Directors, in either case at any meeting called for that purpose at which a quorum shall be present. Any by-law, whether made, altered, amended, changed or repealed by the stockholders or the Board of Directors may be repealed, amended, changed, further amended, changed, repealed or reinstated, as the case may be, either by the stockholders or by the Board of Directors, as herein provided; except that this Article may be altered, amended, changed or repealed only by vote of the stockholders. ARTICLE XII INDEMNIFICATION ----------------------------- SECTION 1. Indemnification. a. Action By Third Party. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is a party or is threatened to be made a party or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he, or a person for whom he or she is the legal representative, is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity against all liability, losses, expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 20 action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. b. Action By Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, trustee, partner, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper. c. To the extent that any person referred to in paragraphs a. or b. above has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to therein, or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith. SECTION 2. Authorization. Any indemnification under Section 1 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, partner, member, trustee, employee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 1 of this Article. Such determination shall be made: a. by the Board of Directors by a majority vote of a quorum consisting of directors who were not By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 21 parties to such action, suit or proceeding, or b. if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in written opinion, or c. by the stockholders. SECTION 3. Expense Advance. Expenses (including attorneys' fees) incurred by an officer or director of the Corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the manner provided in Section 2 of this Article upon receipt of an undertaking by or on behalf of such officer or director to repay such amount, unless it shall ultimately be determined that such person is entitled to be indemnified by the Corporation as authorized in this Article. Such expenses (including attorneys' fees) incurred by other employees or agents of the Corporation may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. SECTION 4. Nonexclusivity. The indemnification and advancement of expenses provided by, or granted pursuant to, the other Sections of this Article shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, partner, member, trustee, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 5. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity against any liability asserted against and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article or Section 145 of Title 8 of the Delaware Code relating to the General Corporation Law of the State of Delaware. SECTION 6. "The Corporation". For the purposes of this Article, references to "the Corporation" shall include the resulting corporation and, to the extent that the Board of Directors of the resulting corporation so decides, all constituent corporations (including any constituent of a By-laws of Iron Mountain Records Managment of Ohio, Inc. A Delaware Corporation Page 22 constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents so that any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or non-profit entity shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation if its separate existence had continued. SECTION 7. Other Indemnification. The Corporation's obligation, if any, to indemnify any person who was or is serving at its request as a director, trustee, partner, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust or other enterprise or non-profit entity or from insurance. SECTION 8. Other Definitions. For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, trustee, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, trustee, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article. SECTION 9. Continuation of Indemnification. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, trustee, partner, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 10. Amendment or Repeal. Neither the amendment nor repeal of this Article nor the adoption of any provision of these By-Laws inconsistent with this Article shall reduce, eliminate or adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the effectiveness of such amendment, repeal or adoption. EX-3.2L 10 BY-LAWS BY - LAWS of DATA STORAGE SYSTEMS, INC. (a Delaware Corporation) DATA STORAGE SYSTEMS, INC. (a Delaware Corporation) BY-LAWS TABLE OF CONTENTS ARTICLE I OFFICES...........................................................1 SECTION 1. Registered Office.....................................1 ARTICLE II SEAL.............................................................1 ARTICLE III MEETING OF STOCKHOLDERS.........................................1 SECTION 1. Place of Meeting......................................1 SECTION 3. Special Meetings......................................1 SECTION 4. Notice................................................2 SECTION 5. Quorum and Adjournments...............................2 SECTION 6. Votes; Proxies........................................3 SECTION 7. Organization..........................................4 SECTION 8. Consent of Stockholders in Lieu of Meeting............4 ARTICLE IV DIRECTORS........................................................5 SECTION 1. Number................................................5 SECTION 2. Term of Office........................................5 SECTION 3. Vacancies.............................................5 SECTION 4. Removal by Stockholders...............................6 SECTION 5. Meetings..............................................6 SECTION 6. Votes.................................................6 SECTION 7. Quorum and Adjournment................................7 SECTION 8. Compensation..........................................7 SECTION 9. Action By Consent of Directors........................7 ARTICLE V COMMITTEES OF DIRECTORS...........................................7 SECTION 1. Executive Committee...................................7 SECTION 2. Audit Committee.......................................8 SECTION 3. Other Committees......................................9 SECTION 4. Term of Office.......................................10 ARTICLE VI OFFICERS........................................................10 SECTION 1. Officers.............................................10 SECTION 2. Vacancies............................................11 SECTION 3. Chairman of the Board................................11 SECTION 4. President............................................11 SECTION 5. Executive Vice Presidents and Vice Presidents .....................................................11 SECTION 6. Secretary............................................11 SECTION 7. Assistant Secretaries................................11 SECTION 8. Treasurer............................................12 SECTION 9. Assistant Treasurers.................................12 SECTION 10. Controller...........................................12 SECTION 11. Assistant Controllers................................12 SECTION 12. Subordinate Officers.................................13 SECTION 13. Compensation.........................................13 SECTION 14. Removal..............................................13 SECTION 15. Bonds................................................13 ARTICLE VII CERTIFICATES OF STOCK..........................................13 SECTION 1. Form and Execution of Certificates...................13 SECTION 2. Transfer of Shares...................................14 SECTION 3. Closing of Transfer Books............................15 SECTION 4. Fixing Date for Determination of Stockholders of Record............................................15 SECTION 5. Lost or Destroyed Certificates.......................16 SECTION 6. Uncertificated Shares................................17 ARTICLE VIII EXECUTION OF DOCUMENTS........................................17 SECTION 1. Execution of Checks, Notes, etc......................17 SECTION 2. Execution of Contracts, Assignments, etc.............17 SECTION 3. Execution of Proxies.................................17 ARTICLE IX INSPECTION OF BOOKS.............................................17 ARTICLE X FISCAL YEAR......................................................18 ARTICLE XI AMENDMENTS......................................................18 ARTICLE XII INDEMNIFICATION................................................18 SECTION 1. Indemnification......................................18 SECTION 2. Authorization........................................20 SECTION 3. Expense Advance......................................21 SECTION 4. Nonexclusivity.......................................21 SECTION 5. Insurance............................................21 SECTION 6. "The Corporation"....................................21 SECTION 7. Other Indemnification................................22 SECTION 8. Other Definitions....................................22 SECTION 9. Continuation of Indemnification......................22 SECTION 10. Amendment or Repeal..................................22 DATA STORAGE SYSTEMS, INC. (a Delaware Corporation) BY-LAWS ARTICLE I OFFICES ------------------- SECTION 1. Registered Office. The registered office of the Corporation shall be located in Wilmington, County of New Castle, State of Delaware, and the name of the resident agent in charge thereof shall be Corporation Service Company. SECTION 2. Other Offices. The Corporation may also have offices at such other places, within or without the State of Delaware, as the Board of Directors may from time to time appoint or the business of the Corporation may require. ARTICLE II SEAL ----------------- The seal of the Corporation shall, subject to alteration by the Board of Directors, consist of a flat-faced circular die with the word "Delaware", together with the name of the Corporation and the year of incorporation, cut or engraved thereon. ARTICLE III MEETING OF STOCKHOLDERS ------------------------------------- SECTION 1. Place of Meeting. Meetings of the stockholders shall be held either within or without the State of Delaware at such place as the Board of Directors may fix from time to time. SECTION 2. Annual Meetings. The annual meeting of stockholders shall be held for the election of directors on such date and at such time as the Board of Directors may fix from time to time. Any other proper business may be transacted at the annual meeting. SECTION 3. Special Meetings. Special meetings of the stockholders for any purpose or purposes may be called by the Chairman of the Board of Directors, if there be one, the President or by the directors (either by written instrument signed by a majority or by resolution adopted by a vote of the majority), and special meetings shall be called by the President or the Secretary whenever stockholders owning at least a majority of the capital stock issued, outstanding and entitled to vote so By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 2 request in writing. Such request of stockholders shall state the purpose or purposes of the proposed meeting. SECTION 4. Notice. Written or printed notice of every meeting of stockholders, annual or special, stating the hour, date and place thereof, and the purpose or purposes in general terms for which the meeting is called shall, not less than ten (10) days, or such longer period as shall be provided by law, the Certificate of Incorporation, these By-Laws, or otherwise, and not more than sixty (60) days before such meeting, be served upon or mailed to each stockholder entitled to vote thereat, at the address of such stockholder as it appears upon the stock records of the Corporation or, if such stockholder shall have filed with the Secretary of the Corporation a written request that notices be mailed to some other address, then to the address designated in such request. Notice of the hour, date, place and purpose of any meeting of stockholders may be dispensed with if every stockholder entitled to vote thereat shall attend either in person or by proxy and shall not, at the beginning of the meeting, object to the holding of such meeting because the meeting has not been lawfully called or convened, or if every absent stockholder entitled to such notice shall in writing, filed with the records of the meeting, either before or after the holding thereof, waive such notice. SECTION 5. Quorum and Adjournments. Except as otherwise provided by law or by the Certificate of Incorporation, the presence in person or by proxy at any meeting of stockholders of the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote thereat, shall be requisite and shall constitute a quorum. If two or more classes of stock are entitled to vote as separate classes upon any question, then, in the case of each such class, a quorum for the consideration of such question shall, except as otherwise provided by law or by the Certificate of Incorporation, consist of *** of all stock of that class issued, outstanding and entitled to vote. If a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote thereat or, where a larger quorum is required, such quorum, shall not be represented at any meeting of the stockholders regularly called, the holders of *** of the shares present or represented by proxy and entitled to vote thereat shall have power to adjourn the meeting to another time, or to another time and place, without notice other than announcement of adjournment at the meeting, and there may be successive adjournments for like cause and in like manner until the requisite amount of shares entitled to vote at such meeting shall be represented; provided, however, that if the adjournment is for more than thirty (30) days, notice of the hour, date and place of the adjourned meeting shall be given to each stockholder entitled to vote thereat. Subject to the requirements of law and the Certificate of Incorporation, on By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 3 any issue on which two or more classes of stock are entitled to vote separately, no adjournment shall be taken with respect to any class for which a quorum is present unless the Chairman of the meeting otherwise directs. At any meeting held to consider matters which were subject to adjournment for want of a quorum at which the requisite amount of shares entitled to vote thereat shall be represented, any business may be transated which might have been transacted at the meeting as originally noticed. SECTION 6. Votes; Proxies. Except as otherwise provided in the Certificate of Incorporation, at each meeting of stockholders, every stockholder of record at the closing of the transfer books, if closed, or on the date set by the Board of Directors for the determination of stockholders entitled to vote at such meeting, shall have one vote for each share of stock entitled to vote which is registered in such stockholder's name on the books of the Corporation, and, in the election of directors, may vote cumulatively to the extent, if any, and in the manner authorized in the Certificate of Incorporation. At each such meeting every stockholder entitled to vote shall be entitled to do so in person, or by proxy appointed by an instrument in writing or as otherwise permitted by law subscribed by such stockholder and bearing a date not more than three (3) years prior to the meeting in question, unless said instrument provides for a longer period during which it is to remain in force. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or any interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing with the Secretary of the Corporation an instrument in writing or as otherwise permitted by law revoking the proxy or another duly executed proxy bearing a later date. Voting at meetings of stockholders need not be by written ballot and, except as otherwise provided by law, need not be conducted by inspectors of election unless so determined by the Chairman of the meeting or by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or represented by proxy at such meeting. If it is required or determined that inspectors of election be appointed, the Chairman shall appoint two inspectors of election, who shall first take and subscribe an oath or affirmation faithfully to execute the duties of inspectors at such meeting with strict impartiality and according to the best of their ability. The inspectors so appointed shall take charge of the polls and, after the balloting, shall make a certificate of the By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 4 result of the vote taken. No director or candidate for the office of director shall be appointed as such inspector. At any meeting at which a quorum is present, a plurality of the votes properly cast for election to fill any vacancy on the Board of Directors shall be sufficient to elect a candidate to fill such vacancy, and a majority of the votes properly cast upon any other question shall decide the question, except in any case where a larger vote is required by law, the Certificate of Incorporation, these By-Laws, or otherwise. SECTION 7. Organization. The Chairman of the Board, if there be one, or in his or her absence the Vice Chairman, or in the absence of a Vice Chairman, the President, or in the absence of the President, a Vice President, shall call meetings of the stockholders to order and shall act as chairman thereof. The Secretary of the Corporation, if present, shall act as secretary of all meetings of stockholders, and, in his or her absence, the presiding officer may appoint a secretary. SECTION 8. Consent of Stockholders in Lieu of Meeting. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted by the Delaware General Corporation Law to be taken at any annual or special meeting of the stockholders of the Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered in the manner required by this section to the Corporation, written consents signed by a sufficient number of stockholders to take action are delivered to the corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 5 Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. In the event that the action which is consented to is such as would have required the filing of a certificate under any section of the Delaware General Corporation Law other than Section 228 thereof, if such action had been voted on by stockholders at a meeting thereof, the certificate filed under such other section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the Delaware General Corporation Law, and that written notice has been given as provided in such Section 228. ARTICLE IV DIRECTORS --------------------- SECTION 1. Number. The business and affairs of the Corporation shall be conducted and managed by a Board of Directors consisting of not less than one director, none of whom needs to be a stockholder. The number of directors for each year shall be fixed at each annual meeting of stockholders, but if the number is not so fixed, the number shall remain as it stood immediately prior to such meeting. At each annual meeting of stockholders, the stockholders shall elect directors. Each director so elected shall hold office, subject to the provisions of law, the Certificate of Incorporation, these By-Laws, or otherwise, until the next annual meeting of stockholders or until his or her successor is elected and qualified. At any time during any year, except as otherwise provided by law, the Certificate of Incorporation, these By-Laws, or otherwise, the number of directors may be increased or reduced, in each case by vote of a majority of the stock issued and outstanding and present in person or represented by proxy and entitled to vote for the election of directors or a majority of the directors in office at the time of such increase or decrease, regardless of whether such majority constitutes a quorum. SECTION 2. Term of Office. Each director shall hold office until the next annual meeting of stockholders and until his or her successor is duly elected and qualified or until his or her earlier death or resignation, subject to the right of the stockholders at any time to remove any director or directors as provided in Section 4 of this Article. SECTION 3. Vacancies. If any vacancy shall occur among the directors, or if the number of directors shall at any time be increased, the directors then in office, although less than a quorum, by a majority vote may fill the vacancies or newly- By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 6 created directorships, or any such vacancies or newly-created directorships may be filled by the stockholders at any meeting. SECTION 4. Removal by Stockholders. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, the holders of record of the capital stock of the Corporation entitled to vote for the election of directors may, by a majority vote, remove any director or directors, with or without cause, and, in their discretion, elect a new director or directors in place thereof. SECTION 5. Meetings. Meetings of the Board of Directors shall be held at such place, within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors or by the Chairman of the Board, if there be one, or by the President, and as may be specified in the notice or waiver of notice of any meeting. Meetings may be held at any time upon the call of the Chairman of the Board, if there be one, or the President or any two (2) of the directors in office by oral, telegraphic, telex, telecopy or other form of electronic transmission, or written notice, duly served or sent or mailed to each director not less than twenty-four (24) hours before such meeting, except that, if mailed, not less than *** (***) hours before such meeting. Meetings may be held at any time and place without notice if all the directors are present and do not object to the holding of such meeting for lack of proper notice or if those not present shall, in writing or by telegram, telex, telecopy or other form of electronic transmission, waive notice thereof. A regular meeting of the Board may be held without notice immediately following the annual meeting of stockholders at the place where such meeting is held. Regular meetings of the Board may also be held without notice at such time and place as shall from time to time be determined by resolution of the Board. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors or any committee thereof need be specified in any written waiver of notice. Members of the Board of Directors or any committee thereof may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting pursuant to the foregoing provisions shall constitute presence in person at the meeting. SECTION 6. Votes. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, the vote of the By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 7 majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 7. Quorum and Adjournment. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, a majority of the directors shall constitute a quorum for the transaction of business. If at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time without notice other than announcement of the adjournment at the meeting, and at such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally noticed. SECTION 8. Compensation. Directors shall receive compensation for their services, as such, and for service on any Committee of the Board of Directors, as fixed by resolution of the Board of Directors and for expenses of attendance at each regular or special meeting of the Board or any Committee thereof. Nothing in this Section shall be construed to preclude a director from serving the Corporation in any other capacity and receiving compensation therefor. SECTION 9. Action By Consent of Directors. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Such consent shall be treated as a vote adopted at a meeting for all purposes. Such consents may be executed in one or more counterparts and not every Director or committee member need sign the same counterpart. ARTICLE V COMMITTEES OF DIRECTORS ----------------------------------- SECTION 1. Executive Committee. The Board of Directors may, by resolution passed by a majority of the whole Board, appoint an Executive Committee of one (1) or more members, to serve during the pleasure of the Board, to consist of such directors as the Board may from time to time designate. The Board of Directors shall designate the Chairman of the Executive Committee. a. Procedure. The Executive Committee shall, by a vote of a majority of its members, fix its own times and places of meeting, determine the number of its members constituting a quorum for the transaction of business, and prescribe its own rules of procedure, no change in which shall be made save by a majority vote of its members. By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 8 b. Responsibilities. During the intervals between the meetings of the Board of Directors, except as otherwise provided by the Board of Directors in establishing such Committee or otherwise, the Executive Committee shall possess and may exercise all the powers of the Board in the management and direction of the business and affairs of the Corporation; provided, however, that the Executive Committee shall not, except to the extent the Certificate of Incorporation or the resolution providing for the issuance of shares of stock adopted by the Board of Directors as provided in Section 151(a) of the Delaware General Business Corporation Law, have the power: (1) to amend or authorize the amendment of the Certificate of Incorporation or these By-Laws; (2) to authorize the issuance of stock; (3) to authorize the payment of any dividend; (4) to adopt an agreement of merger or consolidation of the Corporation or to recommend to the stockholders the sale, lease or exchange of all or substantially all the property and business of the Corporation; (5) to recommend to the stockholders a dissolution, or a revocation of a dissolution, of the Corporation; or (6) to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware Business Corporation Law. c. Reports. The Executive Committee shall keep regular minutes of its proceedings, and all action by the Executive Committee shall be reported promptly to the Board of Directors. Such action shall be subject to review, amendment and repeal by the Board, provided that no rights of third parties shall be adversely affected by such review, amendment or repeal. d. Appointment of Additional Members. In the absence or disqualification of any member of the Executive Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. SECTION 2. Audit Committee. The Board of Directors may, by resolution passed by a majority of the whole Board, appoint an Audit Committee of *** (***) or more members to serve during the By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 9 pleasure of the Board. The Board of Directors shall designate the Chairman of the Audit Committee. a. Procedure. The Audit Committee, by a vote of a majority of its members, shall fix its own times and places of meeting, shall determine the number of its members constituting a quorum for the transaction of business, and shall prescribe its own rules of procedure, no change in which shall be made save by a majority vote of its members. b. Responsibilities. The Audit Committee shall review the annual financial statements of the Corporation prior to their submission to the Board of Directors, shall consult with the Corporation's independent auditors, and may examine and consider such other matters in relation to the internal and external audit of the Corporation's accounts and in relation to the financial affairs of the Corporation and its accounts, including the selection and retention of independent auditors, as the Audit Committee may, in its discretion, determine to be desirable. c. Reports. The Audit Committee shall keep regular minutes of its proceedings, and all action by the Audit Committee shall, from time to time, be reported to the Board of Directors as it shall direct. Such action shall be subject to review, amendment and repeal by the Board, provided that no rights of third parties shall be adversely affected by such review, amendment or repeal. d. Appointment of Additional Members. In the absence or disqualification of any member of the Audit Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. SECTION 3. Other Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, at any time appoint one or more other committees from and outside of its own number. Every such committee must include at least one member of the Board of Directors. The Board may from time to time designate or alter, within the limits permitted by law, the Certificate of Incorporation and this Article, if applicable, the duties, powers and number of members of such other committees or change their membership, and may at any time abolish such other committees or any of them. a. Procedure. Each committee, appointed pursuant to this Section, shall, by a vote of a majority of its members, By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 10 fix its own times and places of meeting, determine the number of its members constituting a quorum for the transaction of business, and prescribe its own rules of procedure, no change in which shall be made save by a majority vote of its members. b. Responsibilities. Each committee, appointed pursuant to this Section, shall exercise the powers assigned to it by the Board of Directors in its discretion. c. Reports. Each committee appointed pursuant to this Section shall keep regular minutes of proceedings, and all action by each such committee shall, from time to time, be reported to the Board of Directors as it shall direct. Such action shall be subject to review, amendment and repeal by the Board, provided that no rights of third parties shall be adversely affected by such review, amendment or repeal. d. Appointment of Additional Members. In the absence or disqualification of any member of each committee, appointed pursuant to this Section, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors (or, to the extent permitted, another person) to act at the meeting in place of any such absent or disqualified member. SECTION 4. Term of Office. Each member of a committee shall hold office until the first meeting of the Board of Directors following the annual meeting of stockholders (or until such other time as the Board of Directors may determine, either in the vote establishing the committee or at the election of such member or otherwise) and until his or her successor is elected and qualified, or until he or she sooner dies, resigns, is removed, is replaced by change of membership or becomes disqualified by ceasing to be a director (where membership on the Board is required), or until the committee is sooner abolished by the Board of Directors. ARTICLE VI OFFICERS --------------------- SECTION 1. Officers. The Board of Directors shall elect a President, a Secretary and a Treasurer, and, in their discretion, may elect a Chairman of the Board, a Vice Chairman of the Board, a Controller, and one or more Executive Vice Presidents, Vice Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controllers as deemed necessary or appropriate. Such officers shall be elected annually by the Board of Directors at its first meeting following the annual By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 11 meeting of stockholders (or at such other meeting as the Board of Directors determines), and each shall hold office for the term provided by the vote of the Board, except that each will be subject to removal from office in the discretion of the Board as provided herein. The powers and duties of more than one office may be exercised and performed by the same person. SECTION 2. Vacancies. Any vacancy in any office may be filled for the unexpired portion of the term by the Board of Directors, at any regular or special meeting. SECTION 3. Chairman of the Board. The Chairman of the Board of Directors, if elected, shall be a member of the Board of Directors and shall preside at its meetings. The Chairman, if other than the President, shall advise and counsel with the President, and shall perform such duties as from time to time may be assigned to him or her by the Board of Directors. SECTION 4. President. The President shall be the chief executive officer of the Corporation. Subject to the directions of the Board of Directors, the President shall have and exercise direct charge of and general supervision over the business and affairs of the Corporation and shall perform all duties incident to the office of the chief executive officer of a corporation and such other duties as from time to time may be assigned to him or her by the Board of Directors. The President may but need not be a member of the Board of Directors. SECTION 5. Executive Vice Presidents and Vice Presidents. Each Executive Vice President and Vice President shall have and exercise such powers and shall perform such duties as from time to time may be assigned to him or to her by the Board of Directors or the President. SECTION 6. Secretary. The Secretary shall keep the minutes of all meetings of the stockholders and of the Board of Directors in books provided for the purpose; shall see that all notices are duly given in accordance with the provisions of law and these By-Laws; the Secretary shall be custodian of the records and of the corporate seal or seals of the Corporation; shall see that the corporate seal is affixed to all documents the execution of which, on behalf of the Corporation under its seal, is duly authorized, and, when the seal is so affixed, he or she may attest the same; the Secretary may sign, with the President, an Executive Vice President or a Vice President, certificates of stock of the Corporation; and, in general, the Secretary shall perform all duties incident to the office of secretary of a corporation, and such other duties as from time to time may be assigned to him or her by the Board of Directors. SECTION 7. Assistant Secretaries. The Assistant Secretaries in order of their seniority shall, in the absence or By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 12 disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Secretary. SECTION 8. Treasurer. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation, and shall deposit, or cause to be deposited, in the name of the Corporation, all monies or other valuable effects in such banks, trust companies or other depositaries as shall, from time to time, be selected by the Board of Directors; may endorse for collection on behalf of the Corporation checks, notes and other obligations; may sign receipts and vouchers for payments made to the Corporation; may sign checks of the Corporation, singly or jointly with another person as the Board of Directors may authorize, and pay out and dispose of the proceeds under the direction of the Board; the Treasurer shall render to the President and to the Board of Directors, whenever requested, an account of the financial condition of the Corporation; the Treasurer may sign, with the President, or an Executive Vice President or a Vice President, certificates of stock of the Corporation; and in general, shall perform all the duties incident to the office of treasurer of a corporation, and such other duties as from time to time may be assigned by the Board of Directors. Unless the Board of Directors shall otherwise determine, the Treasurer shall be the chief financial officer of the Corporation. SECTION 9. Assistant Treasurers. The Assistant Treasurers in order of their seniority shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Treasurer. SECTION 10. Controller. The Controller, if elected, shall be the chief accounting officer of the Corporation and shall perform all duties incident to the office of a controller of a corporation, and, in the absence of or disability of the Treasurer or any Assistant Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the President or the Treasurer. SECTION 11. Assistant Controllers. The Assistant Controllers in order of their seniority shall, in the absence or disability of the Controller, perform the duties and exercise the powers of the Controller and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Controller. By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 13 SECTION 12. Subordinate Officers. The Board of Directors may appoint such subordinate officers as it may deem desirable. Each such officer shall hold office for such period, have such authority and perform such duties as the Board of Directors may prescribe. The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers and to prescribe the powers and duties thereof. SECTION 13. Compensation. The Board of Directors shall fix the compensation of all officers of the Corporation. It may authorize any officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers. SECTION 14. Removal. Any officer of the Corporation may be removed, with or without cause, by action of the Board of Directors. SECTION 15. Bonds. The Board of Directors may require any officer of the Corporation to give a bond to the Corporation, conditional upon the faithful performance of his or her duties, with one or more sureties and in such amount as may be satisfactory to the Board of Directors. ARTICLE VII CERTIFICATES OF STOCK ----------------------------------- SECTION 1. Form and Execution of Certificates. The interest of each stockholder of the Corporation shall be evidenced by a certificate or certificates for shares of stock in such form as the Board of Directors may from time to time prescribe. The certificates of stock of each class shall be consecutively numbered and signed by the Chairman or Vice Chairman of the Board, if any, the President, an Executive Vice President or a Vice President and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of the Corporation, and may be countersigned and registered in such manner as the Board of Directors may by resolution prescribe, and shall bear the corporate seal or a printed or engraved facsimile thereof. Where any such certificate is signed by a transfer agent or transfer clerk acting on behalf of the Corporation, the signatures of any such Chairman, Vice Chairman, President, Executive Vice President, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be facsimiles, engraved or printed. In case any officer or officers, who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates, shall cease to be such officer or officers, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered by the Corporation as though the person or persons who signed such By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 14 certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers. 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. Every certificate for shares of stock which are subject to any restriction on transfer pursuant to law, the Certificate of Incorporation, these By-Laws, or any agreement to which the Corporation is a party, shall have the restriction noted conspicuously on the certificate, and shall also set forth, on the face or back, either the full text of the restriction or a statement of the existence of such restriction and (except if such restriction is imposed by law) a statement that the Corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. Every certificate issued when the Corporation is authorized to issue more than one class or series of stock shall set forth on its face or back either the full text of the preferences, voting powers, qualifications, and special and relative rights of the shares of each class and series authorized to be issued, or a statement of the existence of such preferences, powers, qualifications and rights, and a statement that the Corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. SECTION 2. Transfer of Shares. The shares of the stock of the Corporation shall be transferred on the books of the Corporation by the holder thereof in person or by his or her attorney lawfully constituted, upon surrender for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof or guaranty of the authenticity of the signature as the Corporation or its agents may reasonably require. 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 provided by law or by the Certificate of Incorporation. It shall be the duty of each stockholder to notify the Corporation of his or her post office address. By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 15 SECTION 3. 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 may determine, preceding the date of any meeting of stockholders 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 4. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of directors and which record date: (a) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, the Certificate of Incorporation or otherwise, not be more than sixty (60) nor less than ten (10) days before the date of such meeting; (b) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall, unless otherwise required by law, the Certificate of Incorporation or otherwise, not be more than ten (10) days from the date upon which the resolution fixing the record date is adopted by the Board of Directors; and (c) in the case of any other action, shall not be more than sixty (60) days prior to such other action. If no record date is fixed: (a) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders 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 next preceding the day on which the meeting is held; (b) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action take or proposed to be taken is delivered to the Corporation in accordance with applicable law, or, if prior action by the Board of Directors is required by law, shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action; and (c) the record date for determining stockholders 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. A determination of stockholders of By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 16 record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5. Lost or Destroyed Certificates. In case of the loss or destruction of any certificate of stock, a new certificate may be issued under the following conditions: a. The owner of said certificate shall file with the Secretary or any Assistant Secretary of the Corporation an affidavit giving the facts in relation to the ownership, and in relation to the loss or destruction of said certificate, stating its number and the number of shares represented thereby; such affidavit shall be in such form and contain such statements as shall satisfy the President, any Executive Vice President, Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer, that said certificate has been accidentally destroyed or lost, and that a new certificate ought to be issued in lieu thereof. Upon being so satisfied, any such officer may require such owner to furnish the Corporation a bond in such penal sum and in such form as he or she may deem advisable, and with a surety or sureties approved by him or her, to indemnify and save harmless the Corporation from any claim, loss, damage or liability which may be occasioned by the issuance of a new certificate in lieu thereof. Upon such bond being so filed, if so required, a new certificate for the same number of shares shall be issued to the owner of the certificate so lost or destroyed; and the transfer agent and registrar, if any, of stock shall countersign and register such new certificate upon receipt of a written order signed by any such officer, and thereupon the Corporation will save harmless said transfer agent and registrar in the premises. In case of the surrender of the original certificate, in lieu of which a new certificate has been issued, or the surrender of such new certificate, for cancellation, the bond of indemnity given as a condition of the issue of such new certificate may be surrendered; or b. The Board of Directors of the Corporation may by resolution authorize and direct any transfer agent or registrar of stock of the Corporation to issue and register respectively from time to time without further action or approval by or on behalf of the Corporation new certificates of stock to replace certificates reported lost, stolen or destroyed upon receipt of an affidavit of loss and bond of indemnity in form and amount and with surety satisfactory to such transfer By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 17 agent or registrar in each instance or upon such terms and conditions as the Board of Directors may determine. SECTION 6. Uncertificated Shares. The Board of Directors of the Corporation may by resolution provide that one or more of any or all classes or series of the stock of the Corporation shall be uncertificated shares, subject to the provisions of Section 158 of the Delaware General Corporation Law. ARTICLE VIII EXECUTION OF DOCUMENTS ------------------------------------- SECTION 1. Execution of Checks, Notes, etc. All checks and drafts on the Corporation's bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, shall be signed by such officer or officers, or agent or agents, as shall be thereunto authorized from time to time by the Board of Directors, which may in its discretion authorize any such signatures to be facsimile. SECTION 2. Execution of Contracts, Assignments, etc. Unless the Board of Directors shall have otherwise provided generally or in a specific instance, all contracts, agreements, endorsements, assignments, transfers, stock powers, or other instruments shall be signed by the President, any Executive Vice President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer. The Board of Directors may, however, in its discretion, require any or all such instruments to be signed by any two or more of such officers, or may permit any or all of such instruments to be signed by such other officer or officers, agent or agents, as it shall be thereunto authorize from time to time. SECTION 3. Execution of Proxies. The President, any Executive Vice President or any Vice President, and the Secretary, the Treasurer, any Assistant Secretary or any Assistant Treasurer, or any other officer designated by the Board of Directors, may sign on behalf of the Corporation proxies to vote upon shares of stock of other companies standing in the name of the Corporation. ARTICLE IX INSPECTION OF BOOKS -------------------------------- The Board of Directors shall determine from time to time whether, and if allowed, to what extent and at what time and places and under what conditions and regulations, the accounts and books of the Corporation (except such as may by law be specifically open to inspection) or any of them, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any account or book or document of the By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 18 Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation. ARTICLE X FISCAL YEAR ----------------------- The fiscal year of the Corporation shall be determined from time to time by vote of the Board of Directors. By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 19 ARTICLE XI AMENDMENTS ----------------------- These By-Laws may be altered, amended, changed or repealed and new By-Laws adopted by the stockholders or, to the extent provided in the Certificate of Incorporation, by the Board of Directors, in either case at any meeting called for that purpose at which a quorum shall be present. Any by-law, whether made, altered, amended, changed or repealed by the stockholders or the Board of Directors may be repealed, amended, changed, further amended, changed, repealed or reinstated, as the case may be, either by the stockholders or by the Board of Directors, as herein provided; except that this Article may be altered, amended, changed or repealed only by vote of the stockholders. ARTICLE XII INDEMNIFICATION ----------------------------- SECTION 1. Indemnification. a. Action By Third Party. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is a party or is threatened to be made a party or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he, or a person for whom he or she is the legal representative, is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity against all liability, losses, expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 20 action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. b. Action By Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, trustee, partner, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper. c. To the extent that any person referred to in paragraphs a. or b. above has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to therein, or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith. SECTION 2. Authorization. Any indemnification under Section 1 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, partner, member, trustee, employee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 1 of this Article. Such determination shall be made: a. by the Board of Directors by a majority vote of a quorum consisting of directors who were not By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 21 parties to such action, suit or proceeding, or b. if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in written opinion, or c. by the stockholders. SECTION 3. Expense Advance. Expenses (including attorneys' fees) incurred by an officer or director of the Corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the manner provided in Section 2 of this Article upon receipt of an undertaking by or on behalf of such officer or director to repay such amount, unless it shall ultimately be determined that such person is entitled to be indemnified by the Corporation as authorized in this Article. Such expenses (including attorneys' fees) incurred by other employees or agents of the Corporation may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. SECTION 4. Nonexclusivity. The indemnification and advancement of expenses provided by, or granted pursuant to, the other Sections of this Article shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, partner, member, trustee, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 5. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity against any liability asserted against and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article or Section 145 of Title 8 of the Delaware Code relating to the General Corporation Law of the State of Delaware. SECTION 6. "The Corporation". For the purposes of this Article, references to "the Corporation" shall include the resulting corporation and, to the extent that the Board of Directors of the resulting corporation so decides, all constituent corporations (including any constituent of a By-laws of Data Storage Systems, Inc. A Delaware Corporation Page 22 constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents so that any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or non-profit entity shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation if its separate existence had continued. SECTION 7. Other Indemnification. The Corporation's obligation, if any, to indemnify any person who was or is serving at its request as a director, trustee, partner, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust or other enterprise or non-profit entity or from insurance. SECTION 8. Other Definitions. For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, trustee, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, trustee, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article. SECTION 9. Continuation of Indemnification. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, trustee, partner, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 10. Amendment or Repeal. Neither the amendment nor repeal of this Article nor the adoption of any provision of these By-Laws inconsistent with this Article shall reduce, eliminate or adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the effectiveness of such amendment, repeal or adoption. EX-3.2O 11 BY-LAWS BY - LAWS of DATA ARCHIVE SERVICES, INC. (a Delaware Corporation) DATA ARCHIVE SERVICES, INC. (a Delaware Corporation) BY-LAWS TABLE OF CONTENTS ARTICLE I OFFICES...........................................................1 SECTION 1. Registered Office.....................................1 ARTICLE II SEAL.............................................................1 ARTICLE III MEETING OF STOCKHOLDERS.........................................1 SECTION 1. Place of Meeting......................................1 SECTION 3. Special Meetings......................................1 SECTION 4. Notice................................................2 SECTION 5. Quorum and Adjournments...............................2 SECTION 6. Votes; Proxies........................................3 SECTION 7. Organization..........................................4 SECTION 8. Consent of Stockholders in Lieu of Meeting............4 ARTICLE IV DIRECTORS........................................................5 SECTION 1. Number................................................5 SECTION 2. Term of Office........................................5 SECTION 3. Vacancies.............................................5 SECTION 4. Removal by Stockholders...............................6 SECTION 5. Meetings..............................................6 SECTION 6. Votes.................................................6 SECTION 7. Quorum and Adjournment................................7 SECTION 8. Compensation..........................................7 SECTION 9. Action By Consent of Directors........................7 ARTICLE V COMMITTEES OF DIRECTORS...........................................7 SECTION 1. Executive Committee...................................7 SECTION 2. Audit Committee.......................................8 SECTION 3. Other Committees......................................9 SECTION 4. Term of Office.......................................10 ARTICLE VI OFFICERS........................................................10 SECTION 1. Officers.............................................10 SECTION 2. Vacancies............................................11 SECTION 3. Chairman of the Board................................11 SECTION 4. President............................................11 SECTION 5. Executive Vice Presidents and Vice Presidents .....................................................11 SECTION 6. Secretary............................................11 SECTION 7. Assistant Secretaries................................11 SECTION 8. Treasurer............................................12 SECTION 9. Assistant Treasurers.................................12 SECTION 10. Controller...........................................12 SECTION 11. Assistant Controllers................................12 SECTION 12. Subordinate Officers.................................13 SECTION 13. Compensation.........................................13 SECTION 14. Removal..............................................13 SECTION 15. Bonds................................................13 ARTICLE VII CERTIFICATES OF STOCK..........................................13 SECTION 1. Form and Execution of Certificates...................13 SECTION 2. Transfer of Shares...................................14 SECTION 3. Closing of Transfer Books............................15 SECTION 4. Fixing Date for Determination of Stockholders of Record............................................15 SECTION 5. Lost or Destroyed Certificates.......................16 SECTION 6. Uncertificated Shares................................17 ARTICLE VIII EXECUTION OF DOCUMENTS........................................17 SECTION 1. Execution of Checks, Notes, etc......................17 SECTION 2. Execution of Contracts, Assignments, etc.............17 SECTION 3. Execution of Proxies.................................17 ARTICLE IX INSPECTION OF BOOKS.............................................17 ARTICLE X FISCAL YEAR......................................................18 ARTICLE XI AMENDMENTS......................................................18 ARTICLE XII INDEMNIFICATION................................................18 SECTION 1. Indemnification......................................18 SECTION 2. Authorization........................................20 SECTION 3. Expense Advance......................................21 SECTION 4. Nonexclusivity.......................................21 SECTION 5. Insurance............................................21 SECTION 6. "The Corporation"....................................21 SECTION 7. Other Indemnification................................22 SECTION 8. Other Definitions....................................22 SECTION 9. Continuation of Indemnification......................22 SECTION 10. Amendment or Repeal..................................22 DATA ARCHIVE SERVICES, INC. (a Delaware Corporation) BY-LAWS ARTICLE I OFFICES ------------------- SECTION 1. Registered Office. The registered office of the Corporation shall be located in Wilmington, County of New Castle, State of Delaware, and the name of the resident agent in charge thereof shall be Corporation Service Company. SECTION 2. Other Offices. The Corporation may also have offices at such other places, within or without the State of Delaware, as the Board of Directors may from time to time appoint or the business of the Corporation may require. ARTICLE II SEAL ----------------- The seal of the Corporation shall, subject to alteration by the Board of Directors, consist of a flat-faced circular die with the word "Delaware", together with the name of the Corporation and the year of incorporation, cut or engraved thereon. ARTICLE III MEETING OF STOCKHOLDERS ------------------------------------- SECTION 1. Place of Meeting. Meetings of the stockholders shall be held either within or without the State of Delaware at such place as the Board of Directors may fix from time to time. SECTION 2. Annual Meetings. The annual meeting of stockholders shall be held for the election of directors on such date and at such time as the Board of Directors may fix from time to time. Any other proper business may be transacted at the annual meeting. SECTION 3. Special Meetings. Special meetings of the stockholders for any purpose or purposes may be called by the Chairman of the Board of Directors, if there be one, the President or by the directors (either by written instrument signed by a majority or by resolution adopted by a vote of the majority), and special meetings shall be called by the President or the Secretary whenever stockholders owning at least a majority of the capital stock issued, outstanding and entitled to vote so By-laws of Data Archive Services, Inc. A Delaware Corporation Page 2 request in writing. Such request of stockholders shall state the purpose or purposes of the proposed meeting. SECTION 4. Notice. Written or printed notice of every meeting of stockholders, annual or special, stating the hour, date and place thereof, and the purpose or purposes in general terms for which the meeting is called shall, not less than ten (10) days, or such longer period as shall be provided by law, the Certificate of Incorporation, these By-Laws, or otherwise, and not more than sixty (60) days before such meeting, be served upon or mailed to each stockholder entitled to vote thereat, at the address of such stockholder as it appears upon the stock records of the Corporation or, if such stockholder shall have filed with the Secretary of the Corporation a written request that notices be mailed to some other address, then to the address designated in such request. Notice of the hour, date, place and purpose of any meeting of stockholders may be dispensed with if every stockholder entitled to vote thereat shall attend either in person or by proxy and shall not, at the beginning of the meeting, object to the holding of such meeting because the meeting has not been lawfully called or convened, or if every absent stockholder entitled to such notice shall in writing, filed with the records of the meeting, either before or after the holding thereof, waive such notice. SECTION 5. Quorum and Adjournments. Except as otherwise provided by law or by the Certificate of Incorporation, the presence in person or by proxy at any meeting of stockholders of the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote thereat, shall be requisite and shall constitute a quorum. If two or more classes of stock are entitled to vote as separate classes upon any question, then, in the case of each such class, a quorum for the consideration of such question shall, except as otherwise provided by law or by the Certificate of Incorporation, consist of *** of all stock of that class issued, outstanding and entitled to vote. If a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote thereat or, where a larger quorum is required, such quorum, shall not be represented at any meeting of the stockholders regularly called, the holders of *** of the shares present or represented by proxy and entitled to vote thereat shall have power to adjourn the meeting to another time, or to another time and place, without notice other than announcement of adjournment at the meeting, and there may be successive adjournments for like cause and in like manner until the requisite amount of shares entitled to vote at such meeting shall be represented; provided, however, that if the adjournment is for more than thirty (30) days, notice of the hour, date and place of the adjourned meeting shall be given to each stockholder entitled to vote thereat. Subject to the requirements of law and the Certificate of Incorporation, on By-laws of Data Archive Services, Inc. A Delaware Corporation Page 3 any issue on which two or more classes of stock are entitled to vote separately, no adjournment shall be taken with respect to any class for which a quorum is present unless the Chairman of the meeting otherwise directs. At any meeting held to consider matters which were subject to adjournment for want of a quorum at which the requisite amount of shares entitled to vote thereat shall be represented, any business may be transated which might have been transacted at the meeting as originally noticed. SECTION 6. Votes; Proxies. Except as otherwise provided in the Certificate of Incorporation, at each meeting of stockholders, every stockholder of record at the closing of the transfer books, if closed, or on the date set by the Board of Directors for the determination of stockholders entitled to vote at such meeting, shall have one vote for each share of stock entitled to vote which is registered in such stockholder's name on the books of the Corporation, and, in the election of directors, may vote cumulatively to the extent, if any, and in the manner authorized in the Certificate of Incorporation. At each such meeting every stockholder entitled to vote shall be entitled to do so in person, or by proxy appointed by an instrument in writing or as otherwise permitted by law subscribed by such stockholder and bearing a date not more than three (3) years prior to the meeting in question, unless said instrument provides for a longer period during which it is to remain in force. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or any interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing with the Secretary of the Corporation an instrument in writing or as otherwise permitted by law revoking the proxy or another duly executed proxy bearing a later date. Voting at meetings of stockholders need not be by written ballot and, except as otherwise provided by law, need not be conducted by inspectors of election unless so determined by the Chairman of the meeting or by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or represented by proxy at such meeting. If it is required or determined that inspectors of election be appointed, the Chairman shall appoint two inspectors of election, who shall first take and subscribe an oath or affirmation faithfully to execute the duties of inspectors at such meeting with strict impartiality and according to the best of their ability. The inspectors so appointed shall take charge of the polls and, after the balloting, shall make a certificate of the By-laws of Data Archive Services, Inc. A Delaware Corporation Page 4 result of the vote taken. No director or candidate for the office of director shall be appointed as such inspector. At any meeting at which a quorum is present, a plurality of the votes properly cast for election to fill any vacancy on the Board of Directors shall be sufficient to elect a candidate to fill such vacancy, and a majority of the votes properly cast upon any other question shall decide the question, except in any case where a larger vote is required by law, the Certificate of Incorporation, these By-Laws, or otherwise. SECTION 7. Organization. The Chairman of the Board, if there be one, or in his or her absence the Vice Chairman, or in the absence of a Vice Chairman, the President, or in the absence of the President, a Vice President, shall call meetings of the stockholders to order and shall act as chairman thereof. The Secretary of the Corporation, if present, shall act as secretary of all meetings of stockholders, and, in his or her absence, the presiding officer may appoint a secretary. SECTION 8. Consent of Stockholders in Lieu of Meeting. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted by the Delaware General Corporation Law to be taken at any annual or special meeting of the stockholders of the Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered in the manner required by this section to the Corporation, written consents signed by a sufficient number of stockholders to take action are delivered to the corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. By-laws of Data Archive Services, Inc. A Delaware Corporation Page 5 Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. In the event that the action which is consented to is such as would have required the filing of a certificate under any section of the Delaware General Corporation Law other than Section 228 thereof, if such action had been voted on by stockholders at a meeting thereof, the certificate filed under such other section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the Delaware General Corporation Law, and that written notice has been given as provided in such Section 228. ARTICLE IV DIRECTORS --------------------- SECTION 1. Number. The business and affairs of the Corporation shall be conducted and managed by a Board of Directors consisting of not less than one director, none of whom needs to be a stockholder. The number of directors for each year shall be fixed at each annual meeting of stockholders, but if the number is not so fixed, the number shall remain as it stood immediately prior to such meeting. At each annual meeting of stockholders, the stockholders shall elect directors. Each director so elected shall hold office, subject to the provisions of law, the Certificate of Incorporation, these By-Laws, or otherwise, until the next annual meeting of stockholders or until his or her successor is elected and qualified. At any time during any year, except as otherwise provided by law, the Certificate of Incorporation, these By-Laws, or otherwise, the number of directors may be increased or reduced, in each case by vote of a majority of the stock issued and outstanding and present in person or represented by proxy and entitled to vote for the election of directors or a majority of the directors in office at the time of such increase or decrease, regardless of whether such majority constitutes a quorum. SECTION 2. Term of Office. Each director shall hold office until the next annual meeting of stockholders and until his or her successor is duly elected and qualified or until his or her earlier death or resignation, subject to the right of the stockholders at any time to remove any director or directors as provided in Section 4 of this Article. SECTION 3. Vacancies. If any vacancy shall occur among the directors, or if the number of directors shall at any time be increased, the directors then in office, although less than a quorum, by a majority vote may fill the vacancies or newly- By-laws of Data Archive Services, Inc. A Delaware Corporation Page 6 created directorships, or any such vacancies or newly-created directorships may be filled by the stockholders at any meeting. SECTION 4. Removal by Stockholders. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, the holders of record of the capital stock of the Corporation entitled to vote for the election of directors may, by a majority vote, remove any director or directors, with or without cause, and, in their discretion, elect a new director or directors in place thereof. SECTION 5. Meetings. Meetings of the Board of Directors shall be held at such place, within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors or by the Chairman of the Board, if there be one, or by the President, and as may be specified in the notice or waiver of notice of any meeting. Meetings may be held at any time upon the call of the Chairman of the Board, if there be one, or the President or any two (2) of the directors in office by oral, telegraphic, telex, telecopy or other form of electronic transmission, or written notice, duly served or sent or mailed to each director not less than twenty-four (24) hours before such meeting, except that, if mailed, not less than *** (***) hours before such meeting. Meetings may be held at any time and place without notice if all the directors are present and do not object to the holding of such meeting for lack of proper notice or if those not present shall, in writing or by telegram, telex, telecopy or other form of electronic transmission, waive notice thereof. A regular meeting of the Board may be held without notice immediately following the annual meeting of stockholders at the place where such meeting is held. Regular meetings of the Board may also be held without notice at such time and place as shall from time to time be determined by resolution of the Board. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors or any committee thereof need be specified in any written waiver of notice. Members of the Board of Directors or any committee thereof may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting pursuant to the foregoing provisions shall constitute presence in person at the meeting. SECTION 6. Votes. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, the vote of the By-laws of Data Archive Services, Inc. A Delaware Corporation Page 7 majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 7. Quorum and Adjournment. Except as otherwise provided by law, the Certificate of Incorporation or otherwise, a majority of the directors shall constitute a quorum for the transaction of business. If at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time without notice other than announcement of the adjournment at the meeting, and at such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally noticed. SECTION 8. Compensation. Directors shall receive compensation for their services, as such, and for service on any Committee of the Board of Directors, as fixed by resolution of the Board of Directors and for expenses of attendance at each regular or special meeting of the Board or any Committee thereof. Nothing in this Section shall be construed to preclude a director from serving the Corporation in any other capacity and receiving compensation therefor. SECTION 9. Action By Consent of Directors. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Such consent shall be treated as a vote adopted at a meeting for all purposes. Such consents may be executed in one or more counterparts and not every Director or committee member need sign the same counterpart. ARTICLE V COMMITTEES OF DIRECTORS ----------------------------------- SECTION 1. Executive Committee. The Board of Directors may, by resolution passed by a majority of the whole Board, appoint an Executive Committee of one (1) or more members, to serve during the pleasure of the Board, to consist of such directors as the Board may from time to time designate. The Board of Directors shall designate the Chairman of the Executive Committee. a. Procedure. The Executive Committee shall, by a vote of a majority of its members, fix its own times and places of meeting, determine the number of its members constituting a quorum for the transaction of business, and prescribe its own rules of procedure, no change in which shall be made save by a majority vote of its members. By-laws of Data Archive Services, Inc. A Delaware Corporation Page 8 b. Responsibilities. During the intervals between the meetings of the Board of Directors, except as otherwise provided by the Board of Directors in establishing such Committee or otherwise, the Executive Committee shall possess and may exercise all the powers of the Board in the management and direction of the business and affairs of the Corporation; provided, however, that the Executive Committee shall not, except to the extent the Certificate of Incorporation or the resolution providing for the issuance of shares of stock adopted by the Board of Directors as provided in Section 151(a) of the Delaware General Business Corporation Law, have the power: (1) to amend or authorize the amendment of the Certificate of Incorporation or these By-Laws; (2) to authorize the issuance of stock; (3) to authorize the payment of any dividend; (4) to adopt an agreement of merger or consolidation of the Corporation or to recommend to the stockholders the sale, lease or exchange of all or substantially all the property and business of the Corporation; (5) to recommend to the stockholders a dissolution, or a revocation of a dissolution, of the Corporation; or (6) to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware Business Corporation Law. c. Reports. The Executive Committee shall keep regular minutes of its proceedings, and all action by the Executive Committee shall be reported promptly to the Board of Directors. Such action shall be subject to review, amendment and repeal by the Board, provided that no rights of third parties shall be adversely affected by such review, amendment or repeal. d. Appointment of Additional Members. In the absence or disqualification of any member of the Executive Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. SECTION 2. Audit Committee. The Board of Directors may, by resolution passed by a majority of the whole Board, appoint an Audit Committee of *** (***) or more members to serve during the By-laws of Data Archive Services, Inc. A Delaware Corporation Page 9 pleasure of the Board. The Board of Directors shall designate the Chairman of the Audit Committee. a. Procedure. The Audit Committee, by a vote of a majority of its members, shall fix its own times and places of meeting, shall determine the number of its members constituting a quorum for the transaction of business, and shall prescribe its own rules of procedure, no change in which shall be made save by a majority vote of its members. b. Responsibilities. The Audit Committee shall review the annual financial statements of the Corporation prior to their submission to the Board of Directors, shall consult with the Corporation's independent auditors, and may examine and consider such other matters in relation to the internal and external audit of the Corporation's accounts and in relation to the financial affairs of the Corporation and its accounts, including the selection and retention of independent auditors, as the Audit Committee may, in its discretion, determine to be desirable. c. Reports. The Audit Committee shall keep regular minutes of its proceedings, and all action by the Audit Committee shall, from time to time, be reported to the Board of Directors as it shall direct. Such action shall be subject to review, amendment and repeal by the Board, provided that no rights of third parties shall be adversely affected by such review, amendment or repeal. d. Appointment of Additional Members. In the absence or disqualification of any member of the Audit Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. SECTION 3. Other Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, at any time appoint one or more other committees from and outside of its own number. Every such committee must include at least one member of the Board of Directors. The Board may from time to time designate or alter, within the limits permitted by law, the Certificate of Incorporation and this Article, if applicable, the duties, powers and number of members of such other committees or change their membership, and may at any time abolish such other committees or any of them. a. Procedure. Each committee, appointed pursuant to this Section, shall, by a vote of a majority of its members, By-laws of Data Archive Services, Inc. A Delaware Corporation Page 10 fix its own times and places of meeting, determine the number of its members constituting a quorum for the transaction of business, and prescribe its own rules of procedure, no change in which shall be made save by a majority vote of its members. b. Responsibilities. Each committee, appointed pursuant to this Section, shall exercise the powers assigned to it by the Board of Directors in its discretion. c. Reports. Each committee appointed pursuant to this ------- Section shall keep regular minutes of proceedings, and all action by each such committee shall, from time to time, be reported to the Board of Directors as it shall direct. Such action shall be subject to review, amendment and repeal by the Board, provided that no rights of third parties shall be adversely affected by such review, amendment or repeal. d. Appointment of Additional Members. In the absence or --------------------------------- disqualification of any member of each committee, appointed pursuant to this Section, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors (or, to the extent permitted, another person) to act at the meeting in place of any such absent or disqualified member. SECTION 4. Term of Office. Each member of a committee shall hold office until the first meeting of the Board of Directors following the annual meeting of stockholders (or until such other time as the Board of Directors may determine, either in the vote establishing the committee or at the election of such member or otherwise) and until his or her successor is elected and qualified, or until he or she sooner dies, resigns, is removed, is replaced by change of membership or becomes disqualified by ceasing to be a director (where membership on the Board is required), or until the committee is sooner abolished by the Board of Directors. ARTICLE VI OFFICERS --------------------- SECTION 1. Officers. The Board of Directors shall elect a President, a Secretary and a Treasurer, and, in their discretion, may elect a Chairman of the Board, a Vice Chairman of the Board, a Controller, and one or more Executive Vice Presidents, Vice Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controllers as deemed necessary or appropriate. Such officers shall be elected annually by the Board of Directors at its first meeting following the annual By-laws of Data Archive Services, Inc. A Delaware Corporation Page 11 meeting of stockholders (or at such other meeting as the Board of Directors determines), and each shall hold office for the term provided by the vote of the Board, except that each will be subject to removal from office in the discretion of the Board as provided herein. The powers and duties of more than one office may be exercised and performed by the same person. SECTION 2. Vacancies. Any vacancy in any office may be filled for the unexpired portion of the term by the Board of Directors, at any regular or special meeting. SECTION 3. Chairman of the Board. The Chairman of the Board of Directors, if elected, shall be a member of the Board of Directors and shall preside at its meetings. The Chairman, if other than the President, shall advise and counsel with the President, and shall perform such duties as from time to time may be assigned to him or her by the Board of Directors. SECTION 4. President. The President shall be the chief executive officer of the Corporation. Subject to the directions of the Board of Directors, the President shall have and exercise direct charge of and general supervision over the business and affairs of the Corporation and shall perform all duties incident to the office of the chief executive officer of a corporation and such other duties as from time to time may be assigned to him or her by the Board of Directors. The President may but need not be a member of the Board of Directors. SECTION 5. Executive Vice Presidents and Vice Presidents. Each Executive Vice President and Vice President shall have and exercise such powers and shall perform such duties as from time to time may be assigned to him or to her by the Board of Directors or the President. SECTION 6. Secretary. The Secretary shall keep the minutes of all meetings of the stockholders and of the Board of Directors in books provided for the purpose; shall see that all notices are duly given in accordance with the provisions of law and these By-Laws; the Secretary shall be custodian of the records and of the corporate seal or seals of the Corporation; shall see that the corporate seal is affixed to all documents the execution of which, on behalf of the Corporation under its seal, is duly authorized, and, when the seal is so affixed, he or she may attest the same; the Secretary may sign, with the President, an Executive Vice President or a Vice President, certificates of stock of the Corporation; and, in general, the Secretary shall perform all duties incident to the office of secretary of a corporation, and such other duties as from time to time may be assigned to him or her by the Board of Directors. SECTION 7. Assistant Secretaries. The Assistant Secretaries in order of their seniority shall, in the absence or By-laws of Data Archive Services, Inc. A Delaware Corporation Page 12 disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Secretary. SECTION 8. Treasurer. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation, and shall deposit, or cause to be deposited, in the name of the Corporation, all monies or other valuable effects in such banks, trust companies or other depositaries as shall, from time to time, be selected by the Board of Directors; may endorse for collection on behalf of the Corporation checks, notes and other obligations; may sign receipts and vouchers for payments made to the Corporation; may sign checks of the Corporation, singly or jointly with another person as the Board of Directors may authorize, and pay out and dispose of the proceeds under the direction of the Board; the Treasurer shall render to the President and to the Board of Directors, whenever requested, an account of the financial condition of the Corporation; the Treasurer may sign, with the President, or an Executive Vice President or a Vice President, certificates of stock of the Corporation; and in general, shall perform all the duties incident to the office of treasurer of a corporation, and such other duties as from time to time may be assigned by the Board of Directors. Unless the Board of Directors shall otherwise determine, the Treasurer shall be the chief financial officer of the Corporation. SECTION 9. Assistant Treasurers. The Assistant Treasurers in order of their seniority shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Treasurer. SECTION 10. Controller. The Controller, if elected, shall be the chief accounting officer of the Corporation and shall perform all duties incident to the office of a controller of a corporation, and, in the absence of or disability of the Treasurer or any Assistant Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the President or the Treasurer. SECTION 11. Assistant Controllers. The Assistant Controllers in order of their seniority shall, in the absence or disability of the Controller, perform the duties and exercise the powers of the Controller and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Controller. By-laws of Data Archive Services, Inc. A Delaware Corporation Page 13 SECTION 12. Subordinate Officers. The Board of Directors may appoint such subordinate officers as it may deem desirable. Each such officer shall hold office for such period, have such authority and perform such duties as the Board of Directors may prescribe. The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers and to prescribe the powers and duties thereof. SECTION 13. Compensation. The Board of Directors shall fix the compensation of all officers of the Corporation. It may authorize any officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers. SECTION 14. Removal. Any officer of the Corporation may be removed, with or without cause, by action of the Board of Directors. SECTION 15. Bonds. The Board of Directors may require any officer of the Corporation to give a bond to the Corporation, conditional upon the faithful performance of his or her duties, with one or more sureties and in such amount as may be satisfactory to the Board of Directors. ARTICLE VII CERTIFICATES OF STOCK ----------------------------------- SECTION 1. Form and Execution of Certificates. The interest of each stockholder of the Corporation shall be evidenced by a certificate or certificates for shares of stock in such form as the Board of Directors may from time to time prescribe. The certificates of stock of each class shall be consecutively numbered and signed by the Chairman or Vice Chairman of the Board, if any, the President, an Executive Vice President or a Vice President and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of the Corporation, and may be countersigned and registered in such manner as the Board of Directors may by resolution prescribe, and shall bear the corporate seal or a printed or engraved facsimile thereof. Where any such certificate is signed by a transfer agent or transfer clerk acting on behalf of the Corporation, the signatures of any such Chairman, Vice Chairman, President, Executive Vice President, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be facsimiles, engraved or printed. In case any officer or officers, who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates, shall cease to be such officer or officers, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered by the Corporation as though the person or persons who signed such By-laws of Data Archive Services, Inc. A Delaware Corporation Page 14 certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers. 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. Every certificate for shares of stock which are subject to any restriction on transfer pursuant to law, the Certificate of Incorporation, these By-Laws, or any agreement to which the Corporation is a party, shall have the restriction noted conspicuously on the certificate, and shall also set forth, on the face or back, either the full text of the restriction or a statement of the existence of such restriction and (except if such restriction is imposed by law) a statement that the Corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. Every certificate issued when the Corporation is authorized to issue more than one class or series of stock shall set forth on its face or back either the full text of the preferences, voting powers, qualifications, and special and relative rights of the shares of each class and series authorized to be issued, or a statement of the existence of such preferences, powers, qualifications and rights, and a statement that the Corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. SECTION 2. Transfer of Shares. The shares of the stock of the Corporation shall be transferred on the books of the Corporation by the holder thereof in person or by his or her attorney lawfully constituted, upon surrender for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof or guaranty of the authenticity of the signature as the Corporation or its agents may reasonably require. 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 provided by law or by the Certificate of Incorporation. It shall be the duty of each stockholder to notify the Corporation of his or her post office address. By-laws of Data Archive Services, Inc. A Delaware Corporation Page 15 SECTION 3. 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 may determine, preceding the date of any meeting of stockholders 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 4. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of directors and which record date: (a) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, the Certificate of Incorporation or otherwise, not be more than sixty (60) nor less than ten (10) days before the date of such meeting; (b) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall, unless otherwise required by law, the Certificate of Incorporation or otherwise, not be more than ten (10) days from the date upon which the resolution fixing the record date is adopted by the Board of Directors; and (c) in the case of any other action, shall not be more than sixty (60) days prior to such other action. If no record date is fixed: (a) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders 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 next preceding the day on which the meeting is held; (b) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action take or proposed to be taken is delivered to the Corporation in accordance with applicable law, or, if prior action by the Board of Directors is required by law, shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action; and (c) the record date for determining stockholders 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. A determination of stockholders of By-laws of Data Archive Services, Inc. A Delaware Corporation Page 16 record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5. Lost or Destroyed Certificates. In case of the loss or destruction of any certificate of stock, a new certificate may be issued under the following conditions: a. The owner of said certificate shall file with the Secretary or any Assistant Secretary of the Corporation an affidavit giving the facts in relation to the ownership, and in relation to the loss or destruction of said certificate, stating its number and the number of shares represented thereby; such affidavit shall be in such form and contain such statements as shall satisfy the President, any Executive Vice President, Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer, that said certificate has been accidentally destroyed or lost, and that a new certificate ought to be issued in lieu thereof. Upon being so satisfied, any such officer may require such owner to furnish the Corporation a bond in such penal sum and in such form as he or she may deem advisable, and with a surety or sureties approved by him or her, to indemnify and save harmless the Corporation from any claim, loss, damage or liability which may be occasioned by the issuance of a new certificate in lieu thereof. Upon such bond being so filed, if so required, a new certificate for the same number of shares shall be issued to the owner of the certificate so lost or destroyed; and the transfer agent and registrar, if any, of stock shall countersign and register such new certificate upon receipt of a written order signed by any such officer, and thereupon the Corporation will save harmless said transfer agent and registrar in the premises. In case of the surrender of the original certificate, in lieu of which a new certificate has been issued, or the surrender of such new certificate, for cancellation, the bond of indemnity given as a condition of the issue of such new certificate may be surrendered; or b. The Board of Directors of the Corporation may by resolution authorize and direct any transfer agent or registrar of stock of the Corporation to issue and register respectively from time to time without further action or approval by or on behalf of the Corporation new certificates of stock to replace certificates reported lost, stolen or destroyed upon receipt of an affidavit of loss and bond of indemnity in form and amount and with surety satisfactory to such transfer By-laws of Data Archive Services, Inc. A Delaware Corporation Page 17 agent or registrar in each instance or upon such terms and conditions as the Board of Directors may determine. SECTION 6. Uncertificated Shares. The Board of Directors of the Corporation may by resolution provide that one or more of any or all classes or series of the stock of the Corporation shall be uncertificated shares, subject to the provisions of Section 158 of the Delaware General Corporation Law. ARTICLE VIII EXECUTION OF DOCUMENTS ------------------------------------- SECTION 1. Execution of Checks, Notes, etc. All checks and drafts on the Corporation's bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, shall be signed by such officer or officers, or agent or agents, as shall be thereunto authorized from time to time by the Board of Directors, which may in its discretion authorize any such signatures to be facsimile. SECTION 2. Execution of Contracts, Assignments, etc. Unless the Board of Directors shall have otherwise provided generally or in a specific instance, all contracts, agreements, endorsements, assignments, transfers, stock powers, or other instruments shall be signed by the President, any Executive Vice President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer. The Board of Directors may, however, in its discretion, require any or all such instruments to be signed by any two or more of such officers, or may permit any or all of such instruments to be signed by such other officer or officers, agent or agents, as it shall be thereunto authorize from time to time. SECTION 3. Execution of Proxies. The President, any Executive Vice President or any Vice President, and the Secretary, the Treasurer, any Assistant Secretary or any Assistant Treasurer, or any other officer designated by the Board of Directors, may sign on behalf of the Corporation proxies to vote upon shares of stock of other companies standing in the name of the Corporation. ARTICLE IX INSPECTION OF BOOKS -------------------------------- The Board of Directors shall determine from time to time whether, and if allowed, to what extent and at what time and places and under what conditions and regulations, the accounts and books of the Corporation (except such as may by law be specifically open to inspection) or any of them, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any account or book or document of the By-laws of Data Archive Services, Inc. A Delaware Corporation Page 18 Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation. ARTICLE X FISCAL YEAR ----------------------- The fiscal year of the Corporation shall be determined from time to time by vote of the Board of Directors. By-laws of Data Archive Services, Inc. A Delaware Corporation Page 19 ARTICLE XI AMENDMENTS ----------------------- These By-Laws may be altered, amended, changed or repealed and new By-Laws adopted by the stockholders or, to the extent provided in the Certificate of Incorporation, by the Board of Directors, in either case at any meeting called for that purpose at which a quorum shall be present. Any by-law, whether made, altered, amended, changed or repealed by the stockholders or the Board of Directors may be repealed, amended, changed, further amended, changed, repealed or reinstated, as the case may be, either by the stockholders or by the Board of Directors, as herein provided; except that this Article may be altered, amended, changed or repealed only by vote of the stockholders. ARTICLE XII INDEMNIFICATION ----------------------------- SECTION 1. Indemnification. a. Action By Third Party. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is a party or is threatened to be made a party or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he, or a person for whom he or she is the legal representative, is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity against all liability, losses, expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal By-laws of Data Archive Services, Inc. A Delaware Corporation Page 20 action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. b. Action By Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, trustee, partner, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper. c. To the extent that any person referred to in paragraphs a. or b. above has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to therein, or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith. SECTION 2. Authorization. Any indemnification under Section 1 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, partner, member, trustee, employee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 1 of this Article. Such determination shall be made: a. by the Board of Directors by a majority vote of a quorum consisting of directors who were not By-laws of Data Archive Services, Inc. A Delaware Corporation Page 21 parties to such action, suit or proceeding, or b. if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in written opinion, or c. by the stockholders. SECTION 3. Expense Advance. Expenses (including attorneys' fees) incurred by an officer or director of the Corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the manner provided in Section 2 of this Article upon receipt of an undertaking by or on behalf of such officer or director to repay such amount, unless it shall ultimately be determined that such person is entitled to be indemnified by the Corporation as authorized in this Article. Such expenses (including attorneys' fees) incurred by other employees or agents of the Corporation may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. SECTION 4. Nonexclusivity. The indemnification and advancement of expenses provided by, or granted pursuant to, the other Sections of this Article shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, partner, member, trustee, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 5. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity against any liability asserted against and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article or Section 145 of Title 8 of the Delaware Code relating to the General Corporation Law of the State of Delaware. SECTION 6. "The Corporation". For the purposes of this Article, references to "the Corporation" shall include the resulting corporation and, to the extent that the Board of Directors of the resulting corporation so decides, all constituent corporations (including any constituent of a By-laws of Data Archive Services, Inc. A Delaware Corporation Page 22 constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents so that any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or non-profit entity shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation if its separate existence had continued. SECTION 7. Other Indemnification. The Corporation's obligation, if any, to indemnify any person who was or is serving at its request as a director, trustee, partner, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust or other enterprise or non-profit entity or from insurance. SECTION 8. Other Definitions. For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, trustee, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, trustee, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article. SECTION 9. Continuation of Indemnification. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, trustee, partner, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 10. Amendment or Repeal. Neither the amendment nor repeal of this Article nor the adoption of any provision of these By-Laws inconsistent with this Article shall reduce, eliminate or adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the effectiveness of such amendment, repeal or adoption. EX-4.2 12 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS Draft of September 10, 1996 =============================================================================== IRON MOUNTAIN INCORPORATED and the Restricted Subsidiaries signatory hereto __% SENIOR SUBORDINATED NOTES DUE 2006 _________________ INDENTURE Dated as of _________, 1996 _________________ ____________________________________________ Trustee =============================================================================== NYMAIN01 Doc: 159158_2 CROSS-REFERENCE TABLE* Trust Indenture Act Section Indenture Section 310 (a)(1)............................................. 7.10 (a)(2)............................................. 7.10 (a)(3) ............................................ N.A. (a)(4)............................................. N.A. (a)(5)............................................. 7.10 (b) ............................................... 7.10 (c) ............................................... N.A. 311 (a) ............................................... 7.11 (b) ............................................... 7.11 (c) ............................................... N.A. 312 (a)................................................ 2.05 (b)................................................ 12.03 (c) ............................................... 12.03 313 (a) ............................................... 7.06 (b)(1) ............................................ N.A. (b)(2) ............................................ 7.06;7.07 (c) ............................................... 7.06;12.02 (d)................................................ 7.06 314 (a) ............................................... 4.03;12.02 (b) ............................................... N.A. (c)(1) ............................................ 12.04 (c)(2) ............................................ 12.04 (c)(3) ............................................ N.A. (d)................................................ N.A. (e) .............................................. 12.05 (f)................................................ N.A. 315 (a)................................................ 7.01 (b)................................................ 7.05,12.02 (c) .............................................. 7.01 (d)................................................ 7.01 (e)................................................ 6.11 316 (a)(last sentence) ................................ 2.09 (a)(1)(A).......................................... 6.05 (a)(1)(B) ......................................... 6.04 (a)(2) ............................................ N.A. (b) ............................................... 6.07 (c) ............................................... 2.13 317 (a)(1) ............................................ 6.08 (a)(2)............................................. 6.09 (b) ............................................... 2.04 318 (a)................................................ 12.01 (b)................................................ N.A. (c)................................................ 12.01 N.A. means not applicable. *This Cross-Reference Table is not part of this Indenture. NYMAIN01 Doc: 159158_2 -i- TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE...................................................... 1 Section 1.01. Definitions........................................ 1 Section 1.02. Other Definitions.................................. 14 Section 1.03. Incorporation by Reference of Trust Indenture Act.. 15 Section 1.04. Rules of Construction.............................. 16 ARTICLE 2 THE NOTES......................................................... 16 Section 2.01. Form and Dating.................................... 16 Section 2.02. Execution and Authentication....................... 16 Section 2.03. Registrar and Paying Agent......................... 17 Section 2.04. Paying Agent to Hold Money in Trust................ 18 Section 2.05. Lists of Holders of the Notes...................... 18 Section 2.06. Transfer and Exchange.............................. 18 Section 2.07. Replacement Notes.................................. 19 Section 2.08. Outstanding Notes.................................. 20 Section 2.09. Treasury Notes..................................... 20 Section 2.10. Temporary Notes.................................... 20 Section 2.11. Cancellation....................................... 21 Section 2.12. Defaulted Interest................................. 21 Section 2.13. Record Date........................................ 21 Section 2.14. CUSIP Number....................................... 21 Section 2.15. Computation of Interest............................ 22 ARTICLE 3 REDEMPTION AND OFFERS TO PURCHASE................................. 22 Section 3.01. Notices to Trustee................................. 22 Section 3.02. Selection of Notes to Be Redeemed.................. 22 Section 3.03. Notice of Redemption............................... 22 Section 3.04. Effect of Notice of Redemption..................... 23 Section 3.05. Deposit of Redemption Price........................ 23 Section 3.06. Notes Redeemed in Part............................. 24 Section 3.07. Optional Redemption................................ 24 Section 3.08. Mandatory Redemption............................... 24 Section 3.09. Asset Sale Offers.................................. 25 ARTICLE 4 COVENANTS......................................................... 27 Section 4.01. Payment of Notes................................... 27 NYMAIN01 Doc: 159158_2 -ii- TABLE OF CONTENTS (cont.) Page Section 4.02. Maintenance of Office or Agency.................... 27 Section 4.03. Reports............................................ 28 Section 4.04. Compliance Certificate............................. 28 Section 4.05. Taxes.............................................. 29 Section 4.06. Stay, Extension and Usury Laws..................... 29 Section 4.07. Restricted Payments................................ 29 Section 4.08. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries............................ 31 Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.................................... 32 Section 4.10. Asset Sales........................................ 33 Section 4.11. Transactions with Affiliates....................... 34 Section 4.12. Liens.............................................. 35 Section 4.13. Additional Subsidiary Guarantees................... 35 Section 4.14. Offer to Purchase Upon Change of Control........... 36 Section 4.15. Corporate Existence................................ 37 Section 4.16. Certain Senior Subordinated Debt................... 38 Section 4.17. Designation of unrestricted subsidiaries........... 38 ARTICLE 5 SUCCESSORS........................................................ 39 Section 5.01. Merger, Consolidation, or Sale of Assets........... 39 Section 5.02. Successor Corporation Substituted.................. 39 ARTICLE 6 CERTAIN DEFAULT PROVISIONS........................................ 40 Section 6.01. Events of Default.................................. 40 Section 6.02. Acceleration....................................... 42 Section 6.03. Other Remedies..................................... 43 Section 6.04. Waiver of Past Defaults............................ 43 Section 6.05. Control by Majority................................ 43 Section 6.06. Limitation on Suits................................ 43 Section 6.07. Rights of Holders of Notes to Receive Payment...... 44 Section 6.08. Collection Suit by Trustee......................... 44 Section 6.09. Trustee May File Proofs of Claim................... 44 Section 6.10. Priorities......................................... 45 Section 6.11. Undertaking for Costs.............................. 45 ARTICLE 7 TRUSTEE .......................................................... 46 Section 7.01. Duties of Trustee.................................. 46 NYMAIN01 Doc: 159158_2 -iii- TABLE OF CONTENTS (cont.) Page Section 7.02. Rights of Trustee.................................... 47 Section 7.03. Individual Rights of Trustee......................... 48 Section 7.04. Trustee's Disclaimer................................. 48 Section 7.05. Notice of Defaults................................... 48 Section 7.06. Reports by Trustee to Holders of the Notes........... 48 Section 7.07. Compensation and Indemnity........................... 49 Section 7.08. Replacement of Trustee............................... 50 Section 7.09. Successor Trustee by Merger, etc..................... 51 Section 7.10. Eligibility; Disqualification........................ 51 Section 7.11. Preferential Collection of Claims Against Company.... 51 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE............................ 51 Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance........................................... 51 Section 8.02. Legal Defeasance and Discharge....................... 51 Section 8.03. Covenant Defeasance.................................. 52 Section 8.04. Conditions to Legal or Covenant Defeasance........... 52 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions............. 54 Section 8.06. Repayment to Company................................. 54 Section 8.07. Reinstatement........................................ 55 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER ................................... 55 Section 9.01. Without Consent of Holders of Notes.................. 55 Section 9.02. With Consent of Holders of Notes..................... 56 Section 9.03. Compliance with Trust Indenture Act.................. 57 Section 9.04. Revocation and Effect of Consents.................... 57 Section 9.05. Notation on or Exchange of Notes..................... 58 Section 9.06. Trustee to Sign Amendments, etc...................... 58 ARTICLE 10 SUBORDINATION....................................................... 58 Section 10.01. Agreement to Subordinate............................. 58 Section 10.02. Liquidation; Dissolution; Bankruptcy................. 58 Section 10.03. Default on Designated Senior Debt.................... 59 Section 10.04. Acceleration of Notes................................ 60 Section 10.05. When Distribution Must be Paid Over.................. 60 Section 10.06. Notice By Company.................................... 60 Section 10.07. Subrogation.......................................... 61 NYMAIN01 Doc: 159158_2 -iv- TABLE OF CONTENTS (cont.) Page Section 10.08. Relative Rights.................................... 61 Section 10.09. Subordination May Not Be Impaired by Company....... 61 Section 10.10. Distribution or Notice to Representative........... 61 Section 10.11. Rights of Trustee and Paying Agent................. 62 Section 10.12. Authorization to Effect Subordination.............. 62 Section 10.13. Amendments......................................... 62 ARTICLE 11 SUBSIDIARY GUARANTEES............................................. 62 Section 11.01. Subsidiary Guarantee............................... 62 Section 11.02. Subordination...................................... 64 Section 11.03. Liquidation; Dissolution; Bankruptcy............... 64 Section 11.04. Default on Senior Debt of the Guarantor............ 65 Section 11.05. Acceleration of Notes.............................. 66 Section 11.06. When Distribution Must Be Paid Over................ 66 Section 11.07. Notice by a Guarantor.............................. 66 Section 11.08. Subrogation........................................ 66 Section 11.09. Relative Rights.................................... 67 Section 11.10. Subordination May Not Be Impaired By Any Guarantor. 67 Section 11.11. Distribution or Notice to Representative........... 67 Section 11.12. Rights of Trustee and Paying Agent................. 68 Section 11.13. Authorization to Effect Subordination.............. 68 Section 11.14. Amendments......................................... 68 Section 11.15. Limitation of Guarantor's Liability................ 68 Section 11.16. Restricted Subsidiaries May Consolidate, etc., on Certain Term.................................... 69 Section 11.17. Releases Following Sale of Assets or Designation as Unrestricted Subsidiary......................... 69 ARTICLE 12 MISCELLANEOUS..................................................... 70 Section 12.01. Trust Indenture Act Controls...................... 70 Section 12.02. Notices........................................... 70 Section 12.03. Communication by Holders of Notes with Other Holders of Notes.................................. 71 Section 12.04. Certificate and Opinion as to Conditions Precedent 71 Section 12.05. Statements Required in Certificate or Opinion..... 71 Section 12.06. Rules by Trustee and Agents....................... 72 Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders........................ 72 NYMAIN01 Doc: 159158_2 -v- TABLE OF CONTENTS (cont.) Page Section 12.08. Governing Law....................................... 72 Section 12.09. No Adverse Interpretation of Other Agreements....... 72 Section 12.10. Successors.......................................... 72 Section 12.11. Severability........................................ 73 Section 12.12. Counterpart Originals............................... 73 Section 12.13. Table of Contents, Headings, etc.................... 73 EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF SUPPLEMENTAL INDENTURE Exhibit C FORM OF NOTATION ON NOTE RELATING TO GUARANTEE NYMAIN01 Doc: 159158_2 -vi- INDENTURE dated as of ________, 1996 among Iron Mountain Incorporated, a Delaware corporation (the "Company"), the Restricted Subsidiaries signatory hereto and First Bank National Association, as trustee (the "Trustee"). The Company the Restricted Subsidiaries signatory hereto and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the __% Senior Subordinated Notes due 2006: ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "Acquired Debt" means, with respect to any specified Person, (a) Indebtedness of any other Person existing at the time such other Person merged with or into or became a Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person and (b) Indebtedness encumbering any asset acquired by such specified Person. "Acquisition EBITDA" means, as of any date of determination, with respect to an Acquisition EBITDA Entity, the sum of (a) EBITDA of such Acquisition EBITDA Entity for its last fiscal quarter for which financial statements are available at such date of determination, multiplied by four (or if such quarterly statements are not available, EBITDA for the most recent fiscal year for which financial statements are available), plus (b) projected quantifiable improvements in operating results (on an annualized basis) due to cost reductions calculated in good faith by the Company or one of its Restricted Subsidiaries, as certified by an Officers' Certificate filed with the Trustee, without giving effect to any operating losses of the acquired Person. "Acquisition EBITDA Entity" means, as of any date of determination, a business or Person (a) which has been acquired by the Company or one of its Restricted Subsidiaries and with respect to which financial results on a consolidated basis with the Company have not been made available for an entire fiscal quarter or (b) which is to be acquired in whole or in part with Indebtedness, the incurrence of which will require the calculation on such date of the Acquisition EBITDA of such Acquisition EBITDA Entity for purposes of Section 4.09 hereof. "Adjusted EBITDA" means, as of any date of determination and without duplication, the sum of (a) EBITDA of the Company and its Restricted Subsidiaries for the most recent fiscal quarter for which internal financial statements are available at such date of determination, multiplied by four, and (b) Acquisition EBITDA of each business or Person that is an Acquisition EBITDA Entity as of such date of determination, multiplied by a fraction, the numerator of which is three minus the number of months (and/or any portion thereof ) in such most recent fiscal quarter for which the financial results of such Acquisition EBITDA Entity are included in the EBITDA of the Company and its Restricted Subsidiaries under clause (a) above, and (ii) the NYMAIN01 Doc: 159158_2 denominator of which is three. The effects of unusual or non-recurring items in respect of the Company, a Restricted Subsidiary or an Acquisition EBITDA Entity occurring in any period shall be excluded in the calculation of Adjusted EBITDA. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, will mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Agent" means any Registrar, Paying Agent or co-registrar. "Attributable Indebtedness" in respect of a Sale and Leaseback Transaction means as of the time of determination, the greater of (a) the fair market value of the property subject to such arrangement (as determined by the Board of Directors) and (b) the present value (discounted at the rate of interest implicit in such transaction) of the total obligations of the lessee for rental payments during the remaining terms of the lease included in such Sale and Leaseback Transaction (including any period for which such lease has been extended). "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Board of Directors" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be so required to be capitalized on the balance sheet in accordance with GAAP. "Capital Stock" means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, with respect to partnerships, partnership interests (whether general or limited) and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership. "Cash Equivalents" means (a) securities with maturities of one year or less from the date of acquisition, issued, fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit, time deposits, overnight bank deposits, bankers acceptances and repurchase agreements issued by a Qualified Issuer having maturities of 270 days or less from the date of acquisition, (c) commercial paper of an issuer rated at least A-2 by Standard & Poor's Rating Group, a division of McGraw Hill, Inc., or P-2 by Moody's Investors Service, or carrying an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments and having maturities of 270 days or less from the date of acquisition, (d) money market accounts or funds with or issued by Qualified Issuers and (e) Investments in money market funds substantially all of the assets of which are comprised of securities and other obligations of the types described in clauses (a) through (c) above. NYMAIN01 Doc: 159158_2 2 "Change of Control" means the occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than the Principal Stockholders (or any of them), is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than a majority of the voting power of all classes of Voting Stock of the Company; (b) the Company consolidates with, or merges with or into, another Person or conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company is converted into or exchanged for cash, securities or other property, other than any such transaction where (i) the outstanding Voting Stock of the Company is not converted or exchanged at all (except to the extent necessary to reflect a change in the jurisdiction of incorporation) or is converted into or exchanged for (A) Voting Stock (other than Disqualified Stock) of the surviving or transferee Person or (B) cash, securities and other property (other than Capital Stock described in the foregoing clause (A)) of the surviving or transferee Person in an amount that could be paid as a Restricted Payment pursuant to Section 4.07 hereof and (ii) immediately after such transaction, no "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than the Principal Stockholders (or any of them), is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than a majority of the total outstanding Voting Stock of the surviving or transferee Person; (c) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election to such Board of Directors, or whose nomination for election by the stockholders of the Company, was approved by a vote of 662/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office; or (d) the Company is liquidated or dissolved or adopts a plan of liquidation or dissolution other than in a transaction which complies with the provisions described under "Consolidation, Merger and Sale of Assets." "Chrysler Notes" means the 13.42% Senior Subordinated Notes due December 41, 2000 in the original principal amount of $15.0 million issued by Iron Mountain Information Services, Inc. to Chrysler Capital Corporation. NYMAIN01 Doc: 159158_2 3 "Company" means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means the successor. "Consolidated Adjusted Net Income" means, for any period, the net income (or net loss) of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, adjusted to the extent included in calculating such net income or loss by excluding (a) any net after-tax extraordinary gains or losses (less all fees and expenses relating thereto), (b) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to Asset Sales, (c) the portion of net income (or loss) of any Person (other than the Company or a Restricted Subsidiary), including Unrestricted Subsidiaries, in which the Company or any Restricted Subsidiary has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any Restricted Subsidiary in cash dividends or distributions by such Person during such period, and (d) the net income (or loss) of any Person combined with the Company or any Restricted Subsidiary on a "pooling of interests" basis attributable to any period prior to the date of combination. "Consolidated Income Tax Expense" means, for any period, the provision for federal, state, local and foreign income taxes of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, for any period, without duplication, the sum of (a) the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on a consolidated statement of operations of the Company and its Restricted Subsidiaries for such period, including, without limitation, (i) amortization of debt discount, (ii) the net cost of interest rate contracts (including amortization of discounts), (iii) the interest portion of any deferred payment obligation, (iv) amortization of debt issuance costs and (v) the interest component of Capital Lease Obligations of the Company and its Restricted Subsidiaries, plus (b) all interest on any Indebtedness of any other Person guaranteed and paid by the Company or any of its Restricted Subsidiaries; provided, however, that Consolidated Interest Expense will not include any gain or loss from extinguishment of debt, including write-off of debt issuance costs. "Consolidated Non-Cash Charges" means, for any period, the aggregate depreciation, amortization and other non-cash expenses of the Company and its Restricted Subsidiaries reducing Consolidated Adjusted Net Income for such period, determined on a consolidated basis in accordance with GAAP (excluding any such non-cash charge that requires an accrual of or reserve for cash charges for any future period). "Corporate Trust Office of the Trustee" will be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Agent" means The Chase Manhattan Bank, in its capacity as administrative agent for the lenders party to the Credit Agreement, or any successor or successors party thereto. NYMAIN01 Doc: 159158_2 4 "Credit Agreement" means the Credit Agreement dated as of September 30, 1996 among the Company, the lenders from time to time party thereto and the Credit Agent, as amended, restated, supplemented, modified, renewed, refunded, increased, extended, replaced or refinanced from time to time. "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Depositary" means, with respect to Notes issuable in whole or in part in the form of one or more Global Notes, a clearing agency registered under the Exchange Act that is designated to act as Depositary for such Notes as contemplated by Section 2.01. "Designated Senior Debt" means (a) Senior Bank Debt and (b) other Senior Debt the principal amount of which is $50.0 million or more at the date of designation by the Company in a written instrument delivered to the Trustee; provided that Senior Debt designated as Designated Senior Debt pursuant to clause (b) shall cease to be Designated Senior Debt at any time that the aggregate principal amount thereof outstanding is $10.0 million or less. "Disqualified Stock" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the Holder thereof, in whole or in part, in each case on or prior to the stated maturity of the Notes. "distribution" means, for purposes of Articles 10 and 11, a distribution consisting of cash, securities or other property, by set-off or otherwise. "Dollars" and "$" mean lawful money of the United States of America. "EBITDA" means for any period Consolidated Adjusted Net Income for such period increased by (a) Consolidated Interest Expense for such period, plus (b) Consolidated Income Tax Expense for such period, plus (c) Consolidated Non-Cash Charges for such period. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Proceeds" means (a) with respect to Equity Interests (or debt securities converted into Equity Interests) issued or sold for cash Dollars, the aggregate amount of such cash Dollars and (b) with respect to Equity Interests (or debt securities converted into Equity Interests) NYMAIN01 Doc: 159158_2 5 issued or sold for any consideration other than cash Dollars, the aggregate Market Price thereof computed on the date of the issuance or sale thereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Excluded Restricted Subsidiary" means any Wholly Owned Restricted Subsidiary principally engaged in the records management business domiciled outside the United States of America if the issuance of a Subsidiary Guarantee by such Subsidiary would, as determined in a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee, create a tax disadvantage that is material in relation to the aggregate amount of the Company's and any Restricted Subsidiary's Investment or proposed Investment therein. "Existing Indebtedness" means Indebtedness of the Company and its Subsidiaries (other than under the Credit Agreement) in existence on the date of this Indenture, until such amounts are repaid. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of this Indenture. "Global Note" means a Note that evidences all or part of the Notes and is authenticated and delivered to, and registered in the name of, the Depositary for the Notes or a nominee thereof. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States of America is pledged. "Guarantee" means, as applied to any obligation, (a) a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner, of any part or all of such obligation and (b) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of all or any part of such obligation, including, without limiting the foregoing, the obligation to reimburse amounts drawn down under letters of credit securing such obligations. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (a) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (b) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Holder" means a Person in whose name a Note is registered. NYMAIN01 Doc: 159158_2 6 "Indebtedness" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person, and whether or not contingent, (a) every obligation of such Person for money borrowed, (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services, (e) every Capital Lease Obligation and every obligation of such Person in respect of Sale and Leaseback Transactions that would be required to be capitalized on the balance sheet in accordance with GAAP, (f) all Disqualified Stock of such Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price, plus accrued and unpaid dividends (unless included in such maximum repurchase price), (g) all obligations of such Person under or with respect to Hedging Obligations which would be required to be reflected on the balance sheet as a liability of such Person in accordance with GAAP and (h) every obligation of the type referred to in clauses (a) through (g) of another Person and dividends of another Person the payment of which, in either case, such Person has guaranteed. For purposes of this definition, the "maximum fixed repurchase price" of any Disqualified Stock that does not have a fixed repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were repurchased on any date on which Indebtedness is required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value will be determined in good faith by the board of directors of the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade accounts payable and accrued liabilities arising in the ordinary course of business and any liability for federal, state or local taxes or other taxes owed by such Person will not be considered Indebtedness for purposes of this definition. The amount outstanding at any time of any Indebtedness issued with original issue discount is the aggregate principal amount at maturity of such Indebtedness, less the remaining unamortized portion of the original issue discount of such Indebtedness at such time, as determined in accordance with GAAP. "Indenture" means this Indenture, as amended or supplemented from time to time. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "Issuance Date" means the closing date for the sale and original issuance of the Notes. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest will accrue for the intervening period. NYMAIN01 Doc: 159158_2 7 "Leverage Ratio" means, at any date, the ratio of (a) the aggregate principal amount of Indebtedness of the Company and its Restricted Subsidiaries outstanding as of the most recent available quarterly or annual balance sheet to (b) Adjusted EBITDA, after giving pro forma effect, without duplication, to (i) the incurrence, repayment or retirement of any Indebtedness by the Company or its Restricted Subsidiaries since the last day of the most recent full fiscal quarter of the Company, (ii) if the Leverage Ratio is being determined in connection with the incurrence of Indebtedness by the Company or a Restricted Subsidiary, such Indebtedness to be incurred, and (iii) the Indebtedness to be incurred in connection with the acquisition of any Acquisition EBITDA Entity. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code, or equivalent statutes, of any jurisdiction). "Market Price" means, (a) with respect to the calculation of Equity Proceeds from the issuance or sale of debt securities which have been converted into Equity Interests, the value received upon the original issuance or sale of such converted debt securities, as determined reasonably and in good faith by the Board of Directors, and (b) with respect to the calculation of Equity Proceeds from the issuance or sale of Equity Interests, the average of the daily closing prices for such Equity Interests for the 20 consecutive trading days preceding the date of such computation. The closing price for each day will be (a) if such Equity Interests are then listed or admitted to trading on the New York Stock Exchange, the closing price on the NYSE Consolidated Tape (or any successor consolidated tape reporting transactions on the New York Stock Exchange) or, if such composite tape is not in use or does not report transactions in such Equity Interests, or if such Equity Interests are listed on a stock exchange other than the New York Stock Exchange (including for this purpose the Nasdaq National Market), the last reported sale price regular way for such day, or in case no such reported sale takes place on such day, the average of the closing bid and asked prices regular way for such day, in each case on the principal national securities exchange on which such Equity Interests are listed or admitted to trading (which will be the national securities exchange on which the greatest number of such Equity Interests have been traded during such 20 consecutive trading days), or (b) if such Equity Interests are not listed or admitted to trading on any such exchange, the average of the closing bid and asked prices thereof in the over-the-counter market as reported by the National Association of Securities Dealers Automated Quotation System or any successor system, or if not included therein, the average of the closing bid and asked prices thereof furnished by two members of the National Association of Securities Dealers selected reasonably and in good faith by the Board of Directors for that purpose. In the absence of one or more such quotations, the Market Price for such Equity Interests will be determined reasonably and in good faith by the Board of Directors. "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale, which amount is equal to the excess, if any, of (a) the cash received by the Company or such Restricted Subsidiary (including any cash NYMAIN01 Doc: 159158_2 8 payments received by way of deferred payment pursuant to, or monetization of, a note or installment receivable or otherwise, but only as and when received) in connection with such disposition over (b) the sum of (i) the amount of any Indebtedness which is secured by such asset and which is required to be repaid in connection with the disposition thereof, plus (ii) the reasonable out-of-pocket expenses incurred by the Company or such Restricted Subsidiary, as the case may be, in connection with such disposition or in connection with the transfer of such amount from such Restricted Subsidiary to the Company, plus (iii) provisions for taxes, including income taxes, attributable to the disposition of such asset or attributable to required prepayments or repayments of Indebtedness with the proceeds thereof, plus (iv) if the Company does not first receive a transfer of such amount from the relevant Restricted Subsidiary with respect to the disposition of an asset by such Restricted Subsidiary and such Restricted Subsidiary intends to make such transfer as soon as practicable, the out-of-pocket expenses and taxes that the Company reasonably estimates will be incurred by the Company or such Restricted Subsidiary in connection with such transfer at the time such transfer is expected to be received by the Company (including, without limitation, withholding taxes on the remittance of such amount). "Notes" means the __% Senior Subordinated Notes due 2006, as amended or supplemented from time to time pursuant to the terms hereof, that are issued under this Indenture. "Obligations" means any principal, interest (including post-petition interest, whether or not allowed as a claim in any proceeding), penalties, fees, costs, expenses, indemnifications, reimbursements, damages and other liabilities payable under or in connection with any Indebtedness. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "Officers' Certificate" means a certificate signed, unless otherwise specified, by any two of the Chairman of the Board, a Vice Chairman of the Board, the President, the Chief Financial Officer, the Controller or an Executive Vice President of the Company, and delivered to the Trustee, that meets the requirements of Section 12.05 hereof. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 12.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Permitted Investments" means (a) any Investments in the Company or in a Restricted Subsidiary (other than an Excluded Restricted Subsidiary) of the Company, including without limitation the Guarantee of Indebtedness permitted under Section 4.09 hereof; (b) any Investments in Cash Equivalents; (c) Investments by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Restricted Subsidiary (other than an Excluded Restricted Subsidiary) of the Company or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its NYMAIN01 Doc: 159158_2 9 assets to, or is liquidated into, the Company or a Restricted Subsidiary (other than an Excluded Restricted Subsidiary) of the Company; (d) Investments in assets (including accounts and notes receivable) owned or used in the ordinary course of business; (e) Investments for any purpose related to the Company's records management business in an aggregate outstanding principal amount not to exceed $10.0 million; and (f) Investments by the Company or a Restricted Subsidiary (other than an Excluded Restricted Subsidiary) in one or more Excluded Restricted Subsidiaries, the aggregate outstanding amount of which does not exceed 10% of the consolidated assets of the Company and its Restricted Subsidiaries. "Permitted Liens" means: (a) Liens existing as of the Issuance Date; (b) Liens on property or assets of the Company or any Restricted Subsidiary securing Senior Debt; (c) Liens on any property or assets of a Restricted Subsidiary granted in favor of the Company or any Wholly Owned Restricted Subsidiary; (d) Liens securing the Notes or the Subsidiary Guarantees; (e) any interest or title of a lessor under any Capital Lease Obligation or Sale and Leaseback Transaction so long as the Indebtedness, if any, secured by such Lien does not exceed the principal amount of Indebtedness permitted under Section 4.09 hereof; (f) Liens securing Acquired Debt created prior to (and not in connection with or in contemplation of) the incurrence of such Indebtedness by the Company or any Restricted Subsidiary; provided that such Lien does not extend to any property or assets of the Company or any Restricted Subsidiary other than the assets acquired in connection with the incurrence of such Acquired Debt; (g) Liens securing Hedging Obligations permitted to be incurred pursuant to clause (g) of Section 4.09 hereof; (h) Liens arising from purchase money mortgages and purchase money security interests, or in respect of the construction of property or assets, incurred in the ordinary course of the business of the Company or a Restricted Subsidiary; provided that (i) the related Indebtedness is not secured by any property or assets of the Company or any Restricted Subsidiary other than the property and assets so acquired or constructed and (ii) the Lien securing such Indebtedness is created within 60 days of such acquisition or construction; (i) statutory Liens or landlords' and carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's or other like Liens arising in NYMAIN01 Doc: 159158_2 10 the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate proceedings, if a reserve or other appropriate provision, if any, as is then required in conformity with GAAP has been made therefor; (j) Liens for taxes, assessments, government charges or claims with respect to amounts not yet delinquent or that are being contested in good faith by appropriate proceedings diligently conducted, if a reserve or other appropriate provision, if any, as is required in conformity with GAAP has been made therefor; (k) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory obligations, surety and appeal bonds, government contracts, performance bonds and other obligations of a like nature incurred in the ordinary course of business (other than contracts for the payment of money); (l) easements, rights-of-way, restrictions and other similar charges or encumbrances not interfering in any material respect with the business of the Company or any Restricted Subsidiary incurred in the ordinary course of business; (m) Liens arising by reason of any judgment, decree or order of any court so long as such Lien is adequately bonded and any appropriate legal proceedings that may have been duly initiated for the review of such judgment, decree or order shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (n) Liens arising under options or agreements to sell assets; (o) other Liens securing obligations incurred in the ordinary course of business, which obligations do not exceed $1.0 million in the aggregate at any one time outstanding; and (p) any extension, renewal or replacement, in whole or in part, of any Lien described in the foregoing clauses (a) through (o); provided that any such extension, renewal or replacement does not extend to any additional property or assets. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or any government or any agency or political subdivision thereof. "Principal Stockholders" means each of Vincent J. Ryan, Schooner Capital Corporation, C. Richard Reese, Eugene B. Doggett, and their respective Affiliates. NYMAIN01 Doc: 159158_2 11 "Qualified Equity Offering" means an offering of Capital Stock, other than Disqualified Stock, of the Company for Dollars, whether registered or exempt from registration under the Securities Act. "Qualified Issuer" means (a) any lender party to the Credit Agreement or (b) any commercial bank (i) which has capital and surplus in excess of $500,000,000 and (ii) the outstanding short-term debt securities of which are rated at least A-2 by Standard & Poor's Rating Group, a division of McGraw-Hill, Inc. or at least P-2 by Moody's Investors Service, or carry an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments. "Qualifying Sale and Leaseback Transaction" means any Sale and Leaseback Transaction between the Company or any of its Restricted Subsidiaries and any bank, insurance company or other lender or investor providing for the leasing to the Company or such Restricted Subsidiary of any property (real or personal) which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor and where the property in question has been constructed or acquired after the date of this Indenture. "Refinancing Indebtedness" means new Indebtedness incurred or given in exchange for, or the proceeds of which are used to repay, redeem, defease, extend, refinance, renew, replace or refund, other Indebtedness; provided, however, that (a) the principal amount of such new Indebtedness shall not exceed the principal amount of Indebtedness so repaid, redeemed, defeased, extended, refinanced, renewed, replaced or refunded (plus the amount of fees, premiums, consent fees, prepayment penalties and expenses incurred in connection therewith); (b) such Refinancing Indebtedness shall have a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of the Indebtedness so repaid, redeemed, defeased, extended, refinanced, renewed, replaced or refunded or shall mature after _______, 2006; (c) to the extent such Refinancing Indebtedness refinances Indebtedness that has a final maturity date occurring after ________, 2006, such new Indebtedness shall have a final scheduled maturity not earlier than the final scheduled maturity of the Indebtedness so repaid, redeemed, defeased, extended, refinanced, renewed, replaced or refunded and shall not permit redemption at the option of the holder earlier than the earliest date of redemption at the option of the holder of the Indebtedness so repaid, redeemed, defeased, extended, refinanced, renewed, replaced or refunded; (d) to the extent such Refinancing Indebtedness refinances Indebtedness subordinate to the Notes, such Refinancing Indebtedness shall be subordinated in right of payment to the Notes and to the extent such Refinancing Indebtedness refinances Notes or Indebtedness pari passu with the Notes, such Refinancing Indebtedness shall be pari passu with or subordinated in right of payment to the Notes, in each case on terms at least as favorable to the holders of Notes as those contained in the documentation governing the Indebtedness so repaid, redeemed, defeased, extended, refinanced, renewed, replaced or refunded; and (e) with respect to Refinancing Indebtedness incurred by a Restricted Subsidiary, such Refinancing Indebtedness shall rank no more senior, and shall be at least as subordinated, in right of payment to the Subsidiary Guarantee of such Restricted Subsidiary as the Indebtedness being extended, refinanced, renewed, replaced or refunded. NYMAIN01 Doc: 159158_2 12 "Representative" means, for purposes of Articles 10 and 11, the Credit Agent or other agent, trustee or representative for any Senior Debt of the Company or, with respect to any Restricted Subsidiary, for any Senior Debt of such Restricted Subsidiary. "Responsible Officer" when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Subsidiary" means (a) each direct or indirect Subsidiary of the Company existing on the date of this Indenture and (b) any other direct or indirect Subsidiary of the Company formed, acquired or existing after the date of this Indenture, in each case which is not designated by the Board of Directors as an "Unrestricted Subsidiary." "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Sale and Leaseback Transaction" means any transaction or series of related transactions pursuant to which a Person sells or transfers any property or asset in connection with the leasing, or the resale against installment payments, of such property or asset to the seller or transferor. "Senior Bank Debt" means all Obligations outstanding under or in connection with the Credit Agreement (including Guarantees of such Obligations by Subsidiaries of the Company). "Senior Debt" means (a) the Senior Bank Debt and (b) any other Indebtedness permitted to be incurred by the Company or any Restricted Subsidiary, as the case may be, under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes. Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not include (i) any liability for federal, state, local or other taxes owed or owing by the Company, (ii) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates, (iii) any trade payables or (iv) any Indebtedness that is incurred in violation of this Indenture; provided, however, that such Indebtedness shall be deemed not to have been incurred in violation of this Indenture for purpooses of this clause (iv) if, in the case of any obligations under the Credit Agreement, the holders of such obligations or their agent or representative shall have received a written representation from the Company to the effect that the incurrence of such Indebtedness does not violate the provisions of this Indenture. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof. "Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, NYMAIN01 Doc: 159158_2 13 managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof. "Subsidiary Guarantee" means a Guarantee of a Guarantor pursuant to Article 11 hereof. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Subsidiary" means (a) any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary in accordance with Section 4.17 hereof and (b) any Subsidiary of an Unrestricted Subsidiary. "Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency). "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (b) the then outstanding principal amount of such Indebtedness. "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary of the Company all of the outstanding Capital Stock or other ownership interests of which (other than director's qualifying shares) shall at the time be owned by the Company or by one of more Wholly Owned Restricted Subsidiaries of the Company. SECTION 1.02. OTHER DEFINITIONS. Defined in Term Section "Affiliate Transaction"....................................... 4.11 "Asset Sale".................................................. 4.10 "Asset Sale Offer"............................................ 4.10 "Benefitted Party"............................................ 11.01 "Change of Control Offer"..................................... 4.14 NYMAIN01 Doc: 159158_2 14 "Change of Control Payment"................................... 4.14 "Change of Control Payment Date".............................. 4.14 "Covenant Defeasance"......................................... 8.03 "Commencement Date"........................................... 4.10 "Event of Default"............................................ 6.01 "Excess Proceeds"............................................. 4.10 "Guarantor"................................................... 11.01 "incur"....................................................... 4.09 "Legal Defeasance" ........................................... 8.02 "Non-Monetary Default"........................................ 10.03 "Offer Amount"................................................ 3.09 "Offer Period"................................................ 3.09 "Paying Agent"................................................ 2.03 "Payment Blockage Notice"..................................... 10.03 "Payment Default"............................................. 10.03 "Purchase Date"............................................... 3.09 "Registrar"................................................... 2.03 "Restricted Payments"......................................... 4.07 "Separation Date"............................................. 2.06 SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture, other than those provisions of the TIA that may be excluded herein, which provision shall be excluded to the extent specifically excluded in this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes and the Subsidiary Guarantees, if any; "indenture security holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; "obligor" on the Notes means the Company, the Guarantors and any successor obligor upon the Notes or any Subsidiary Guarantee, as the case may be. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by a rule or regulation promulgated by the SEC under the TIA have the meanings so assigned to them. NYMAIN01 Doc: 159158_2 15 SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act or the Exchange Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time. ARTICLE 2 THE NOTES SECTION 2.01. FORM AND DATING. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto, the terms of which are incorporated in and made a part of this Indenture. The notation on each Note relating to the Subsidiary Guarantees shall be substantially in the form set forth on Exhibit C, which is part of this Indenture. The Notes may have notations, legends or endorsements approved as to form by the Company and required by law, stock exchange rule, agreements to which the Company or each Restricted Subsidiary is subject, or usage. Each Note shall be dated the date of its authentication. The Notes shall be issuable only in denominations of $1,000 and integral multiples thereof. The Notes may, at the option of the Company, be issuable in whole or in part in the form of one or more Global Notes and, in such case, the Depositary or Depositaries for such Global Note or Global Notes shall be designated by the Company in an Officers' Certificate delivered to the Trustee on or prior to the Issuance Date. Every Global Note authenticated and delivered hereunder will bear a legend substantially in the form thereof set forth on Exhibit A hereto. SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers of the Company shall sign the Notes for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Notes and may be in NYMAIN01 Doc: 159158_2 16 facsimile form. An Officer of each Guarantor shall sign the Subsidiary Guarantee for such Guarantor by manual or facsimile signature. If an Officer of the Company or a Guarantor whose signature is on a Note or a Subsidiary Guarantee, as the case may be, no longer holds that office at the time the Note is authenticated, the Note or the Subsidiary Guarantee, as the case may be, shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature of the Trustee shall be conclusive evidence that the Note has been authenticated under this Indenture. The form of Trustee's certificate of authentication to be borne by the Notes shall be substantially as set forth in Exhibit A hereto. The Trustee shall, upon a written order of the Company signed by two Officers of the Company, authenticate Notes for original issue up to an aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time shall not exceed $__,000,000 except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or any Guarantor or an Affiliate of the Company or any Guarantor. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain (i) an office or agency where Notes may be presented for registration of transfer or for exchange (including any co-registrar, the "Registrar") and (ii) an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent, Registrar or co-registrar without prior notice to any Holder of a Note. The Company shall notify the Trustee and the Trustee shall notify the Holders of the Notes of the name and address of any Agent not a party to this Indenture. The Company or any Guarantor may act as Paying Agent, Registrar or co-registrar. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which shall be subject to any obligations imposed by the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such, and shall be entitled to appropriate compensation in accordance with Section 7.07 hereof. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of notices and demands in connection with the Notes. NYMAIN01 Doc: 159158_2 17 SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of the Holders of the Notes or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any, and interest on the Notes, and shall notify the Trustee of any Default by the Company or the Guarantors in making any such payment. While any such Default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Guarantor) shall have no further liability for the money delivered to the Trustee. If the Company or a Guarantor acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders of the Notes, subject to Article 10 hereof, all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceeding relating to the Company or a Guarantor, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05. LISTS OF HOLDERS OF THE NOTES. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders of the Notes and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Company and/or the Guarantors shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders of the Notes, including the aggregate principal amount of the Notes held by each thereof, and the Company and each Guarantor shall otherwise comply with TIA ss. 312(a). SECTION 2.06. TRANSFER AND EXCHANGE. When Notes are presented to the Registrar with a request to register the transfer or to exchange them for an equal principal amount of Notes of other denominations, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met; provided, however, that any Note presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar and the Trustee duly executed by the Holder thereof or by his attorney duly authorized in writing. To permit registrations of transfer and exchanges, the Company shall issue and the Trustee shall authenticate Notes at the Registrar's request, subject to such rules as the Trustee may reasonably require. Neither the Company nor the Registrar shall be required to (a) issue, register the transfer of or exchange Notes during a period beginning at the opening of business on a Business Day 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection or (b) register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. NYMAIN01 Doc: 159158_2 18 No service fee shall be charged to any Holder of a Note for any registration of transfer or exchange (except as otherwise expressly permitted herein), but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than such transfer tax or similar governmental charge payable upon exchanges pursuant to Sections 2.10, 3.06 or 9.05 hereof, which shall be paid by the Company). Prior to due presentment to the Trustee for registration of the transfer of any Note, the Trustee, any Agent, the Company and each Guarantor may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of, premium, if any, and interest on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Trustee, any Agent, the Company or any Guarantor shall be affected by notice to the contrary. Notwithstanding any other provision in this Indenture, no Global Note may be transferred to, or registered or exchanged for Notes registered in the name of, any Person other than the Depositary for such Global Note or any nominee thereof, and no such transfer may be registered, unless (a) such Depositary (i) notifies the Company that it is unwilling or unable to continue as Depositary for such Global Note or (ii) ceases to be a clearing agency registered under the Exchange Act, (b) the Company delivers to the Trustee an Officers' Certificate stating that such Global Note shall be so transferable, registrable, and exchangeable, and such transfers shall be registrable, or (c) there shall have occurred and be continuing an Event of Default with respect to the Notes evidenced by such Global Note. Notwithstanding any other provision in this Indenture, a Global Note to which the restriction set forth in the preceding sentence shall have ceased to apply may be transferred only to, and may be registered and exchanged for Notes registered only in the name or names of, such Person or Persons as the Depositary for such Global Note shall have directed and no transfer thereof other than such a transfer may be registered. Every Note authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Note to which the restriction set forth in the first sentence of this paragraph shall apply, whether pursuant to this Section 2.06 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Note. SECTION 2.07. REPLACEMENT NOTES. If any mutilated Note is surrendered to the Trustee, or the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon the written order of the Company signed by two Officers of the Company, shall authenticate a replacement Note (accompanied by a notation of the Subsidiary Guarantees duly endorsed by each Guarantor) if the Trustee's requirements for replacements of Notes are met. If required by the Trustee, the Company or the Guarantors, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee, the Company and the Guarantors to protect the Company, the Guarantors, the Trustee, any Agent or any authenticating agent from any loss which any of them may suffer if a Note is replaced. Each of the Company, the Guarantors and the Trustee may charge for its expenses in replacing a Note. NYMAIN01 Doc: 159158_2 19 Every replacement Note is an additional obligation of the Company and the Guarantors and shall be entitled to all of the benefits of this Indenture equally and ratably with all other Notes duly issued hereunder. SECTION 2.08. OUTSTANDING NOTES. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section 2.08 as not outstanding. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. Subject to Section 2.09 hereof, a Note does not cease to be outstanding because the Company, a Guarantor, a Subsidiary of the Company or a Guarantor or an Affiliate of the Company or a Guarantor holds the Note. SECTION 2.09. TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, any Guarantor, any of their respective Subsidiaries or any Affiliate of the Company or any Guarantor shall be considered as though not outstanding, except that for purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee knows to be so owned shall be so considered. Notwithstanding the foregoing, Notes that are to be acquired by the Company, any Guarantor, any Subsidiary of the Company or any Guarantor or an Affiliate of the Company or any Guarantor pursuant to an exchange offer, tender offer or other agreement shall not be deemed to be owned by the Company, such Guarantor, a Subsidiary of the Company or such Guarantor or an Affiliate of the Company or such Guarantor until legal title to such Notes passes to the Company, such Guarantor, such Subsidiary or such Affiliate, as the case may be. SECTION 2.10. TEMPORARY NOTES. Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes (accompanied by a notation of the Subsidiary Guarantees duly endorsed by each Guarantor). Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company and the Trustee consider appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee, upon receipt of the written order of the Company signed by two Officers of the Company, shall authenticate definitive Notes (accompanied by a notation of the Subsidiary Guarantees duly endorsed by each Guarantor) in exchange for temporary Notes. Until such exchange, temporary Notes shall be entitled to the same rights, benefits and privileges as definitive Notes. NYMAIN01 Doc: 159158_2 20 SECTION 2.11. CANCELLATION. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy canceled Notes (subject to the record retention requirement of the Exchange Act), unless the Company directs canceled Notes to be returned to it. The Company may not issue new Notes to replace Notes that it has redeemed or paid or that have been delivered to the Trustee for cancellation. All canceled Notes held by the Trustee shall be destroyed and certification of their destruction delivered to the Company, unless by a written order, signed by two Officers of the Company, the Company shall direct that canceled Notes be returned to it. SECTION 2.12. DEFAULTED INTEREST. If the Company and the Guarantors default in a payment of interest on the Notes, the Company or any such Guarantor (to the extent of its obligations under its Subsidiary Guarantee) shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders of the Notes on a subsequent special record date, which date shall be at the earliest practicable date but in all events at least five Business Days prior to the payment date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall fix or cause to be fixed each such special record date and payment date, and shall, promptly thereafter, notify the Trustee of any such date. At least 15 days before the special record date, the Company (or the Trustee, in the name of and at the expense of the Company) shall mail to Holders of the Notes a notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.13. RECORD DATE. The record date for purposes of determining the identity of Holders of the Notes entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture shall be determined as provided for in TIA ss. 316(c). SECTION 2.14. CUSIP NUMBER. The Company in issuing the Notes may use a "CUSIP" number and, if it does so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Notes and that reliance may be placed only on the other identification numbers printed on the Notes. The Company will promptly notify the Trustee of any change in the CUSIP number. NYMAIN01 Doc: 159158_2 21 SECTION 2.15. COMPUTATION OF INTEREST. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. ARTICLE 3 REDEMPTION AND OFFERS TO PURCHASE SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the Section of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED. If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed among the applicable Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate, provided that no Notes of $1,000 or less shall be redeemed in part. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; NYMAIN01 Doc: 159158_2 22 (b) the redemption price (including accrued interest to the redemption date); (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption shall cease to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. On and after the redemption date, unless the Company defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption and all rights of Holders with respect to such Notes will terminate except for the right to receive payment of the redemption price upon surrender for redemption. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. One Business Day prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. NYMAIN01 Doc: 159158_2 23 If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption, whether or not such Notes are presented for payment. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. SECTION 3.06. NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note (accompanied by a notation of the Subsidiary Guarantees duly endorsed by each Guarantor) equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.07. OPTIONAL REDEMPTION. The Notes shall not be redeemable at the Company's option prior to ______, 2001. Thereafter, the Notes shall be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on ______ of the years indicated below: Year Percentage 2001..................................................... ___.__% 2002..................................................... ___.__% 2003..................................................... ___.__% 2004 and thereafter...................................... 100.00% Notwithstanding the foregoing, at any time prior to ______, 1999, the Company may redeem up to 35% of the initial principal amount of the Notes originally issued with the net proceeds of one or more Qualified Equity Offerings at a redemption price equal to ___% of the principal amount of such Notes, plus accrued and unpaid interest, if any, to the date of redemption; provided, that at least 65% of the principal amount of Notes originally issued remains outstanding immediately after the occurrence of any such redemption and that such redemption occurs within 60 days following the closing of any such Qualified Equity Offering. SECTION 3.08. MANDATORY REDEMPTION. NYMAIN01 Doc: 159158_2 24 Except as set forth below under Section 4.10 and Section 4.14 hereof, the Company shall not be required to make sinking fund or redemption payments with respect to the Notes. SECTION 3.09. ASSET SALE OFFERS. In the event that the Company shall commence an Asset Sale Offer pursuant to Section 4.10 hereof, it shall follow the procedures specified below: The Asset Sale Offer shall remain open for 20 Business Days after the Commencement Date relating to such Asset Sale Offer, except to the extent required to be extended by applicable law (as so extended, the "Offer Period"). No later than one Business Day after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount (the "Offer Amount") of Notes required to be purchased in such Asset Sale Offer pursuant to Sections 3.02 and 4.10 hereof or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. If the Purchase Date is on or after an interest payment record date and on or before the related interest payment date, any interest accrued to such Purchase Date shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. On the Commencement Date of any Asset Sale Offer, the Company shall send or cause to be sent, by first class mail, a notice to each of the Holders, with a copy to the Trustee. Such notice, which shall govern the terms of the Asset Sale Offer, shall contain all instructions and materials necessary to enable the Holders to tender Notes pursuant to the Asset Sale Offer and shall state: (1) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (2) the Offer Amount, the Purchase Price and the Purchase Date; (3) that any Note not tendered or accepted for payment shall continue to accrue interest; (4) that, unless the Company defaults in the payment of the Purchase Price, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date; (5) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice prior to the close of business on the Business Day preceding the Purchase Date; NYMAIN01 Doc: 159158_2 25 (6) that Holders shall be entitled to withdraw their election if the Company, depositary or Paying Agent, as the case may be, receives, not later than the close of business on the Business Day preceding the termination of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have the Note purchased; (7) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Trustee shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (8) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered. On or before 12:00 p.m. on each Purchase Date, the Company shall irrevocably deposit with the Trustee or Paying Agent in immediately available funds the aggregate Purchase Price with respect to a principal amount of Notes equal to the Offer Amount, together with accrued interest thereon, if any, to be held for payment in accordance with the terms of this Section 3.09. On the Purchase Date, the Company shall, to the extent lawful, (i) accept for payment, on a pro rata basis to the extent necessary, an aggregate principal amount equal to the Offer Amount of Notes tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes or portions thereof tendered, (ii) deliver or cause the Paying Agent or depositary, as the case may be, to deliver to the Trustee Notes so accepted and (iii) deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, depositary or Paying Agent, as the case may be, shall promptly (but in any case not later than three Business Days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the Purchase Price with respect to the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee shall authenticate and mail or deliver such new Note, to such Holder, equal in principal amount to any unpurchased portion of such Holder's Notes surrendered. Any Note not accepted in the Asset Sale Offer shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce in a newspaper of general circulation the results of the Asset Sale Offer on the Purchase Date. The Asset Sale Offer shall be made by the Company in compliance with all applicable laws, including, without limitation, Regulation 14E of the Exchange Act and the rules thereunder, to the extent applicable, and all other applicable federal and state securities laws. Each purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of the second paragraph of Section 3.05 hereof to the extent applicable. NYMAIN01 Doc: 159158_2 26 In the event the amount of Excess Proceeds to be applied to an Asset Sale Offer would result in the purchase of a principal amount of Notes which is not evenly divisible by $1,000, the Trustee shall promptly refund to the Company the portion of such Excess Proceeds that is not necessary to purchase the immediately lesser principal amount of Notes that is so divisible. ARTICLE 4 COVENANTS SECTION 4.01. PAYMENT OF NOTES. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Restricted Subsidiary, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company or any Restricted Subsidiary in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof. NYMAIN01 Doc: 159158_2 27 SECTION 4.03. REPORTS. Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company will furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10- Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all financial information that would be required to be included in a Form 8-K filed with the SEC if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the SEC, the Company will file a copy of all such information and reports with the SEC for public availability (unless the SEC will not accept such a filing) and make such information available to investors who request it in writing. Notwithstanding anything to the contrary contained herein, the Trustee shall have no duty to review such documents for purposes of determining compliance with any provisions of this Indenture. SECTION 4.04. COMPLIANCE CERTIFICATE. (a) The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company and each Restricted Subsidiary has kept, observed, performed and fulfilled its obligations under this Indenture (including with respect to any Restricted Payments made during such year, the basis upon which the calculations required by Section 4.07 hereof were computed, which calculations may be based on the Company's latest available financial statements), and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge, the Company and each Restricted Subsidiary has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company and each Restricted Subsidiary, as the case may be, is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company and each Restricted Subsidiary, as the case may be, is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03 hereof shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of NYMAIN01 Doc: 159158_2 28 existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.05. TAXES. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except (i) such as are contested in good faith and by appropriate proceedings or (ii) the nonpayment of which would not materially adversely affect the business, condition (financial or otherwise), operations, performance or properties of the Company and its Subsidiaries, taken as a whole. SECTION 4.06. STAY, EXTENSION AND USURY LAWS. Each of the Company and the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and each of the Company and the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.07. RESTRICTED PAYMENTS. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (a) declare or pay any dividend or make any distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or such Restricted Subsidiary or dividends or distributions payable to the Company or any Restricted Subsidiary); (b) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any Restricted Subsidiary or other Affiliate of the Company (other than any such Equity Interests owned by the Company or any Restricted Subsidiary); (c) purchase, redeem or otherwise acquire or retire prior to scheduled maturity for value any Indebtedness that is subordinated in right of payment to the Notes; or (d) make any Investment other than a Permitted Investment (all such payments and other actions set forth in clauses (a) through (d) above being collectively referred to as "Restricted Payments"), unless, at the time of such Restricted Payment: NYMAIN01 Doc: 159158_2 29 (i) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (ii) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the test set forth in the first paragraph of Section 4.09 hereof; and (iii)such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of this Indenture is less than (x) the cumulative EBITDA of the Company, minus 1.75 times the cumulative Consolidated Interest Expense of the Company, in each case for the period (taken as one accounting period) from June 30, 1996, to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, plus (y) the aggregate net Equity Proceeds received by the Company from the issuance or sale since the date of this Indenture of Equity Interests of the Company or of debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests or convertible debt securities sold to a Restricted Subsidiary of the Company and other than Disqualified Stock or debt securities that have been converted into Disqualified Stock), plus (z) $2.0 million. The foregoing provisions will not prohibit (A) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (B) the redemption, repurchase, retirement or other acquisition or retirement for value of any Equity Interests of the Company in exchange for, or with the net cash proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of other Equity Interests of the Company (other than any Disqualified Stock); (C) the defeasance, redemption, repurchase, retirement or other acquisition or retirement for value of Indebtedness that is subordinated or pari passu in right of payment to the Notes in exchange for, or with the net cash proceeds of, a substantially concurrent issuance and sale (other than to a Restricted Subsidiary of the Company) of Equity Interests of the Company (other than Disqualified Stock); (D) the defeasance, redemption, repurchase, retirement or other acquisition or retirement for value of Indebtedness that is subordinated or pari passu in right of payment to the Notes in exchange for, or with the net cash proceeds of, a substantially concurrent issue and sale (other than to the Company or any of its Restricted Subsidiaries) of Refinancing Indebtedness; (E) the repurchase of any Indebtedness subordinated or pari passu in right of payment to the Notes at a purchase price not greater than 101% of the principal amount of such Indebtedness in the event of a Change of Control in accordance with provisions similar to the covenant set forth in Section 4.14 hereof, provided that prior to or contemporaneously with such repurchase the Company has made the Change of Control Offer as provided in such covenant with respect to the Notes and has repurchased all Notes validly tendered for payment in connection with such Change of Control Offer; (F) the prepayment of the Chrysler Notes, together with premium and interest thereon; (G) the prepayment of $450,000 of junior subordinated notes originally issued by the Company to First Document Storage, Inc. in connection with a 1990 acquisition, together with interest thereon; and (H) additional payments to current or former employees or directors of the Company for repurchases of stock, stock options or other equity interests, provided that the NYMAIN01 Doc: 159158_2 30 aggregate amount of all such payments under this clause (H) does not exceed $500,000 in any year and $2.0 million in the aggregate. The Restricted Payments described in clauses (B), (C), (E) and (H) of the immediately preceding paragraph will be Restricted Payments that will be permitted to be taken in accordance with such paragraph but will reduce the amount that would otherwise be available for Restricted Payments under clause (iii) of the first paragraph of this section, and the Restricted Payments described in clauses (A), (D), (F) and (G) of the immediately preceding paragraph will be Restricted Payments that will be permitted to be taken in accordance with such paragraph and will not reduce the amount that would otherwise be available for Restricted Payments under clause (iii) of the first paragraph of this section. If an Investment results in the making of a Restricted Payment, the aggregate amount of all Restricted Payments deemed to have been made as calculated under the foregoing provision will be reduced by the amount of any net reduction in such Investment (resulting from the payment of interest or dividends, loan repayment, transfer of assets or otherwise) to the extent such net reduction is not included in the Company's EBITDA; provided, however, that the total amount by which the aggregate amount of all Restricted Payments may be reduced may not exceed the lesser of (a) the cash proceeds received by the Company and its Restricted Subsidiaries in connection with such net reduction and (b) the initial amount of such Investment. If the aggregate amount of all Restricted Payments calculated under the foregoing provision includes an Investment in an Unrestricted Subsidiary or other Person that thereafter becomes a Restricted Subsidiary, such Investment will no longer be counted as a Restricted Payment for purposes of calculating the aggregate amount of Restricted Payments. For the purpose of making any calculations under this Indenture, (a) an Investment will include the fair market value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and will exclude the fair market value of the net assets of any Unrestricted Subsidiary that is designated as a Restricted Subsidiary, (b) any property transferred to or from an Unrestricted Subsidiary will be valued at fair market value at the time of such transfer, provided that, in each case, the fair market value of an asset or property is as determined by the Board of Directors in good faith, and (c) subject to the foregoing, the amount of any Restricted Payment, if other than cash, will be determined by the Board of Directors, whose good faith determination will be conclusive. The Board of Directors may designate a Restricted Subsidiary to be an Unrestricted Subsidiary in compliance with Section 4.17 hereof. Upon such designation, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments made at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this Section 4.07. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. NYMAIN01 Doc: 159158_2 31 SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (a) (i) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or (B) with respect to any other interest or participation in, or measured by, its profits, or (ii) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries, (b) make loans or advances to the Company or any of its Restricted Subsidiaries or (c) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (1) Existing Indebtedness as in effect on the date of this Indenture, (2) the Credit Agreement as in effect as of the date of this Indenture, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancing thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are no more restrictive in the aggregate with respect to such dividend and other payment restrictions than those contained in the Credit Agreement as in effect on the date of this Indenture, (3) this Indenture and the Notes, (4) applicable law, (5) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that the EBITDA of such Person is not taken into account in determining whether such acquisition was permitted by the terms of this Indenture, (6) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices, (7) restrictions on the transfer of property subject to purchase money or capitalized lease obligations otherwise permitted by clause (e) of Section 4.09 hereof, or (8) permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Refinancing Indebtedness are no more restrictive in the aggregate than those contained in the agreements governing the Indebtedness being refinanced. SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty or otherwise become directly or indirectly liable with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and the Company will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Company may incur Indebtedness and may permit a Restricted Subsidiary to incur Indebtedness if at the time of such incurrence and after giving effect thereto the Leverage Ratio would be less than 6.0 to 1.0. The foregoing limitations will not apply to (a) the incurrence by the Company or any Restricted Subsidiary of Senior Bank Debt in an aggregate amount not to exceed $25.0 million at any one time outstanding, (b) the issuance by the Restricted Subsidiaries of Subsidiary Guarantees, NYMAIN01 Doc: 159158_2 32 (c) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness, (d) the issuance by the Company of the Notes, (e) the incurrence by the Company and its Restricted Subsidiaries of Capital Lease Obligations and/or additional Indebtedness constituting purchase money obligations up to an aggregate of $2.5 million at any one time outstanding, provided that the Liens securing such Indebtedness constitute Permitted Liens, (f) the incurrence of Indebtedness between (i) the Company and its Restricted Subsidiaries and (ii) the Restricted Subsidiaries, (g) Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding, (h) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness arising out of letters of credit, performance bonds, surety bonds and bankers' acceptances incurred in the ordinary course of business up to an aggregate of $2.0 million at any one time outstanding, (i) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock, and (j) the incurrence by the Company and its Restricted Subsidiaries of Refinancing Indebtedness issued in exchange for, or the proceeds of which are used to repay, redeem, defease, extend, refinance, renew, replace or refund, Indebtedness referred to in clauses (b) through (e) above, and this clause (j). SECTION 4.10. ASSET SALES. The Company will not, and will not permit any of its Restricted Subsidiaries to, (a) sell, lease, convey or otherwise dispose of any assets (including by way of a Sale and Leaseback Transaction, but excluding a Qualifying Sale and Leaseback Transaction) other than sales of inventory in the ordinary course of business (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company will be governed by the provisions of Section 4.14 hereof and/or the provisions of Section 5.01 hereof, and not by the provisions of this Section 4.10), or (b) issue or sell Equity Interests of any of its Restricted Subsidiaries, that, in the case of either clause (a) or (b) above, whether in a single transaction or a series of related transactions, (i) have a fair market value in excess of $1.0 million, or (ii) result in Net Proceeds in excess of $1.0 million (each of the foregoing, an "Asset Sale"), unless (x) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by an Officers' Certificate delivered to the Trustee, and for Asset Sales having a fair market value or resulting in net proceeds in excess of $5.0 million, evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets sold or otherwise disposed of and (y) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or like-kind assets (in each case as determined in good faith by the Company, evidenced by a resolution of the Board of Directors and certified by an Officers' Certificate filed with the Trustee); provided, however, that the amount of (A) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto) of the Company or such Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets and (B) any notes or other obligations received by the Company or such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted NYMAIN01 Doc: 159158_2 33 Subsidiary into cash (to the extent of the cash received) or Cash Equivalents, shall be deemed to be cash for purposes of this provision; and provided, further, that the 75% limitation referred to in the foregoing clause (y) shall not apply to any Asset Sale in which the cash portion of theconsideration received therefrom is equal to or greater than what the after-tax proceeds would have been had such Asset Sale complied with the aforementioned 75% limitation. A transfer of assets or issuance of Equity Interests by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary will not be deemed to be an Asset Sale. Within 360 days of any Asset Sale, the Company may, at its option, apply an amount equal to the Net Proceeds from such Asset Sale either (a) to permanently reduce Senior Debt, or (b) to an investment in a Restricted Subsidiary or in another business or capital expenditure or other long-term/tangible assets, in each case, in the same or a similar line of business as the Company or any of its Restricted Subsidiaries was engaged in on the date of this Indenture or in businesses similar or reasonably related thereto. Pending the final application of any such Net Proceeds, the Company may temporarily reduce Senior Bank Debt or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from such Asset Sale that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company shall make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase, in accordance with the procedures set forth in this Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. An Asset Sale Offer shall be made pursuant to the provisions of Section 3.09 hereof. No later than the date which is five Business Days after the date on which the aggregate amount of Excess Proceeds exceeds $5 million, the Company shall notify the Trustee of such Asset Sale Offer and provide the Trustee with an Officers' Certificate setting forth the calculations used in determining the amount of Net Proceeds to be applied to the purchase of Securities. The Company shall commence or cause to be commenced the Asset Sale Offer on a date no later than 15 Business Days after such notice (the "Commencement Date"). SECTION 4.11. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (a) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant NYMAIN01 Doc: 159158_2 34 Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with a non-Affiliated Person and (b) the Company delivers to the Trustee (i) with respect to any Affiliate Transaction involving aggregate payments in excessof $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (a) above and such Affiliate Transaction is approved by a majority of the disinterested members of the Board of Directors and (ii) with respect to any Affiliate Transaction involving aggregate payments in excess of $5.0 million, an opinion as to the fairness to the Company or such Restricted Subsidiary from a financial point of view issued by an investment banking firm of national standing; provided, however, that (A) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary, (B) transactions between or among the Company and/or its Restricted Subsidiaries, (C) transactions permitted by the provisions of Section 4.07 hereof and (D) the grant of stock, stock options or other equity interests to employees and directors of the Company in accordance with duly adopted Company stock grant, stock option and similar plans, in each case, shall not be deemed Affiliate Transactions; and further provided that (1) the provisions of clause (b) shall not apply to sales of inventory by the Company or any Restricted Subsidiary to any Affiliate in the ordinary course of business and (2) the provisions of clause (b)(ii) shall not apply to loans or advances to the Company or any Restricted Subsidiary from, or equity investments in the Company or any Restricted Subsidiary by, any Affiliate to the extent permitted by Section 4.09 hereof. SECTION 4.12. LIENS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien (other than a Permitted Lien) upon any property or assets now owned or hereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income therefrom, unless (a) in the case of any Lien securing any Indebtedness that is subordinate to the Notes, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien and (b) in the case of any other Lien, the Notes are equally and ratably secured with the obligation or liability secured by such Lien. SECTION 4.13. ADDITIONAL SUBSIDIARY GUARANTEES. If any entity (other than an Excluded Restricted Subsidiary) shall become a Restricted Subsidiary after the date of this Indenture, then such Restricted Subsidiary shall execute a Subsidiary Guarantee and deliver an opinion of counsel with respect thereto, in accordance with the terms of this Indenture. No Restricted Subsidiary shall consolidate with or merge with or into (whether or not such Restricted Subsidiary is the surviving Person), another Person (other than the Company) whether or not affiliated with such Restricted Subsidiary unless (a) subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Restricted Subsidiary) assumes all the obligations of such Restricted Subsidiary under NYMAIN01 Doc: 159158_2 35 its Subsidiary Guarantee, if any, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee; (b) immediately after giving effect to such transaction, no Default or Event of Default exists; and (c) such Restricted Subsidiary, or any Person formed byor surviving any such consolidation or merger, would be permitted to incur, immediately after giving effect to such transaction, at least $1.00 of additional Indebtedness pursuant to Section 4.09 hereof. In the event of (a) a sale or other disposition of all of the assets of any Guarantor by way of merger, consolidation or otherwise, (b) a sale or other disposition of all of the capital stock of any Guarantor, or (c) the designation of a Guarantor as an Unrestricted Subsidiary in accordance with the terms of Section 4.17, then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the capital stock of such Guarantor, or in the event of the designation of such Guarantor as an Unrestricted Subsidiary) or the corporation acquiring the property (in the event of a sale or other disposition of all of the assets of such Guarantor) shall be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture. SECTION 4.14. OFFER TO PURCHASE UPON CHANGE OF CONTROL. Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to but excluding the date of purchase (the "Change of Control Payment"). Within 30 calendar days following any Change of Control, the Company will mail a notice to each Holder stating: (a) that the Change of Control Offer is being made pursuant to this Section 4.14 and that all Notes tendered will be accepted for payment; (b) the purchase price and the purchase date, which will be no earlier than 30 calendar days nor later than 60 calendar days from the date such notice is mailed (the "Change of Control Payment Date"); (c) that any Note not tendered will continue to accrue interest; (d) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on and after the Change of Control Payment Date; (e) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the NYMAIN01 Doc: 159158_2 36 address specified in such notice prior to the close of business on the fifth Business Day preceding the Change of Control Payment Date; (f) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased; and (g) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable to the repurchase of the Notes in connection with a Change of Control. On the Change of Control Payment Date, the Company will, to the extent lawful, (a) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer, (b) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (c) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the Notes or portions thereof tendered to the Company. The Paying Agent will promptly mail to each Holder of Notes so accepted the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. Prior to complying with the provisions of this Section 4.14, but in any event within 90 calendar days following a Change of Control, the Company shall either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this Section 4.14. The Company shall publicly announce in The Wall Street Journal, or if no longer published, a national newspaper of general circulation the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. SECTION 4.15. CORPORATE EXISTENCE. Subject to Article 5 and Article 11 hereof, as the case may be, the Company and each of the Restricted Subsidiaries shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of their Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company, any such Restricted Subsidiary or any such Subsidiary, as the case may be, and (ii) the rights (charter and statutory), licenses and franchises of the Company, the Restricted Subsidiaries and their respective Subsidiaries; provided, however, that the Company and the Restricted Subsidiaries shall not be required to preserve any NYMAIN01 Doc: 159158_2 37 such right, license or franchise, or the corporate, partnership or other existence of any of their respective Subsidiaries, if an officer of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company, the Restricted Subsidiaries and their Subsidiaries, taken as a whole and that the loss thereof is not adverse in any material respect to the Holders of the Notes. SECTION 4.16. CERTAIN SENIOR SUBORDINATED DEBT. Notwithstanding the provisions of Section 4.09 hereof, (a) the Company shall not incur any Indebtedness that is subordinated or junior in right of payment to any Senior Debt of the Company and senior in any respect in right of payment to the Notes, and (b) the Company shall not permit any Restricted Subsidiary to incur any Indebtedness that is subordinated or junior in right of payment to its Senior Debt and senior in any respect in right of payment to its Subsidiary Guarantee. SECTION 4.17. DESIGNATION OF UNRESTRICTED SUBSIDIARIES. The Board of Directors may designate any Subsidiary (including any Restricted Subsidiary or any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as: (i) neither the Company nor any Restricted Subsidiary is directly or indirectly liable for any Indebtedness of such Subsidiary; (ii) no default with respect to any Indebtedness of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Indebtedness of the Company or any Restricted Subsidiary to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; (iii) any Investment in such Subsidiary deemed to be made as a result of designating such Subsidiary an Unrestricted Subsidiary will not violate the provisions of Section 4.07 hereof; (iv) neither the Company nor any Restricted Subsidiary has a contract, agreement, arrangement, understanding or obligation of any kind, whether written or oral, with such Subsidiary other than (A) those that might be obtained at the time from Persons who are not Affiliates of the Company or (B) administrative, tax sharing and other ordinary course contracts, agreements, arrangements and understandings or obligations entered into in the ordinary course of business; and (v) neither the Company nor any Restricted Subsidiary has any obligation to subscribe for additional shares of Capital Stock or other Equity Interests in such Subsidiary, or to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results, other than as permitted under Section 4.07 hereof. Notwithstanding the foregoing, the Company may not designate as an Unrestricted Subsidiary any Subsidiary which, on the date of this Indenture, is a Significant Subsidiary, and may not sell, transfer or otherwise dispose of any properties or assets of any such Significant Subsidiary to an Unrestricted Subsidiary, other than in the ordinary course of business. The Board of Directors may designate any Unrestricted Subsidiary as a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if (i) such Indebtedness is permitted under Section 4.09 hereof and (ii) no Default or Event of Default would occur as a result of such designation. SECTION 4.18 LIMITATION ON SALE AND LEASEBACK TRANSACTIONS The Company shall not, and shall not permit any Restricted Subsidiary to, enter into any Sale and Leaseback Transaction unless (a) the consideration received in such Sale and Leaseback Transaction is at least equal to the fair market value of the property sold, as determined by a resolution of the Board of Directors, and (b) the Company or such Restricted Subsidiary could incur the Attributable Indebtedness in respect of such Sale and Leaseback Transaction in compliance with Section 4.09 hereof. NYMAIN01 Doc: 159158_2 38 ARTICLE 5 SUCCESSORS SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS. The Company shall not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another Person unless (a) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (c) immediately after such transaction no Default or Event of Default exists; and (d) the Company or any Person formed by or surviving any such consolidation or merger, or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made will, at the time of such transaction and after giving pro forma effect thereto, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of Section 4.09 hereof. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company or the Company and its Subsidiaries on a consolidated basis in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. NYMAIN01 Doc: 159158_2 39 ARTICLE 6 CERTAIN DEFAULT PROVISIONS SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if: (a) the Company and the Guarantors default in the payment of interest on the Notes (whether or not prohibited by the subordination provisions of Article 10 or Article 11 hereof, as the case may be) when the same becomes due and payable and such default continues for a period of 30 days; (b) the Company and the Guarantors default in the payment of principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of Article 10 or Article 11 hereof, as the case may be) when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise; (c) the Company fails to comply with the provisions of Section 4.14 hereof; (d) the Company or the Guarantors fail to comply with any of their other respective agreements or covenants in, or provisions of, the Notes, the Subsidiary Guarantees or this Indenture and the Default continues for the period and after the notice specified below; (e) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is Guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists or shall be created hereafter if (i) such default results in the acceleration of such Indebtedness prior to its express maturity or shall constitute a default in the payment of such Indebtedness at final maturity of such Indebtedness and (ii) the principal amount of such Indebtedness that has been accelerated or not paid at maturity, together with the principal amount of any other Indebtedness that has been accelerated or not paid at maturity, exceeds $5.0 million; (f) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Restricted Subsidiaries and such judgments remain unpaid, undischarged or unstayed for a period of 60 days, provided that the aggregate of all such unpaid, undischarged or unstayed judgments exceeds $5.0 million; (g) except as otherwise permitted hereunder, any Subsidiary Guarantee issued by a Guarantor shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor (or its successors or NYMAIN01 Doc: 159158_2 40 assigns), or any Person acting on behalf of any Guarantor (or its successors or assigns), shall deny or disaffirm its obligations in writing under its Subsidiary Guarantee; (h) the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) admits in writing its inability generally to pay its debts as the same become due, in each case, pursuant to or within the meaning of any Bankruptcy Law; or (i) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Restricted Subsidiary that is a Significant Subsidiary of the Company in an involuntary case, (ii) appoints a Custodian of the Company or any Restricted Subsidiary that is a Significant Subsidiary of the Company or for all or substantially all of the property of the Company or any Restricted Subsidiary that is a Significant Subsidiary of the Company, or (iii)orders the liquidation of the Company or any Restricted Subsidiary that is a Significant Subsidiary of the Company, and such order or decree remains unstayed and in effect for 60 consecutive days. A Default under clause (d) is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in principal amount of the then outstanding Notes notify the Company and the Trustee, of the Default and the Company does not cure the Default within 60 days after receipt of the notice. The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." In the case of any Event of Default pursuant to the provisions of this Section 6.01 occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have NYMAIN01 Doc: 159158_2 41 had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07 hereof,an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon acceleration of the Notes as provided below, anything in this Indenture or in the Notes to the contrary notwithstanding. If an Event of Default occurs prior to ______, [2004] by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to ______, [2004] pursuant to Section 3.07 hereof, then the premium payable for purposes of this paragraph for each of the years beginning on ______ of the years set forth below shall be as set forth in the following table expressed as a percentage of the amount that would otherwise be due but for the provisions of this sentence, plus accrued interest, if any, to the date of payment: Year Percentage 1996...................................... ___% 1997...................................... ___% 1998...................................... ___% 1999...................................... ___% 2000...................................... ___% 2001...................................... ___% 2002...................................... ___% 2003...................................... ___% 2004...................................... ___% SECTION 6.02. ACCELERATION. If an Event of Default (other than an Event of Default specified in clauses (h)(i) through (h)(iv) and (i) of Section 6.01 hereof relating to the Company or any Significant Subsidiary) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the then outstanding Notes by notice to the Company and the Trustee may declare the unpaid principal of and any accrued interest on all the Notes to be due and payable. Upon such declaration the principal and interest shall be due and payable immediately (together with the premium referred to in Section 6.01 hereof, if applicable); provided, however, that if any Obligation with respect to Senior Bank Debt is outstanding pursuant to the Credit Agreement upon a declaration of acceleration of the Notes, the principal, premium, if any, and interest on the Notes will not be payable until the earlier of (1) the day which is five Business Days after written notice of acceleration is received by the Company and the Credit Agent, and (2) the date of acceleration of the Indebtedness under the Credit Agreement. If an Event of Default specified in clauses (h)(i) through (h)(iv) or (i) of Section 6.01 hereof relating to the Company or any Significant Subsidiary occurs, such an amount shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. In the event of a declaration of acceleration of the Notes because an Event of Default has occurred and is continuing as a result of the acceleration of any Indebtedness described in Section 6.01(e) hereof, the declaration of acceleration of the Notes shall be automatically annulled if the holders of any Indebtedness described in Section 6.01(e) have rescinded the declaration of acceleration in respect of such Indebtedness within 30 days of the date of such declaration and if (a) the NYMAIN01 Doc: 159158_2 42 annulment of the acceleration of the Notes would not conflict with any judgment or decree of a competent jurisdiction, and (b) all existing Events of Default, except non-payment of principal or interest on the Notes that became due solely because of the acceleration of the Notes, have been cured or waived. SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04. WAIVER OF PAST DEFAULTS. Holders of not less than a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on, the Notes (including in connection with an offer to purchase) (provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05. CONTROL BY MAJORITY. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. SECTION 6.06. LIMITATION ON SUITS. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes if, and only if: NYMAIN01 Doc: 159158_2 43 (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default or the Trustee receives such notice from the Company; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Nothing contained in this Section 6.06 shall affect the right of a Holder of a Note to sue for enforcement of any overdue payment thereon. SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT. Subject to Articles 10 and 11 hereof, notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal of, premium, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with a Purchase Offer), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a) or (b) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company NYMAIN01 Doc: 159158_2 44 (or any other obligor upon the Notes, including the Guarantors), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to the holders of Senior Debt of the Company or the Restricted Subsidiaries, as the case may be, to the extent required by Article 10 or Article 11 hereof, as applicable; Third: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and interest, respectively; and Fourth: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. NYMAIN01 Doc: 159158_2 45 SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7 TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and NYMAIN01 Doc: 159158_2 46 (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) Except with respect to Sections 4.01 and 4.04 herein, the Trustee shall have no duty to inquire as to the performance of the Company's covenants in Article 4 hereof. In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of Default except (i) any Event of Default occurring pursuant to Sections 6.01(a), 6.01(b), 4.01 and 4.04 herein or (ii) any Default or Event of Default of which the Trustee shall have received written notification or obtained actual knowledge. SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. NYMAIN01 Doc: 159158_2 47 (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company, any Restricted Subsidiary or any Affiliate of the Company or any Restricted Subsidiary with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to the Holders of the Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA ss. 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in NYMAIN01 Doc: 159158_2 48 accordance with TIA ss. 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company and the Restricted Subsidiaries shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company and the Restricted Subsidiaries shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company and the Restricted Subsidiaries shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company and the Restricted Subsidiaries (including this Section 7.07), and defending itself against any claim (whether asserted by the Company, any Restricted Subsidiary or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company and the Restricted Subsidiaries of their obligations hereunder. The Company and the Restricted Subsidiaries shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company and the Restricted Subsidiaries shall pay the reasonable fees and expenses of such counsel. The Company and the Restricted Subsidiaries need not pay for any settlement made without their consent, which consent shall not be unreasonably withheld. The obligations of the Company and the Restricted Subsidiaries under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. To secure the Company's and the Restricted Subsidiaries' payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to the extent applicable. NYMAIN01 Doc: 159158_2 49 SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, any Restricted Subsidiary, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10 hereof, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's and the Restricted Subsidiaries' obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. NYMAIN01 Doc: 159158_2 50 SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $50 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b). SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article Eight. SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, each of the Company and the Guarantors, if any, shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes and Subsidiary Guarantees on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes NYMAIN01 Doc: 159158_2 51 and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (b) the Company's and Guarantors' obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's and the Guarantors' obligations in connection therewith and (d) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. SECTION 8.03. COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, each of the Company and the Guarantors, if any, shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17 and Article V hereof with respect to the outstanding Notes and Subsidiary Guarantees on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture, such Notes and the Subsidiary Guarantees, if any, shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(c) through 6.01(f) and Section 6.01(h) and 6.01(i) hereof shall not constitute Events of Default. SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a NYMAIN01 Doc: 159158_2 52 combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, of such principal or installment of principal of, premium, if any, or interest on the outstanding Notes; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States (which counsel may be an employee of the Company or any Subsidiary of the Company) reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the Issuance Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States (which counsel may be an employee of the Company or any Subsidiary of the Company) reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or, insofar as Sections 6.01(h) and 6.01(i) hereof are concerned, at any time in the period ending on the 91st day after the date of deposit (or greater period of time in which any such deposit of trust funds may remain subject to Bankruptcy Law insofar as those apply to the deposit by the Company); (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of NYMAIN01 Doc: 159158_2 53 Notes over any other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company and the Guarantors shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.06. REPAYMENT TO COMPANY. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest, if any, on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest, if any, have become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the NYMAIN01 Doc: 159158_2 54 Company cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 8.07. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Restricted Subsidiaries' obligations under this Indenture, the Notes and the Subsidiary Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company and the Restricted Subsidiaries make any payment of principal of, premium, if any, or interest, if any, on any Note following the reinstatement of its obligations, the Company and the Restricted Subsidiaries shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes; (c) to provide for the assumption of the Company's or any Guarantor's obligations to the Holders of the Notes in the case of a merger or consolidation pursuant to Article Five or Article 11 hereof, as the case may be; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes (including providing for additional Subsidiary Guarantees pursuant to Section 4.13 hereof) or that does not materially adversely affect the legal rights hereunder of any Holder of the Note; or NYMAIN01 Doc: 159158_2 55 (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES. Except as provided below in this Section 9.02, the Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence reasonably satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding may waive compliance in NYMAIN01 Doc: 159158_2 56 a particular instance by the Company or any Guarantor with any provision of this Indenture, the Note or the Subsidiary Guarantees. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter any of the provisions with respect to the redemption of the Notes in a manner adverse to the Holders of the Notes; (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes; (g) waive a redemption payment with respect to any Note (other than a payment required by Section 4.10 or Section 4.14 hereof); (h) except pursuant to Article 4, Article 8 and Article 11 hereof, release any Guarantor from its obligations under its Subsidiary Guarantee, or change any Subsidiary Guarantee in any manner that would materially adversely affect the Holders; or (i) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation NYMAIN01 Doc: 159158_2 57 of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes (accompanied by a notation of the Subsidiary Guarantees duly endorsed by the Restricted Subsidiaries) that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article Nine if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company and the Guarantors may not sign an amendment or supplemental Indenture until the Board of Directors of the Company and each of the Guarantors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10 SUBORDINATION SECTION 10.01. AGREEMENT TO SUBORDINATE. The Company, the Trustee and each Holder by accepting a Note agrees, that the indebtedness and obligations evidenced by the Note are subordinated in right of payment, to the extent and in the manner provided in this Article, to the prior payment in full, in cash, of all Obligations with respect to Senior Debt of the Company (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt of the Company. SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment or distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar NYMAIN01 Doc: 159158_2 58 proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshaling of the Company's assets and liabilities: (1) holders of Senior Debt of the Company shall be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Debt of the Company (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt of the Company, whether or not allowed as a claim in such proceeding) before Holders shall be entitled to receive any payment or distribution from the Company with respect to the Notes; and (2) until all Obligations with respect to Senior Debt of the Company (as provided in subsection (1) above) are paid in full in cash, any payment or distribution to which the Trustee or any Holder would be entitled but for this Article shall be made to holders of Senior Debt of the Company, as their interests may appear. SECTION 10.03. DEFAULT ON DESIGNATED SENIOR DEBT. The Company may not make any payment or distribution upon or in respect of the Notes, including, without limitation, by way of set-off or otherwise, or redeem (or make a deposit in redemption of), defease or acquire any of the Notes, for cash, properties or securities if: (i) a default in the payment of any principal, premium, if any, or interest or other Obligations (a "Payment Default") with respect to Senior Debt of the Company occurs and is continuing; or (ii) a default (other than a Payment Default) or any event that, after notice or passage of time would become a default (a "Non-Monetary Default"), on Senior Debt of the Company occurs and is continuing that then permits holders of the Senior Debt of the Company to accelerate its maturity and the Trustee receives a notice of the default (a "Payment Blockage Notice") from a Person who may give it pursuant to Section 10.11 hereof. Any number of such Payment Blockage Notices may be given, provided, however, that (i) not more than one Payment Blockage Notice may be commenced during any period of 360 consecutive days and (ii) any Non-Monetary Default that existed or was continuing on the date of delivery of any such notice to the Trustee (to the extent the holder of Designated Senior Debt, or such trustee or agent, giving such Payment Blockage Notice had knowledge of the same) shall not be the basis for a subsequent Payment Blockage Notice, unless such default has been cured or waived for a period of not less than 90 days. The Company may and shall resume payments on and distributions in respect of the Notes and all Obligations with respect thereto, and may acquire such Notes or Obligations upon the earlier of: (1) in the case of a Payment Default, the date upon which such default is cured or waived, or NYMAIN01 Doc: 159158_2 59 (2) in the case of a Non-Monetary Default, on the earlier of the date on which such Non-Monetary Default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, if the maturity of such Senior Debt of the Company has not been accelerated, if this Article 10 otherwise permits the payment, distribution or acquisition at the time thereof. SECTION 10.04. ACCELERATION OF NOTES. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify Representatives of the holders of Senior Debt of the Company of the acceleration. SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee or any Holder receives from the Company any payment of any Obligations with respect to the Notes at a time when the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by Section 10.02 or 10.03 hereof, such payment shall be held by the Trustee or such Holder in trust for the benefit of, and shall be paid forthwith over and delivered upon written request to, the holders of Senior Debt of the Company, as their interests may appear, or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt of the Company may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt of the Company remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt of the Company. With respect to the holders of Senior Debt of the Company, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Debt of the Company shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt of the Company, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt of the Company shall be entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. SECTION 10.06. NOTICE BY COMPANY. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt of the Company as provided in this Article. NYMAIN01 Doc: 159158_2 60 SECTION 10.07. SUBROGATION. After all Obligations with respect to Senior Debt of the Company are paid in full, in cash, and until the Notes are paid in full, Holders shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt of the Company to receive distributions applicable to Senior Debt of the Company to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Debt of the Company. A distribution made under this Article to holders of Senior Debt of the Company that otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on the Notes. SECTION 10.08. RELATIVE RIGHTS. This Article defines the relative rights of Holders and holders of Senior Debt of the Company. Nothing in this Indenture shall: (1) impair, as between the Company and Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (2) affect the relative rights of Holders and creditors of the Company other than their rights in relation to holders of Senior Debt of the Company; or (3) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt of the Company to receive distributions and payments otherwise payable to Holders. If the Company fails because of this Article 10 to pay principal of, premium or interest on a Note on the due date, the failure is still a Default or Event of Default. SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right of any holder of Senior Debt of the Company to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of Senior Debt of the Company, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating NYMAIN01 Doc: 159158_2 61 trustee or agent or other Person making any distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt of the Company and other Indebtedness of the Company, the amount or amounts thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least one Business Day prior to the date of such payment a Payment Blockage Notice. Only the holders or the Representative of holders of Designated Senior Debt of the Company may give a Payment Blockage Notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt of the Company with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a Note by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the Representatives of the Senior Debt of the Company are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. SECTION 10.13. AMENDMENTS. The provisions of this Article 10 shall not be amended or modified without the written consent of the holders of all Senior Debt of the Company. ARTICLE 11 SUBSIDIARY GUARANTEES SECTION 11.01. SUBSIDIARY GUARANTEE. Each Subsidiary that is a signatory hereto and each Restricted Subsidiary of the Company which in accordance with Section 4.13 hereof is required to guarantee the obligations of the NYMAIN01 Doc: 159158_2 62 Company under the Notes (each, a "Guarantor"), upon execution of a counterpart of this Indenture, hereby jointly and severally unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee irrespective of the validity or enforceability of this Indenture, the Notes or the obligations of the Company under this Indenture or the Notes, that: (i) the principal of and interest on the Notes will be paid in full when due, whether at the maturity or interest payment or mandatory redemption date, by acceleration, call for redemption or otherwise, and interest on the overdue principal of and interest, if any, on the Notes and all other obligations of the Company to the Holders or the Trustee under this Indenture or the Notes will be promptly paid in full or performed, all in accordance with the terms of this Indenture and the Notes; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, they will be paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed for whatever reason, each Guarantor will be obligated to pay the same whether or not such failure to pay has become an Event of Default which could cause acceleration pursuant to Section 6.02 hereof. Each Guarantor agrees that this is a guarantee of payment not a guarantee of collection. Each Guarantor hereby agrees that its obligations with regard to this Subsidiary Guarantee shall be joint and several, unconditional, irrespective of the validity or enforceability of the Notes or the obligations of the Company under this Indenture, the absence of any action to enforce the same, the recovery of any judgment against the Company or any other obligor with respect to this Indenture, the Notes or the obligations of the Company under this Indenture or the Notes, any action to enforce the same or any other circumstances (other than complete performance) which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor further, to the extent permitted by law, waives and relinquishes all claims, rights and remedies accorded by applicable law to guarantors and agrees not to assert or take advantage of any such claims, rights or remedies, including but not limited to: (a) any right to require the Trustee, the Holders or the Company (each, a "Benefitted Party") to proceed against the Company or any other Person or to proceed against or exhaust any security held by a Benefitted Party at any time or to pursue any other remedy in any Benefitted Party's power before proceeding against such Guarantor; (b) the defense of the statute of limitations in any action hereunder or in any action for the collection of any Indebtedness or the performance of any obligation hereby guaranteed; (c) any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other Person or the failure of a Benefitted Party to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other Person; (d) demand, protest and notice of any kind including but not limited to notice of the existence, creation or incurring of any new or additional Indebtedness or obligation or of any action or non-action on the part of such Guarantor, the Company, any Benefitted Party, any creditor of such Guarantor, the Company or on the part of any other Person whomsoever in connection with any Indebtedness or obligations hereby guaranteed; (e) any defense based upon an election of remedies by a Benefitted Party, including but not limited to an election to proceed against such Guarantor for reimbursement; (f) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (g) any defense arising because of a Benefitted Party's election, in any proceeding instituted under Bankruptcy Law, of the application of 11 U.S.C. Section 1111(b)(2); or (h) any defense based on NYMAIN01 Doc: 159158_2 63 any borrowing or grant of a security interest under 11 U.S.C. Section 364. Each Guarantor hereby covenants that its Subsidiary Guarantee will not be discharged except by complete performance of the obligations contained in its Subsidiary Guarantee and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to either the Company or any Guarantor, or any Custodian acting in relation to either the Company or such Guarantor, any amount paid by the Company or such Guarantor to the Trustee or such Holder, the applicable Subsidiary Guarantees, to the extent theretofore discharged, shall be reinstated and be in full force and effect. Each Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Section 6.02 hereof for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration as to the Company or any other obligor on the Notes of the obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of those obligations as provided in Section 6.02 hereof, those obligations (whether or not due and payable) will forthwith become due and payable by such Guarantor for the purpose of this Subsidiary Guarantee. SECTION 11.02. SUBORDINATION. Each Guarantor, the Trustee, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Subsidiary Guarantees is subordinated in right of payment, to the extent and in the manner provided in this Article 11, to the prior payment in full, in cash, of all Obligations with respect to Senior Debt of such Guarantor (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt of such Guarantor. SECTION 11.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment or distribution to creditors of any Guarantor in a liquidation or dissolution of such Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such Guarantor or its property, in an assignment for the benefit of creditors or any marshaling of such Guarantor's assets and liabilities: (1) holders of Senior Debt of such Guarantor shall be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Debt of such Guarantor (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt of such Guarantor, whether or not allowed as a claim in such proceeding) before the Holders shall be entitled to receive any payment or distribution from the Guarantor with respect to such Guarantor's Subsidiary Guarantee; and NYMAIN01 Doc: 159158_2 64 (2) until all Obligations with respect to Senior Debt of such Guarantor (as provided in subsection (1) above) are paid in full in cash, any payment or distribution to which the Trustee or any Holder would be entitled but for this Article shall be made to holders of Senior Debt of such Guarantor, as their interests may appear. SECTION 11.04. DEFAULT ON SENIOR DEBT OF THE GUARANTOR. No Guarantor shall make any payment or distribution upon or in respect of the Notes or its Subsidiary Guarantee, including, without limitation, by way of set-off or otherwise, or redeem (or make a deposit in redemption of), defease or acquire any of the Notes, for cash, properties or securities if: (i) a Payment Default with respect to Senior Debt of such Guarantor occurs and is continuing; or (ii) a Non-Monetary Default on Senior Debt of such Guarantor occurs and is continuing that then permits holders of the Senior Debt of such Guarantor to accelerate its maturity and the Trustee receives a Payment Blockage Notice from a Person who may give it pursuant to Section 11.12 hereof. Any number of such Payment Blockage Notices may be given, provided, however, that (i) not more than one Payment Blockage Notice may be commenced during any period of 360 consecutive days and (ii) any default or event of default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee (to the extent the holder of Designated Senior Debt, or such trustee or agent, giving such Payment Blockage Notice had knowledge of the same) shall not be the basis for a subsequent Payment Blockage Notice pursuant to Section 11.12 herein, unless such default has been cured or waived for a period of not less than 90 consecutive days. Each Guarantor may and shall resume payments on and distributions in respect of its Subsidiary Guarantee, the Notes and all Obligations with respect thereto, and may acquire such Notes or Obligations upon the earlier of: (1) in the case of a payment default, the date upon which such default is cured or waived, or (2) in the case of a Non-Monetary Default, on the earlier of the date on which such Non-Monetary Default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, if the maturity of such Senior Debt of such Guarantor has not been accelerated, if this Article 11 otherwise permits the payment, distribution or acquisition at the time thereof. NYMAIN01 Doc: 159158_2 65 SECTION 11.05. ACCELERATION OF NOTES. If payment of the Notes is accelerated because of an Event of Default, each Guarantor shall promptly notify the Representative of the holders of Senior Debt of such Guarantor of the acceleration. SECTION 11.06. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee or any Holder receives from a Guarantor any payment of any Obligations with respect to the Notes or the Subsidiary Guarantees at a time when the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by Section 11.03 or 11.04 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered upon written request to, the holders of Senior Debt of such Guarantor, as their interests may appear, or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt of such Guarantor may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt of such Guarantor remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt of such Guarantor. With respect to the holders of Senior Debt of any Guarantor, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 11, and no implied covenants or obligations with respect to the holders of Senior Debt of such Guarantor shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt of such Guarantor, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt of such Guarantor shall be entitled by virtue of this Article 11, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. SECTION 11.07. NOTICE BY A GUARANTOR. Each Guarantor shall promptly notify the Trustee and the Paying Agent of any facts known to such Guarantor that would cause a payment of any Obligations with respect to the Notes or its Subsidiary Guarantee to violate this Article, but failure to give such notice shall not affect the subordination of its Subsidiary Guarantee or of the Notes to the Senior Debt of such Guarantor as provided in this Article. SECTION 11.08. SUBROGATION. With respect to any Guarantor, after all Obligations with respect to Senior Debt of such Guarantor is paid in full, in cash, and until the Notes are paid in full, Holders shall be subrogated (equally and ratably with all other Indebtedness pari passu with such Guarantor's Subsidiary Guarantee) to the rights of holders of Senior Debt of such Guarantor to receive distributions applicable to Senior Debt of such Guarantor to the extent that distributions otherwise payable to NYMAIN01 Doc: 159158_2 66 the Holders have been applied to the payment of Senior Debt of such Guarantor. A distribution made under this Article to holders of Senior Debt of such Guarantor that otherwise would have been made to Holders is not, as between such Guarantor and Holders, a payment by such Guarantor on the Notes or the Subsidiary Guarantee. SECTION 11.09. RELATIVE RIGHTS. This Article defines the relative rights of Holders and holders of Senior Debt of such Guarantor. Nothing in this Indenture shall: (1) impair, as between such Guarantor and the Holders, the obligation of such Guarantor, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with the terms of the Subsidiary Guarantee; (2) affect the relative rights of Holders and creditors of such Guarantor other than their rights in relation to holders of Senior Debt of such Guarantor; or (3) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of Senior Debt of such Guarantor set forth herein to receive distributions and payments otherwise payable to Holders. If any Guarantor fails because of this Article 11 to pay principal of, premium or interest on a Note on the due date, the failure is still a Default or Event of Default. SECTION 11.10. SUBORDINATION MAY NOT BE IMPAIRED BY ANY GUARANTOR. With respect to any Guarantor, no right of any holder of Senior Debt of such Guarantor to enforce the subordination of the Indebtedness evidenced by the Subsidiary Guarantee shall be impaired by any act or failure to act by such Guarantor or any Holder or by failure of such Guarantor or any Holder to comply with this Indenture. SECTION 11.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. With respect to any Guarantor, whenever a distribution is to be made or a notice given to holders of Senior Debt of such Guarantor, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of any Guarantor referred to in this Article 11, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt of such Guarantor and other Indebtedness of such Guarantor, the amount or amounts thereof NYMAIN01 Doc: 159158_2 67 or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 11. SECTION 11.12. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 11 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least one Business Day prior to the date of such payment a Payment Blockage Notice. Only the Representative of holders of Designated Senior Debt may give a Payment Blockage Notice. Nothing in this Article 11 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. With respect to any Guarantor, the Trustee in its individual or any other capacity may hold Senior Debt of such Guarantor with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 11.13. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a Note by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 11, and appoints the Trustee to act as the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding relative to any Guarantor referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the Representatives of Senior Debt of such Guarantor are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. SECTION 11.14. AMENDMENTS. With respect to any Guarantor, the provisions of Section 11.02 through 11.14 hereof shall not be amended or modified without the written consent of the holders of all Senior Debt of such Guarantor. SECTION 11.15. LIMITATION OF GUARANTOR'S LIABILITY. Each Guarantor and, by its acceptance hereof, the Trustee and each Holder hereby confirm that it is its intention that the Subsidiary Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Subsidiary Guarantee. To effectuate the foregoing intention, each such person hereby irrevocably agrees that the obligation of such Guarantor under its Subsidiary Guarantee under this Article 11 shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other (contingent or other) liabilities of such Guarantor that are relevant NYMAIN01 Doc: 159158_2 68 under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor in respect of such maximum amount not constituting a fraudulent transfer or conveyance under said laws. The Trustee and each Holder by accepting the benefits hereof, confirms its intention that, in the event of a bankruptcy, reorganization or other similar proceeding of the Company or any Guarantor in which concurrent claims are made upon such Guarantor hereunder, to the extent such claims will not be fully satisfied, each such claimant with a valid claim against the Company shall be entitled to a ratable share of all payments by such Guarantor in respect of such concurrent claims. For all purposes of this Section 11.15, Senior Debt shall be deemed to have been incurred prior to the incurrence of the obligations in respect of the Subsidiary Gaurantees. SECTION 11.16. RESTRICTED SUBSIDIARIES MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. No Guarantor shall consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another Person whether or not it is affiliated with such Guarantor unless (i) subject to the provisions of Section 11.17 hereof, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor pursuant to a supplemental indenture in form reasonably satisfactory to the Trustee, under its Subsidiary Guarantee, the Notes and this Indenture, (ii) immediately after giving effect to such transaction, no Default or Event of Default exists, and (iii) such Guarantor, or any Person formed by or surviving any such consolidation or merger, will be permitted to incur, immediately after giving effect to such transaction, at least $1.00 of additional Indebtedness pursuant to the first paragraph of Section 4.09 hereof. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee in this Indenture and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. SECTION 11.17. RELEASES FOLLOWING SALE OF ASSETS OR DESIGNATION AS UNRESTRICTED SUBSIDIARY. In the event of (a) a sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or (b) a sale or other disposition of all of the capital stock of any Guarantor, or (c) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary in accordance with the terms of Section 4.17 hereof, then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the capital stock of such Guarantor, or in the event of the designation of such Guarantor as an Unrestricted Subsidiary) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) shall be released and relieved of its obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with Section 4.10 hereof. NYMAIN01 Doc: 159158_2 69 ARTICLE 12 MISCELLANEOUS SECTION 12.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA ss.318(c), the imposed duties shall control. SECTION 12.02. NOTICES. Any notice or communication by the Company, the Restricted Subsidiaries or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company or any Restricted Subsidiary: Iron Mountain Incorporated 745 Atlantic Avenue Boston, MA 02111 Attention: President Telecopier No.: (617) 350-7881 With a copy to: Sullivan & Worcester LLP One Post Office Square Boston, MA 02109 Telecopier No.: (617) 338-2880 Attention: William J. Curry, Esq. If to the Trustee: First Bank National Association c/o First Trust National Association 180 East Fifth Street St. Paul, MN 55101 Telecopier No.: (612) 244-0711 Attention: Richard Prokosch, 2nd Floor The Company, the Restricted Subsidiaries or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. NYMAIN01 Doc: 159158_2 70 All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA ss. 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company or any Restricted Subsidiary mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA ss. 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Restricted Subsidiaries, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company or the Restricted Subsidiaries to the Trustee to take any action under this Indenture, the Company or the Restricted Subsidiaries shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss. 314(e) and shall include: NYMAIN01 Doc: 159158_2 71 (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. SECTION 12.06. RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Restricted Subsidiary, as such, shall have any liability for any obligations of the Company or any Restricted Subsidiary under the Notes, the Subsidiary Guarantees, this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note and the related Subsidiary Guarantees waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Subsidiary Guarantees. SECTION 12.08. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES. SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.10. SUCCESSORS. NYMAIN01 Doc: 159158_2 72 All agreements of the Company and the Restricted Subsidiaries in this Indenture and the Notes and the Subsidiary Guarantees, as the case may be, shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 12.11. SEVERABILITY. In case any provision in this Indenture, in the Notes or in the Subsidiary Guarantees shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 12.12. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] NYMAIN01 Doc: 159158_2 73 SIGNATURES Dated as of _________, 1996 IRON MOUNTAIN INCORPORATED By: -------------------------------- Name: Title: Dated as of _________, 1996 IRON MOUNTAIN RECORDS MANAGEMENT, INC. By: --------------------------------- Name: Title: Dated as of _________, 1996 CRITERION PROPERTY, INC. By: --------------------------------- Name: Title: Dated as of _________, 1996 CRITERION ATLANTIC PROPERTY, INC. By: --------------------------------- Name: Title: Dated as of _________, 1996 HOLLYWOOD PROPERTY, INC. By: --------------------------------- Name: Title: Dated as of _________, 1996 IRON MOUNTAIN DATA PROTECTION SERVICES, INC. By: --------------------------------- Name: Title: Dated as of _________, 1996 IRON MOUNTAIN INFORMATION PARTNERS, INC. By: --------------------------------- Name: Title: Dated as of _________, 1996 IRON MOUNTAIN RECORDS MANAGEMENT OF OHIO, INC. By: --------------------------------- Name: Title: Dated as of _________, 1996 METRO BUSINESS ARCHIVES, INC. By: --------------------------------- Name: Title: Dated as of _________, 1996 IM SAN DIEGO, INC. By: --------------------------------- Name: Title: Dated as of _________, 1996 IRON MOUNTAIN RECORDS MANAGEMENT OF MARYLAND, INC. By: --------------------------------- Name: Title: Dated as of _________, 1996 DATA STORAGE SYSTEMS, INC. By: --------------------------------- Name: Title: Dated as of _________, 1996 DATA ARCHIVE SERVICES, INC. By: --------------------------------- Name: Title: Dated as of _________, 1996 IRON MOUNTAIN RECORDS MANAGEMENT OF MISSOURI LLC By: --------------------------------- Name: Title: Dated as of _________, 1996 IRON MOUNTAIN RECORDS MANAGEMENT OF BOSTON, INC. By: --------------------------------- Name: Title: Dated as of _________, 1996 IRON MOUNTAIN WILMINGTON, INC. By: --------------------------------- Name: Title: Dated as of _________, 1996 FIRST BANK NATIONAL ASSOCIATION as Trustee By: --------------------------------- Name: Title: By: --------------------------------- Name: Title: NYMAIN01 Doc: 159158_2 74 EXHIBIT A (Face of Note) __% Senior Subordinated Notes due 2006 No. $__________ IRON MOUNTAIN INCORPORATED promises to pay to ____________________________________ or registered assigns, the principal sum of ________________________________ Dollars on ______, 2006. Interest Payment Dates: ________ and ________. Record Dates: ________ and ________. Dated: _______________ __, 1996 [Every Global Note authenticated and delivered hereunder will bear a legend in substantially the following form:] [This Note is a Global Note within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee thereof. This Note may not be transferred to, or registered or exchanged for Notes registered in the name of, any Person other than the Depositary or a nominee thereof, and no such transfer may be registered, except in the limited circumstances described in the Indenture. Every Note authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, this Note will be a Global Note subject to the foregoing, except in such limited circumstances.] IRON MOUNTAIN INCORPORATED By:____________________________________ Name: CUSIP No. __________ Title: By:____________________________________ Name: Title: This is one of the Notes referred to in the within-mentioned Indenture: First Bank National Association, as Trustee By: _______________________ Authorized Signatory NYMAIN01 Doc: 159158_2 A-1 (Back of Note) __% SENIOR SUBORDINATED NOTE DUE 2006 Capitalized terms used herein have the meanings assigned to them in the Indenture (as defined below) unless otherwise indicated. 1. Interest. Iron Mountain Incorporated, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at the rate and in the manner specified below. The Company shall pay in cash interest on the principal amount of this Note at the rate per annum of __%. The Company will pay interest semi-annually in arrears on ________ and ________ of each year, commencing on ________, 1997 or if any such day is not a Business Day (as defined in the Indenture), on the next succeeding Business Day (each an "Interest Payment Date"), to Holders of record on the immediately preceding ________ and _________. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of the original issuance of the Notes. To the extent lawful, the Company shall pay interest on overdue principal at the rate of 1% per annum in excess of the then applicable interest rate on the Notes; it shall pay interest on overdue installments of interest (without regard to any applicable grace periods) at the same rate to the extent lawful. 2. Method of Payment. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the record date next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company, however, may pay principal, premium, if any, and interest by check payable in such money. It may mail an interest check to a Holder's registered address. 3. Paying Agent and Registrar. Initially, the Trustee will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-registrar without notice to any Holder. The Company or any Restricted Subsidiary may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture dated as of ________, 1996 (the "Indenture") between the Company, the Restricted Subsidiaries named therein and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject to all such terms, and Holders of NYMAIN01 Doc: 159158_2 A-2 the Notes are referred to the Indenture and such act for a statement of such terms. The terms of the Indenture shall govern any inconsistencies between the Indenture and the Notes. The Notes are unsecured general obligations of the Company limited to $___,000,000 in aggregate principal amount. 5. Optional Redemption. The Company shall not have the option to redeem the Notes pursuant to Section 3.07 of the Indenture prior to _________, 2001. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of the principal amount) set forth below, plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the 12 month period beginning on ________ 15 of the years indicated below: Year Percentage 2001..................................................... ___.__% 2002..................................................... ___.__% 2003..................................................... ___.__% 2004 and thereafter...................................... 100.00% Notwithstanding the foregoing, at any time prior to ________, 1999, the Company may redeem up to 35% of the initial principal amount of the Notes originally issued with the net proceeds of one or more Qualified Equity Offerings at a redemption price equal to ___% of the principal amount of such Notes, plus accrued and unpaid interest, if any, to the date of redemption; provided, that at least 65% of the principal amount of Notes originally issued remains outstanding immediately after the occurrence of any such redemption and that such redemption occurs within 60 days following the closing of any such Qualified Equity Offering. 6. Mandatory Redemption. Except as described in paragraph 7 below, the Company shall not be required to make sinking fund or redemption payments with respect to the Notes. 7. Redemption or Repurchase at Option of Holder. This Note is subject to purchase at the option of the Holder upon the circumstances set forth in Section 3.09 and 4.14 of the Indenture. 8. Notice of Redemption. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notes may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. 9. Subordination. The Notes are subordinated to Senior Debt (as defined in the Indenture) (whether outstanding on the date of the Indenture or thereafter created, incurred, NYMAIN01 Doc: 159158_2 A-3 assumed or guaranteed) and all Obligations (as defined in the Indenture) with respect thereto. To the extent provided in the Indenture, Senior Debt must be paid in full in cash before the Notes may be paid. The Company agrees, and each Holder by accepting a Note agrees, to the subordination and authorizes the Trustee to give it effect. 10. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Note or portion of a Note selected for redemption. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed, or during the period between a record date and the corresponding Interest Payment Date. 11. Persons Deemed Owners. Prior to due presentment to the Trustee for registration of the transfer of this Note, the Trustee, any Agent, the Company and the Guarantors may deem and treat the Person in whose name this Note is registered as its absolute owner for the purpose of receiving payment of principal of, premium, if any, and interest on this Note and for all other purposes whatsoever, whether or not this Note is overdue, and none of the Trustee, any Agent, the Company or any Guarantor shall be affected by notice to the contrary. The registered holder of a Note shall be treated as its owner for all purposes. 12. Amendments and Waivers. Subject to certain exceptions, the Indenture or the Notes may be amended with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes). Without the consent of any Holder, the Indenture or the Notes may be amended to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for assumption of the Company's or any Restricted Subsidiary's obligations to Holders in the case of a merger or consolidation or to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the rights of any Holder under the Indenture or to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 13. Defaults and Remedies. Events of Default include: default for 30 days in the payment when due of interest on the Notes (whether or not prohibited by the subordination provisions of the Indenture); default in payment when due of principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture); failure by the Company to comply with Section 4.14 of the Indenture; failure by the Company or the Restricted Subsidiaries for 60 days after notice from the Trustee or the Holders of not less than NYMAIN01 Doc: 159158_2 A-4 25% of the aggregate principal amount of the Notes outstanding to comply with any of its other agreements in the Indenture or the Notes; default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, if (a) such default results in the acceleration of such Indebtedness prior to its express maturity or shall constitute a default in the payment of such Indebtedness at final maturity of such Indebtedness and (b) the principal amount of such Indebtedness that has been accelerated or not paid at maturity, together with the principal amount of any other Indebtedness that has been accelerated or not paid at maturity, exceeds $5.0 million; failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments remain unpaid, undischarged or unstayed for a period of 60 days; except as permitted by the Indenture, any Subsidiary Guarantee issued by a Restricted Subsidiary shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Restricted Subsidiary, or any Person acting on behalf of any Restricted Subsidiary, shall deny or disaffirm its obligations under its Subsidiary Guarantees; and certain events of bankruptcy or insolvency with respect to the Company or any of its Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, relating to the Company or any Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice; provided, however, that if any Obligation with respect to Senior Bank Debt is outstanding pursuant to the Credit Agreement upon a declaration of acceleration of the Notes, the principal, premium, if any, and interest on the Notes will not be payable until the earlier of (1) the day which is five Business Days after written notice of acceleration is received by the Company and the Credit Agent, and (2) the date of acceleration of the Indebtedness under the Credit Agreement. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Company must furnish an annual compliance certificate to the Trustee. 14. Subsidiary Guarantees. Payment of principal of, premium, if any, and interest (including interest on overdue principal, premium, if any, and interest, if lawful) on the Notes is guaranteed on an unsecured, senior subordinated basis by the Guarantors pursuant to Article 11 of the Indenture. 15. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company, any Restricted Subsidiary or their respective Affiliates, and may otherwise deal with the Company, any Restricted Subsidiary or their respective Affiliates, as if it were not Trustee. NYMAIN01 Doc: 159158_2 A-5 16. No Recourse Against Others. No past, present or future director, officer, employee, incorporator or stockholder, as such, of the Company or any Restricted Subsidiary shall have any liability for any obligations of the Company or any Restricted Subsidiary under the Notes, the Subsidiary Guarantees or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Note and the related Subsidiary Guarantees, if any, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 17. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 18. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 19. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 20. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE GUARANTEES, IF ANY. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Request may be made to: Iron Mountain Incorporated 745 Atlantic Avenue Boston, MA 602111 Telecopier No.: (617) 350-7881 Attention: Chief Financial Officer NYMAIN01 Doc: 159158_2 A-6 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to _______________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint _______________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. _______________________________________________________________________________ Date: ____________________________ Your Signature: ___________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee. NYMAIN01 Doc: 159158_2 A-7 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.14 of the Indenture, check the box below: [ ] Section 4.10 [ ] Section 4.14 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased: $____________ Date: __________________ Your Signature: _______________________ (Sign exactly as your name appears on the Note) Tax Identification No.: _______________ Signature Guarantee. NYMAIN01 Doc: 159158_2 A-8 EXHIBIT B FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY FUTURE RESTRICTED SUBSIDIARIES SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ________________, between __________________ (the "Restricted Subsidiary"), a subsidiary of Iron Mountain Incorporated (or its successor), a Delaware corporation (the "Company"), and ______________________________, a national banking association, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, Iron Mountain Incorporated, a Delaware corporation has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of ________, 1996, providing for the issuance of an aggregate principal amount of $___,000,000 of __% Senior Subordinated Notes due 2006 (the "Notes"); WHEREAS, Section 4.13 of the Indenture provides that under certain circumstances the Company is required to cause the Restricted Subsidiary to execute and deliver to the Trustee a supplemental indenture pursuant to which the Restricted Subsidiary shall unconditionally guarantee all of the Company's obligations under the Notes pursuant to a Subsidiary Guarantee on the terms and conditions set forth herein; and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Restricted Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Restricted Subsidiary hereby agrees that its obligations to the Holder and the Trustee pursuant to this Subsidiary Guarantee shall be as expressly set forth in Article 11 of the Indenture and in such other provisions of the Indenture as are applicable to Restricted Subsidiaries, and reference is made to the Indenture for the precise terms of this Supplemental Indenture. The terms of Article 11 of the Indenture and such other provisions of the Indenture as are applicable to Restricted Subsidiaries are incorporated herein by reference. 3. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES. (a) To evidence its Subsidiary Guarantee set forth in this Supplemental Indenture, the Restricted Subsidiary hereby agrees that a notation of such Subsidiary Guarantee substantially NYMAIN01 Doc: 159158_2 B-1 in the form of Exhibit C to the Indenture shall be endorsed by an Officer of such Restricted Subsidiary on each Note authenticated and delivered by the Trustee after the date hereof. (b) Notwithstanding the foregoing, the Restricted Subsidiary hereby agrees that its Subsidiary Guarantee set forth herein shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. (c) If an Officer whose signature is on this Supplemental Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. (d) The delivery of any Note by the Trustee, after the authentication thereof under the Indenture, shall constitute due delivery of the Subsidiary Guarantee set forth in this Supplemental Indenture on behalf of the Restricted Subsidiary. 4. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder of the Restricted Subsidiary, as such, shall have any liability for any obligations of the Company or any Restricted Subsidiary under the Notes, any Subsidiary Guarantee, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. 5. NEW YORK LAW TO GOVERN. The internal law of the State of New York shall govern and be used to construe this Supplemental Indenture and the Subsidiary Guarantee. 6. COUNTERPARTS The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. NYMAIN01 Doc: 159158_2 B-2 7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: ____________, ____ [Restricted Subsidiary] By: ___________________________ Name: Title: Dated: ____________, ____ ____________________________, as Trustee By: ___________________________ Name: Title: NYMAIN01 Doc: 159158_2 B-3 EXHIBIT C FORM OF NOTATION ON SENIOR SUBORDINATED NOTE RELATING TO SUBSIDIARY GUARANTEE Each Guarantor set forth below and each Restricted Subsidiary of the Company which in accordance with Section 4.13 of the Indenture is required to guarantee the obligations of the Company under the Notes, upon execution of a counterpart of the Indenture, jointly and severally unconditionally guarantees (i) the due and punctual payment of the principal of and interest on the Notes, whether at the maturity or interest payment or mandatory redemption date, by acceleration, call for redemption or otherwise, and of interest on the overdue principal of and interest, if any, on the Notes and all other obligations of the Company to the Holders or the Trustee under the Indenture or the Notes and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration or otherwise. The obligations of each Guarantor to the Holder and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are as expressly set forth in Article 11 of the Indenture and in such other provisions of the Indenture as are applicable to Guarantors, and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guarantee. The terms of Article 11 of the Indenture and such other provisions of the Indenture as are applicable to Guarantors are incorporated herein by reference. This Subsidiary Guaranty is subject to release as described in Sections 4.13 and 11.17 of the Indenture, and the obligations of each Guarantor under this Subsidiary Guaranty and the Indenture are limited as provided in Section 11.15 of the Indenture. This is a continuing guarantee and shall remain in full force and effect and shall be binding upon each Guarantor and its successors and assigns until full and final payment of all of the Company's obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a guarantee of payment and not a guarantee of collection. This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. [RESTRICTED SUBSIDIARY] By:________________________________________ Name: Title: NYMAIN01 Doc: 159158_2 C-1 EX-5 13 REGISTRATION STATEMENT ON FORM S-1 EXHIBIT 5 September 25, 1996 Iron Mountain Incorporated 745 Atlantic Avenue Boston, Massachusetts 02111 Re: Registration Statement on Form S-1 $150,000,000 of Senior Subordinated Notes due 2006 Ladies and Gentlemen: The following opinion is furnished to you in connection with the registration pursuant to a registration statement on Form S-1 (File No. 333-10359) (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), by Iron Mountain Incorporated, a Delaware corporation (the "Company"), of $150,000,000 of Senior Subordinated Notes due 2006 (the "Notes"), which Notes will initally be guaranteed (the "Guarantees") by each of the Company's direct and indirect wholly owned subsidiaries (collectively, the "Subsidiary Guarantors") and issued under an indenture relating to the Notes (the "Indenture") by and among the Company, the Subsidiary Guarantors and First Bank National Association, as Trustee (the "Trustee"). We have acted as counsel to the Company in connection with the preparation of the Registration Statement, and we have examined originals or copies, certified or otherwise identified to our satisfaction, of corporate records, certificates and statements of officers and accountants of the Company, of public officials, and such other documents as we have considered necessary in order to furnish the opinion hereinafter set forth. We express no opinion herein as to any laws other than the General Corporation Law of the State of Delaware and the Laws of the Commonwealth of Massachusetts and the State of New York. Insofar as the opinions herein pertain to matters of California law relating to Hollywood Property, Inc., a California corporation and a Subsidiary Guarantor ("HPI"), we have with your consent relied upon the opinion of Nossaman, Guthner, Knox & Elliott, California counsel to HPI. Iron Mountain Incorporated September 25, 1996 Page 2 Based upon and subject to the foregoing, we are of the opinion that the Company and the Subsidiary Guarantors have taken all necessary action to approve the Indenture and the terms of the Notes and Guarantees, and when (i) the Registration Statement has become effective under the Securities Act, (ii) the Indenture has been duly executed and delivered by the Company, the Subsidiary Guarantors and the Trustee and the Notes have been duly executed by the Company and authenticated by the Trustee and the Guarantees have been duly executed by the Subsidiary Guarantors in accordance with the provisions of the Indenture, (iii) the Indenture has been qualified under the Trust Indenture Act of 1939, as amended, and (iv) the Notes with the Guarantees affixed thereto have been delivered to the purchasers thereof against payment of the purchase price therefor as described in the Registration Statement, the Notes and the Guarantees will be validly issued and binding obligations of the Company and the Subsidiary Guarantors, respectively, subject in each case to the effect of (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors and the obligations of debtors generally and (b) the application of general principles of equity (regardless of whether enforcement is considered in proceedings at law or in equity). We express no opinion as to the applicability (and, if applicable, the effect) of Section 548 of the United States Bankruptcy Code or any comparable provision of state law to the conclusions expressed above. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm made therein under the caption "Validity of Securities." In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the Rules and Regulations of the Securities and Exchange Commission promulgated thereunder. Very truly yours, /s/Sullivan & Worcester LLP SULLIVAN & WORCESTER LLP EX-10.3B 14 MATERIAL CONTRACTS ================================================================================ IRON MOUNTAIN INCORPORATED CREDIT AGREEMENT Dated as of September [__], 1996 $100,000,000 THE CHASE MANHATTAN BANK, as Administrative Agent ================================================================================ TABLE OF CONTENTS Page RECITALS............................................................. 1 Section 1. Definitions and Accounting Matters........................ 1 1.01 Certain Defined Terms................................. 1 1.02 Accounting Terms and Determinations................... 23 1.03 Types of Loans........................................ 24 Section 2. Loans, Etc................................................ 24 2.01 Loans................................................. 24 2.02 Reductions of Commitments............................. 24 2.03 Fees ................................................. 25 2.04 Lending Offices....................................... 25 2.05 Several Obligations; Remedies Independent............. 25 2.06 Notes................................................. 26 2.07 Use of Proceeds....................................... 26 2.08 Letters of Credit..................................... 26 Section 3. Borrowings, Conversions and Prepayments................... 31 3.01 Borrowings............................................ 31 3.02 Prepayments and Conversions........................... 32 Section 4. Payments of Principal and Interest........................ 33 4.01 Repayment of Loans.................................... 33 4.02 Interest.............................................. 33 Section 5. Payments; Pro Rata Treatment; Computations; Etc........... 35 5.01 Payments.............................................. 35 5.02 Pro Rata Treatment.................................... 36 5.03 Computations.......................................... 36 5.04 Minimum and Maximum Amounts; Types.................... 36 5.05 Certain Notices....................................... 37 5.06 Non-Receipt of Funds by the Administrative Agent...... 38 5.07 Sharing of Payments; Waiver of Enforcement Without Consent, Etc............................. 38 5.08 Withholding Tax Exemption............................. 39 Section 6. Yield Protection and Illegality........................... 40 6.01 Additional Costs...................................... 40 6.02 Limitation on Types of Loans.......................... 42 6.03 Illegality............................................ 42 6.04 Substitute ABR Loans.................................. 42 6.05 Compensation.......................................... 43 6.06 Capital Adequacy...................................... 43 6.07 Substitution of Lender................................ 44 6.08 Additional Costs in Respect of Letters of Credit...... 44 Section 7. Conditions Precedent...................................... 45 7.01 Initial Extension of Credit........................... 45 7.02 Initial and Subsequent Loans.......................... 48 Section 8. Representations and Warranties............................ 48 8.01 Corporate Existence................................... 48 8.02 Information........................................... 49 8.03 Litigation............................................ 50 8.04 No Breach............................................. 50 8.05 Corporate Action...................................... 51 8.06 Approvals............................................. 51 8.07 Regulations U and X................................... 51 8.08 ERISA................................................. 51 8.09 Taxes................................................. 51 8.10 Subsidiaries; Agreements; Etc......................... 52 8.11 Investment Company Act................................ 52 8.12 Public Utility Holding Company Act.................... 53 8.13 Ownership and Use of Properties....................... 53 8.14 Environmental Compliance.............................. 53 8.15 Solvency.............................................. 55 8.16 Capitalization........................................ 55 8.17 Senior Debt........................................... 55 Section 9. Covenants................................................. 55 9.01 Financial Statements and Other Information............ 55 9.02 Taxes and Claims...................................... 58 9.03 Insurance............................................. 58 9.04 Maintenance of Existence; Conduct of Business......... 59 9.05 Maintenance of and Access to Properties............... 60 9.06 Compliance with Applicable Laws....................... 60 9.07 Litigation............................................ 60 9.08 Indebtedness.......................................... 60 9.09 Leverage Ratio........................................ 61 9.10 Interest Coverage Ratio............................... 61 9.11 Fixed Charges Coverage Ratio.......................... 62 9.12 Mergers, Asset Dispositions, Etc...................... 63 9.13 Liens................................................. 64 9.14 Investments........................................... 65 9.15 Restricted Payments................................... 67 9.16 Transactions with Affiliates.......................... 68 9.17 Subordinated Indebtedness............................. 68 9.18 Lines of Businesses................................... 69 9.19 Capital Expenditures.................................. 69 9.20 Modification of Other Agreements...................... 69 9.21 Interest Rate Protection.............................. 69 9.22 Certain Obligations Respecting Subsidiaries........... 69 9.23 Environmental Matters................................. 71 9.24 Residual Assurances................................... 71 Section 10. Defaults................................................. 72 10.01 Events of Default.................................... 72 Section 11. The Administrative Agent................................. 75 11.01 Appointment, Powers and Immunities................... 75 11.02 Reliance by Administrative Agent..................... 76 11.03 Defaults............................................. 76 11.04 Rights as a Lender................................... 77 11.05 Indemnification...................................... 77 ii 11.06 Non-Reliance on Administrative Agent and Other Lenders......................................... 78 11.07 Failure to Act....................................... 78 11.08 Resignation or Removal of Administrative Agent....... 78 11.09 Consents under Basic Documents....................... 79 11.10 Collateral Sub-Agents................................ 79 Section 12. Miscellaneous............................................ 79 12.01 Waiver............................................... 79 12.02 Notices.............................................. 80 12.03 Expenses, Etc........................................ 80 12.04 Indemnification...................................... 80 12.05 Amendments, Etc...................................... 81 12.06 Successors and Assigns............................... 81 12.07 Confidentiality...................................... 82 12.08 Survival............................................. 83 12.09 Captions............................................. 83 12.10 Counterparts; Integration............................ 83 12.11 Additional Lenders................................... 83 12.12 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL............................ 84 iii Schedules SCHEDULE I - Commitments SCHEDULE II - Lending Offices; Addresses for Notices SCHEDULE III - Subsidiaries; Investments in Joint Ventures and Other Persons SCHEDULE IV - Credit Agreements, Indentures, Leases SCHEDULE V - Capitalization; Equity Rights SCHEDULE VI - Existing Letters of Credit Exhibits EXHIBIT A - Form of Note EXHIBIT B - Form of Subsidiary Guaranty EXHIBIT C - Form of Company Pledge Agreement EXHIBIT D - Form of Subsidiary Pledge Agreement EXHIBIT E - Form of Opinion of Special New York Counsel to the Company EXHIBIT F - Form of Opinion of Special New York Counsel to the Administrative Agent iv CREDIT AGREEMENT dated as of September [__], 1996, among: IRON MOUNTAIN INCORPORATED, a corporation duly organized and validly existing under the laws of the State of Delaware (together with its successors, the "Company"); each of the lenders which is or which may from time to time become a signatory hereto (individually, together with its successors, a "Lender" and, collectively, together with their respective successors, the "Lenders"); and THE CHASE MANHATTAN BANK, as agent for the Lenders (in such capacity, together with its successors in such capacity, the "Administrative Agent"). The Company has requested that the Lenders extend credit to the Company (to be made available by the Company to the Subsidiary Guarantors, as defined below) in an aggregate principal or face amount at any one time outstanding not exceeding $100,000,000 to finance the operations of the Company and such Subsidiary Guarantors, to refinance certain of their existing indebtedness and to enable certain acquisitions and capital expenditures by them, and for other purposes permitted hereunder. Accordingly, the parties hereto agree as follows: Section 1. Definitions and Accounting Matters. 1.01 Certain Defined Terms. As used herein, the following terms shall have the following meanings (all terms defined in this Section 1.01 or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa): "ABR Loans" shall mean Loans which bear interest at a rate based upon the Alternate Base Rate. "Acquisition" shall mean an acquisition of assets of, or all or substantially all of the Capital Stock of, another business by the Company and/or one or more of its Subsidiaries. "Acquisition Consideration" shall mean, with respect to any Acquisition, the aggregate amount of consideration paid by the Company and its Subsidiaries in connection therewith, inclusive of (a) Stock Consideration and (b) other consideration on account of (i) any expenses incurred in connection with such Acquisition, (ii) liabilities under agreements not to compete incurred in connection with such Acquisition, (iii) the principal amount of Indebtedness assumed in connection with such Acquisition and (iv) Additional Expenditures related to such Acquisition. Credit Agreement - 2 - "Additional Expenditures" shall mean, with respect to any Acquisition, amounts expended or to be expended by the Company and its Subsidiaries within twelve months after the date of such Acquisition to acquire or construct facilities and equipment that are not part of the assets acquired pursuant to such Acquisition but which are deemed by the Company to be essential for the integration or restructuring of the assets so acquired. "Additional Subordinated Indebtedness" shall mean Indebtedness payable to sellers in connection with Permitted Acquisitions that by its terms is subordinated to the payment of the principal of and interest on the Loans. "Adjusted EBITDA" shall mean, for any period, EBITDA for such period, minus the tax provision for such period currently payable. "Affiliate" shall mean, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person and, if such Person is an individual, any member of the immediate family (including parents, siblings, spouse, children, stepchildren, nephews, nieces and grandchildren) of such individual and any trust whose principal beneficiary is such individual or one or more members of such immediate family and any Person who is controlled by any such member or trust. As used in this definition, "control" (including, with correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise), provided that, in any event, any Person which owns directly or indirectly more than 5% of the securities having ordinary voting power for the election of directors or other governing body of a corporation or more than 5% of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person. Notwithstanding the foregoing, (a) no individual shall be deemed to be an Affiliate of a corporation solely by reason of his or her being an officer or director of such corporation and (b) Subsidiary Guarantors shall be deemed not to be Affiliates of the Company or any of the Subsidiary Guarantors. "Alternate Base Rate" shall mean, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds Credit Agreement - 3 - Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively. "Applicable Commitment Fee Rate" shall mean, at any time, the percentage per annum set forth in the schedule below opposite the Pricing Level in effect at such time: - ----------------------------------------------------------------------------- Applicable Commitment Pricing Level Fee Rate - ----------------------------------------------------------------------------- Level 6 0.500% - ----------------------------------------------------------------------------- Level 5 0.500% - ----------------------------------------------------------------------------- Level 4 0.375% - ----------------------------------------------------------------------------- Level 3 0.250% - ----------------------------------------------------------------------------- Level 2 0.150% - ----------------------------------------------------------------------------- Level 1 0.100% - ----------------------------------------------------------------------------- For purposes of this definition, the "Pricing Level" in effect at any time shall be (i) during the Initial Period, Level 4, and (ii) at any time thereafter, the level (either Level 1, Level 2, Level 3, Level 4, Level 5 or Level 6) indicated in the schedule set forth in the definition of "Applicable Margin" in this Section 1.01 corresponding to the Applicable Leverage Ratio in effect at such time. "Applicable L/C Percentage" shall mean, at any time, the Applicable Margin in effect at such time with respect to Eurodollar Loans (irrespective of whether at the time any Eurodollar Loan is outstanding). Credit Agreement - 4 - "Applicable Lending Office" shall mean, for each Lender and for each Type of Loan, the Lending Office of such Lender (or of an affiliate of such Lender) designated for such Type of Loan below its name on Schedule II hereto or such other office of such Lender (or of an affiliate of such Lender) as such Lender may from time to time specify to the Administrative Agent and the Company as the office by which its Loans of such Type are to be made. "Applicable Leverage Ratio" shall mean, at any time, the Leverage Ratio as at the end of the most recent fiscal quarter of the Company in respect of which financial statements have been delivered by the Company pursuant to either Section 9.01(a) or 9.01(b) hereof; provided that no change in the Applicable Leverage Ratio will take effect until the date five Business Days following receipt by the Administrative Agent of the applicable financial statements. "Applicable Margin" shall mean: (a) during the Initial Period, (i) with respect to ABR Loans, 1.25% per annum; and (ii) with respect to Eurodollar Loans, 2.25% per annum; and (b) at any time thereafter, the rate for the respective Type of Loan set forth below opposite the level (either Level 1, Level 2, Level 3, Level 4, Level 5 or Level 6) indicated in the schedule set forth below corresponding to the Applicable Leverage Ratio in effect at such time: - ------------------------------------------------------------------------------ Applicable Margin Range of Applicable Leverage Ratio ABR Eurodollar Loans Loans - ------------------------------------------------------------------------------ Level 6 Greater than 4.25 to 1.00 1.75% 2.75% - ------------------------------------------------------------------------------ Level 5 Less than or equal to 4.25 to 1.00 and 1.50% 2.50% greater than 3.75 to 1.00 Credit Agreement - 5 - - -------------------------------------------------------------------------------- Level 4 Less than or equal to 3.75 to 1.00 and 1.25% 2.25% greater than 3.25 to 1.00 - -------------------------------------------------------------------------------- Level 3 Less than or equal to 3.25 to 1.00 and 1.00% 2.00% greater than 2.75 to 1.00 - -------------------------------------------------------------------------------- Level 2 Less than or equal to 2.75 to 1.00 and 0.75% 1.75% greater than 2.25 to 1.00 - -------------------------------------------------------------------------------- Level 1 Less than or equal to 2.25 to 1.00 0.50% 1.50% - -------------------------------------------------------------------------------- "Assessment Rate" shall mean, for any day, the annual assessment rate in effect on such day that is payable by a member of the Bank Insurance Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for insurance by such Corporation of time deposits made in Dollars at the offices of such member in the United States; provided that if, as a result of any change in any law, rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be determined by the Administrative Agent to be representative of the cost of such insurance to the Lenders. "Bankruptcy Code" shall mean the United States Bankruptcy Code, as now or hereafter in effect, or any successor statute. "Base CD Rate" shall mean the sum of (a) the ThreeMonth Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate. Credit Agreement - 6 - "Basic Documents" shall mean this Agreement, the Notes, the Letter of Credit Documents, the Subsidiary Guaranty, the Security Documents, the Senior Subordinated Debt Documents and any instruments evidencing or agreements providing for the issuance of Additional Subordinated Indebtedness. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Business Day" shall mean any day other than a day on which commercial banks are authorized or required to close in New York City or Boston, Massachusetts and, where such term is used in the definition of "Quarterly Date" in this Section 1.01 or if such day relates to a borrowing of, a payment or prepayment of principal of or interest on, a conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice by the Company with respect to any such borrowing, payment, prepayment, conversion or Interest Period, which is also a day on which dealings in Dollar deposits are carried out in the London interbank market. "Calculation Period" shall mean (a) initially, the twelve-month period commencing on October 1, 1996 and (b) thereafter, each successive twelve-month period. "Capital Expenditures" shall mean expenditures in respect of fixed assets by the Company or any of its Subsidiaries, including the capitalized amount of Capital Lease Obligations incurred during the relevant period, other than (i) expenditures for the restoration or replacement of fixed assets to the extent financed by the proceeds of an insurance policy described in clause (1) of Section 9.03 hereof or through a condemnation award, (ii) Permitted Acquisitions, (iii) Qualifying Sale-Leaseback Transactions (except to the extent any lease of Property by the Company or any of its Subsidiaries in connection therewith would constitute a capital lease), (iv) Additional Expenditures related to Permitted Acquisitions and (v) Large Volume Account Capitalized Expenditures. "Capital Lease Obligations" shall mean, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP (including Statement of Financial Accounting Standards No. 13 of the Financial Accounting Standards Board) and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP (including such Statement No. 13). Credit Agreement - 7 - "Capital Stock" shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person's capital stock or other ownership interests, including, without limitation, all common stock and all preferred stock. "Casualty Event" shall mean, with respect to any property of any Person, any loss of or damage to, or any condemnation or other taking of, such property for which such Person or any of its Subsidiaries receives insurance proceeds, or proceeds of a condemnation award or other compensation. "Chase" shall mean The Chase Manhattan Bank and its successors. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "Change of Control" shall mean that: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than the Principal Stockholders (or any of them), is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the voting power of all classes of Voting Stock of the Company; or (b) during any consecutive 25-month period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election to such Board of Directors, or whose nomination for election by the stockholders of the Company, was approved by a vote of at least 66-2/3% of the directors still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office; or (c) the Company shall be required pursuant to the provisions of the Senior Subordinated Debt Documents (or any other agreement or instrument relating to or providing for any other Subordinated Indebtedness) to redeem or repurchase, or make an offer to redeem or repurchase, all or any portion of the Senior Subordinated Debt (or such Subordinated Indebtedness, as the case may be) as a result of a change of control (however defined). Credit Agreement - 8 - "Closing Date" shall mean the date upon which the initial extension of credit hereunder is made. "Code" shall mean the Internal Revenue Code of 1986, as amended, or any successor statute. "Collateral Account" shall mean a cash collateral account in the name and under the control of the Administrative Agent maintained in accordance with the terms of the Security Documents. "Commitment" shall mean, as to each Lender, the obligation of such Lender to make Loans, and to issue or participate in Letters of Credit pursuant to Section 2.08 hereof, in an aggregate principal or face amount at any one time outstanding up to but not exceeding the amount set opposite the name of such Lender on Schedule I hereto under the caption "Commitment" or, in the case of a Person that becomes a Lender pursuant to an assignment permitted under Section 12.06 hereof, as specified in the respective instrument of assignment pursuant to which such assignment is effected (as the same may be reduced at any time or from time to time pursuant to Section 2.02 or 3.02 hereof). "Commitment Percentage" shall mean, with respect to any Lender at any time, the ratio of (a) the amount of the Commitment of such Lender at such time to (b) the aggregate amount of the Commitments of all of the Lenders at such time. "Commitment Termination Date" shall mean September 30, 2001 (or, if such day is not a Business Day, the next preceding Business Day). "Company Pledge Agreement" shall mean a Pledge Agreement substantially in the form of Exhibit C hereto between the Company and the Administrative Agent, as the same shall be modified and supplemented and in effect from time to time. "Controlled Group" shall mean all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Company, are treated as a single employer under Section 414 of the Code. "Default" shall mean an Event of Default or an event which with notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Dollars" and "$" shall mean lawful money of the United States of America. Credit Agreement - 9 - "EBITDA" shall mean, for any period, the sum (without duplication), determined on a consolidated basis for the Company and its Subsidiaries, of (a) net income for such period plus (b) to the extent deducted in determining net income for such period, the sum of (i) depreciation and amortization (including deferred financing costs, organization costs, goodwill and non-compete amortization) for such period, (ii) other non-cash expenses for such period, (iii) interest expense for such period, (iv) provision for income taxes for such period, (v) extraordinary losses (including without limitation losses arising from any natural disasters) for such period, (vi) non-compete expenses for such period to the extent not capitalized in accordance with GAAP and (vii) losses on sales of fixed assets not in the ordinary course of business for such period after giving effect to any related charges for, reductions of or provisions for taxes thereon minus (c) to the extent included in the calculation of net income for such period, the sum of (i) other income (including interest income) for such period, (ii) extraordinary gains for such period and (iii) gains on sales of fixed assets not in the ordinary course of business for such period after giving effect to any related charges for, reductions of or provisions for taxes thereon. For the purposes of calculating the ratios set forth in Sections 9.09, 9.10 and 9.11 there may, at the Company's option, be included in EBITDA for any relevant period, on a pro forma basis (adjusted to give effect to expenses that will not be ongoing), the net income (and the additions and subtractions thereto referred to above) for such period of any Person (or assets) acquired after the commencement of such period in connection with any Permitted Acquisition having Acquisition Consideration of more than $750,000. The net income (and the related additions and substractions) of the Person or assets acquired pursuant to such Acquisition for such period shall be calculated by reference to the most recent available quarterly financial statements of the acquired business, annualized. "Environmental Laws" shall mean any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, codes, plans, injunctions, permits, concessions, grants, franchises, licenses or other governmental restrictions, contracts, indemnities, assumptions of liability or agreements relating to the environment or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum Credit Agreement - 10 - products, chemicals or industrial, toxic or hazardous substances or wastes or the clean-up or other remediation thereof. "Environmental Liabilities" shall mean all liabilities of the Company and each Subsidiary, whether vested or unvested, contingent or fixed, actual or potential which arise under or relate to Environmental Laws. "Equity Rights" shall mean, with respect to any Person, any subscriptions, options, warrants, commitments, preemptive rights or agreements of any kind (including, without limitation, any stockholders' or voting trust agreements) for the issuance, sale, registration or voting of, or securities convertible into, any additional shares of Capital Stock of any class, or partnership or other ownership interests of any type in, such Person. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurodollar Base Rate" shall mean, with respect to any Eurodollar Loans, the rate per annum determined by the Administrative Agent to be the average of the rates quoted by the Reference Lenders at approximately 11:00 a.m. London time (or as soon thereafter as practicable) on the day two Business Days prior to the first day of the Interest Period for such Loans for the offering by the Reference Lenders to leading banks in the London interbank market of Dollar deposits having a term comparable to such Interest Period and in an amount comparable to the principal amount of the respective Eurodollar Loans of the Reference Lenders to which such Interest Period relates. If any Reference Lender is not participating in any Eurodollar Loans during the Interest Period therefor (pursuant to Section 6.04 hereof or for any other reason), the Eurodollar Base Rate for such Loans for such Interest Period shall be determined by reference to the amount of the Loan which such Reference Lender would have made had it been participating in such Loans. If any Reference Lender does not furnish a timely quotation, the Administrative Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Lender or Lenders or, if none of such quotations is available on a timely basis, the provisions of Section 6.02 shall apply. "Eurodollar Loans" shall mean Loans the interest on which is determined on the basis of rates referred to in the definition of "Eurodollar Base Rate" in this Section 1.01. "Eurodollar Rate" shall mean, for any Eurodollar Loans, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined by the Administrative Agent to be equal to Credit Agreement - 11 - (i) the Eurodollar Base Rate for such Loans for the Interest Period for such Loans divided by (ii) 1 minus the Reserve Requirement for such Loans for such Interest Period. "Events of Default" shall have the meaning assigned to such term in Section 10.01 hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Excluded Subsidiary" shall mean any Subsidiary of the Company principally engaged in the records management business domiciled (within the meaning of the Code) outside the United States of America. "Existing Letters of Credit" shall mean, collectively, all letters of credit identified on Schedule VI hereto and outstanding on the Closing Date. "Federal Funds Effective Rate" shall mean, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of l%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Fixed Charges" shall mean for any period the sum of (i) Scheduled Amortization for such period plus (ii) Interest Expense for such period plus (iii) the aggregate amount of Maintenance Capital Expenditures for such period plus (iv) the aggregate amount of non-compete expenses for such period to the extent not capitalized in accordance with GAAP. "Funded Indebtedness" shall mean, without duplication, (a) Indebtedness that matures or otherwise becomes due more than one year after the incurrence thereof or is extendible, renewable or refundable, at the option of the obligor, to a date more than one year after the incurrence thereof (including the current portion thereof) and (b) Indebtedness outstanding hereunder. "GAAP" shall mean generally accepted accounting principles as in effect from time to time consistently applied. "Guaranty" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness of any other Person and, without Credit Agreement - 12 - limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise, other than agreements to purchase goods at an arm's length price in the ordinary course of business) or (ii) entered into for the purpose of assuring in any other manner the holder of such Indebtedness of the payment thereof or to protect such holder against loss in respect thereof (in whole or in part), provided that the term Guaranty shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Hazardous Substances" shall mean any toxic, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, including any substance regulated under Environmental Laws. "Indebtedness" shall mean, as to any Person (determined without duplication): (i) indebtedness of such Person for borrowed money (whether by loan or the issuance and sale of debt securities) or for the deferred purchase or acquisition price of property or services (including amounts payable under agreements not to compete and other similar arrangements), other than accounts payable (other than for borrowed money) incurred in the ordinary course of business and accrued expenses incurred in the ordinary course of business; (ii) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (iii) Capital Lease Obligations of such Person; (iv) obligations of such Person to redeem or otherwise retire shares of Capital Stock of such Person; (v) indebtedness of others of the type described in clauses (i) through (iv) above secured by a Lien on the property of such Person, whether or not the respective obligation so secured has been assumed by such Person; and (vi) indebtedness of others of the type described in clauses (i) through (v) above Guaranteed by such Person. Credit Agreement - 13 - Notwithstanding anything to the contrary contained in clause (i) of the preceding sentence, indebtedness of any Person in respect of amounts payable under an agreement not to compete shall be the amount carried on the balance sheet of such Person in respect of such agreement in accordance with GAAP. "Initial Period" shall mean the period from and including the Closing Date to but excluding the date five Business Days after the date on which the Company first delivers financial statements to the Administrative Agent pursuant to Section 9.01(b) hereof. "Interest Expense" shall mean, for any period, the sum (determined without duplication) of the aggregate amount of interest accruing during such period on Indebtedness of the Company and its Subsidiaries (on a consolidated basis), including the interest portion of payments under Capital Lease Obligations and any capitalized interest, and excluding amortization of debt discount and expense and interest paid in kind. "Interest Period" shall mean, with respect to any Eurodollar Loans, the period commencing on the date such Loans are made or converted from ABR Loans or the last day of the next preceding Interest Period with respect to such Loans and ending on the numerically corresponding day in the first, second, third, sixth or (if acceptable to all Lenders) twelfth calendar month thereafter, as the Company may select as provided in Section 5.05 hereof, except that each such Interest Period which commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month. Notwithstanding the foregoing: (i) if any Interest Period would otherwise end after the Commitment Termination Date, such Interest Period shall end on the Commitment Termination Date; (ii) each Interest Period that would otherwise end on a day that is not a Business Day shall end on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); and (iii) notwithstanding clause (i) above, no Interest Period shall have a duration of less than one month and, if the Interest Period for any Eurodollar Loan would otherwise be a shorter period, such Loans shall not be available hereunder for such period. Credit Agreement - 14 - "Interest Rate Agreement" shall mean (i) an interest rate swap agreement, interest rate cap agreement or similar arrangement between the Company and one or more of the Lenders or (ii) an interest rate swap agreement, interest rate cap agreement or similar arrangement between the Company and one or more financial institutions (other than a Lender) approved by the Administrative Agent (which approval shall not be unreasonably withheld) pursuant to which the Company is not required in the absence of default to make any payments other than initial fees. "Investments" shall have the meaning assigned to such term in Section 9.14 hereof. "Issuing Bank" shall mean Chase, as the issuer of Letters of Credit under Section 2.08 hereof, together with its successors and assigns in such capacity. "Large Volume Account Capitalized Expenditures" shall mean any expenditures incurred by the Company or its Subsidiaries in connection with new customers initially storing with the Company or its Subsidiaries in excess of 10,000 boxes, to the extent that such expenditures are capitalized in accordance with GAAP. "Letter of Credit Documents" shall mean, with respect to any Letter of Credit, collectively, any application therefor and any other agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk with respect to such Letter of Credit or (b) any collateral security for any of such obligations, each as the same may be modified and supplemented and in effect from time to time. "Letter of Credit Liability" shall mean, without duplication, at any time and in respect of any Letter of Credit, the sum of (a) the undrawn face amount of such Letter of Credit plus (b) the aggregate unpaid principal amount of all Reimbursement Obligations of the Company at such time due and payable in respect of all drawings made under such Letter of Credit. For purposes of this Agreement, a Lender (other than the Issuing Bank) shall be deemed to hold a Letter of Credit Liability in an amount equal to its participation interest in the related Letter of Credit under Section 2.08 hereof, and the Issuing Bank shall be deemed to hold a Letter of Credit Liability in an amount equal to its retained interest in the related Letter of Credit after giving effect to the acquisition by the Lenders other than the Issuing Bank of their participation interests under said Section 2.08. Credit Agreement - 15 - "Letters of Credit" shall have the meaning assigned to such term in Section 2.08 hereof. "Leverage Ratio" shall have the meaning assigned to such term in Section 9.09 hereof. "Lien" shall mean, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Company and each of its Subsidiaries shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Liquid Investments" shall mean: (i) certificates of deposit maturing within 90 days of the acquisition thereof denominated in Dollars and issued by (X) a Lender or (Y) a bank or trust company having combined capital and surplus of at least $500,000,000 and which has (or which is a Subsidiary of a bank holding company which has) publicly traded debt securities rated A or higher by Standard & Poor's Ratings Services or A-2 or higher by Moody's Investors Service, Inc.; (ii) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with (x) any Lender or (y) any bank or trust company meeting the qualifications specified in clause (i)(Y) above; (iii) obligations issued or guaranteed by the United States of America, with maturities not more than one year after the date of issue; (iv) commercial paper with maturities of not more than 90 days and a published rating of not less than A-2 and P-2 (or the equivalent rating); and (v) investments in money market funds substantially all of whose assets are comprised of securities and other obligations of the types described in clauses (i) through (iv) above. "Loans" shall mean the loans provided for in Section 2.01 hereof, which may be ABR Loans and/or Eurodollar Loans. "Maintenance Capital Expenditures" shall mean Capital Expenditures required to maintain, reconfigure, or replace Credit Agreement - 16 - existing assets (as distinguished from Capital Expenditures relating to growth and as distinguished from Additional Expenditures), as certified pursuant to Section 9.01(i) hereof. "Majority Lenders" shall mean Lenders having at least 51% of the aggregate amount of the Commitments (or, if the Commitments shall have terminated, the aggregate unpaid principal amount of Loans and Letter of Credit Liabilities). "Material Adverse Effect" shall mean a material adverse effect on (a) the business, assets, property, condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole, (b) the validity or enforceability of any of the Basic Documents, (c) the rights and remedies of the Lenders and the Administrative Agent under any of the Basic Documents or (d) the timely payment of the principal of or interest on the Loans or the Reimbursement Obligations or other amounts payable in connection therewith. "Multiemployer Plan" shall mean at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which the Company or any member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the Controlled Group during such five year period. "Net Cash Proceeds" shall mean, in each case as set forth in a statement in reasonable detail delivered to the Administrative Agent: (a) with respect to the disposition of any asset by the Company or any of its Subsidiaries, the excess, if any, of (i) the cash received in connection with such disposition over (ii) the sum of (A) the principal amount of any Indebtedness which is secured by such asset and which is required to be repaid in connection with the disposition thereof, plus (B) the reasonable out-of-pocket expenses incurred by the Company or such Subsidiary, as the case may be, in connection with such disposition, plus (C) provision for taxes, including income taxes, attributable to the disposition of such asset; (b) with respect to the issuance of any Indebtedness of the Company or any its Subsidiaries the gross proceeds received by the Company or such Subsidiary from such issuance less all reasonable legal expenses, discounts and commissions and other fees and expenses incurred or to be incurred and all federal, state, local and foreign taxes assessed or to be assessed in connection therewith; and Credit Agreement - 17 - (c) in the case of any Casualty Event, the aggregate amount of proceeds of insurance, condemnation awards and other compensation received by the Company and its Subsidiaries in respect of such Casualty Event net of (i) reasonable expenses incurred by the Company and its Subsidiaries in connection therewith and (ii) contractually required repayments of Indebtedness to the extent secured by a Lien on such property and any income and transfer taxes payable by the Company or any of its Subsidiaries in respect of such Casualty Event. "Notes" shall mean the promissory notes provided for by Section 2.06 hereof and all promissory notes delivered in substitution or exchange therefor, in each case as the same shall be modified and supplemented and in effect from time to time. "Obligor" shall mean, collectively, the Company and each of the Subsidiary Guarantors. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Permitted Acquisition" has the meaning set forth in Section 9.12. "Permitted Indebtedness" shall mean, without duplication: (i) Additional Subordinated Indebtedness; (ii) Indebtedness secured by Permitted Mortgages; (iii) Indebtedness in respect of agreements not to compete; (iv) Capitalized Lease Obligations; (v) Indebtedness consisting of reimbursement obligations in respect of letters of credit issued by any bank for the account of the Company or any of its Subsidiaries, the aggregate amount available to be drawn under which may not exceed $1,500,000 at any time; (vi) Indebtedness in respect of any Interest Rate Agreement; (vii) unsecured Indebtedness of the Company in an aggregate outstanding principal amount not at any time exceeding $3,000,000; Credit Agreement - 18 - (viii) Indebtedness of Excluded Subsidiaries in an aggregate outstanding principal amount not at any time exceeding $5,000,000 (and any guaranty by the Company of such Indebtedness to the extent constituting an Investment permitted under Section 9.14(vii) hereof); and (ix) any guaranty by the Company of Indebtedness incurred pursuant to the foregoing clauses (ii), (iii), (iv) or (v) by a Subsidiary of the Company; provided that (A) Permitted Indebtedness incurred pursuant to the foregoing clauses (i) and (iii) may be incurred only in connection with Permitted Acquisitions; and (B) Permitted Indebtedness incurred pursuant to the foregoing clauses (i), (ii), (iii) and (viii) shall be incurred on terms and pursuant to documentation in all respects reasonably satisfactory to the Administrative Agent. "Permitted Mortgage" means any mortgage subjecting property of any Subsidiary of the Company to a Lien where (i) the outstanding Capital Stock of such Subsidiary has been pledged to the Administrative Agent for the benefit of the Lenders pursuant to the Company Pledge Agreement, the Subsidiary Pledge Agreement or another pledge agreement that is in form and substance reasonably acceptable to the Administrative Agent, (ii) the Company shall agree, for the benefit of the Administrative Agent and the Lenders, not to permit any Subsidiary owning any interest in such property to create, incur or suffer to exist any Indebtedness other than Indebtedness permitted hereunder (determined without giving effect to clause (ii) of the definition of "Permitted Indebtedness" in this Section 1.01) and other Indebtedness secured by such mortgage, (iii) such mortgage (and the other documentation, if any, relating thereto) does not contain any cross-default provisions referring to any other indebtedness of the Company or its Subsidiaries and (iv) such mortgage (and the other documentation, if any, relating thereto) does not contain any covenants subjecting the Company or its Subsidiaries to financial tests of any nature. "Person" shall mean an individual, a corporation, a company, a voluntary association, a partnership, a limited liability company, a trust, an unincorporated organization or a government or any agency, instrumentality or political subdivision thereof. "Plan" shall mean an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (a) maintained by the Company or any member of the Controlled Group for employees of the Company or any member of the Controlled Group or (b) maintained pursuant to a collective Credit Agreement - 19 - bargaining agreement or any other arrangement under which more than one employer makes contributions and to which the Company or any member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. "Post-Default Rate" shall mean a rate equal to the sum of 2% plus the higher of (i) the rate of interest applicable to ABR Loans and (ii) in the case of any Loan, the rate of interest (if any) otherwise applicable to such Loan. "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by The Chase Manhattan Bank as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Principal Stockholders" shall mean each of Vincent J. Ryan, Schooner Capital Corporation, C. Richard Reese, Eugene B. Doggett, and their respective Affiliates. "Qualifying Sale-Leaseback Transaction" shall mean any arrangement by which the Company or any of its Subsidiaries enters into an arrangement with any bank, insurance company or other lender or investor providing for the leasing to the Company or a Subsidiary thereof of any real property which has been or is to be sold or transferred by the Company or such Subsidiary to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor and where the real property in question has been constructed after the Closing Date. "Quarterly Dates" shall mean the last Business Day of each March, June, September and December. "RCRA" means the Resource Conservation and Recovery Act, as amended. "Reference Lenders" shall mean each of Chase and such other Lenders as the Administrative Agent may designate with the consent of the Company, such consent not to be unreasonably withheld. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. "Regulatory Change" shall mean, with respect to any Lender, any change on or after the date of this Agreement in United States federal, state or foreign laws or regulations, Credit Agreement - 20 - including Regulation D, or the adoption or making on or after such date of any interpretations, directives or requests applying to a class of lenders including such Lender of or under any United States federal or state, or any foreign, laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. "Reimbursement Obligations" shall mean, at any time, the obligations of the Company then outstanding to reimburse amounts paid by the Issuing Bank in respect of any drawings under a Letter of Credit. "Release" shall have the meaning set forth in 42 U.S.C. Section 9601(22), but shall not include any "federally permitted release" as defined in 42 U.S.C. Section 9601(10). The term "Released" shall have a corresponding meaning. "Reserve Requirement shall mean, for any Eurodollar Loans for any Interest Period therefor, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding one billion Dollars against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such member banks by reason of any Regulatory Change against (i) any category of liabilities which includes deposits by reference to which the Eurodollar Rate is to be determined as provided in the definition of "Eurodollar Base Rate" in this Section 1.01 or (ii) any category of extensions of credit or other assets which include Eurodollar Loans. "Residual Assurances" shall mean any commitment or undertaking by the Company required as a condition to any financing made available by any Person to an Affiliate of the Company to finance the costs of construction or acquisition by such Affiliate of records management facilities (including the acquisition of real estate for development purposes), where such facility is intended to be leased to the Company or a Subsidiary of the Company, which commitment or undertaking is intended to provide such Person with an additional assurance that it will receive a minimum return under such financing (and which does not constitute a Guaranty of the principal amount of such financing); provided that no payment under any such commitment or undertaking may be made prior to July 31, 2002, and that such commitment or undertaking shall be entered into on terms and pursuant to documentation in all respects reasonably satisfactory to the Administrative Agent. Credit Agreement - 21 - "Restricted Payment" shall mean dividends (in cash, property or obligations) on, or other payments or distributions on account of, or the setting apart of money for a sinking or other analogous fund for the purchase, redemption, retirement or other acquisition of, any shares of any class of Capital Stock of the Company, or any payment in respect of any option or warrant to purchase any shares of any class of Capital Stock of the Company or the exchange or conversion of any shares of any class of Capital Stock of the Company for or into any obligations of or shares of any other class of Capital Stock of the Company or any other property, but excluding dividends payable solely in, or exchanges or conversions for or into, shares of common stock of the Company. "Scheduled Amortization" shall mean, for any period, the sum (calculated without duplication) of all payments of principal of Indebtedness of the Company (other than Indebtedness hereunder) scheduled to be made during such period. "Security Documents" shall mean, collectively, the Company Pledge Agreement, the Subsidiary Pledge Agreement and all Uniform Commercial Code financing statements required by said agreements to be filed with respect to the security interests in personal Property created pursuant thereto. "Senior Subordinated Debt" shall mean the Indebtedness of the Company in respect of the ____% Senior Subordinated Notes of the Company due ________, 2006 issued pursuant to Senior Subordinated Debt Indenture. "Senior Subordinated Debt Documents" shall mean all documents and agreements executed and delivered in connection with the original issuance of the Senior Subordinated Debt, including the Senior Subordinated Debt Indenture and the promissory notes evidencing Indebtedness thereunder, in each case as the same may be amended or modified, without prejudice to the provisions of Section 9.20 hereof. "Senior Subordinated Debt Indenture" shall mean the Indenture dated as of _________, 1996 among the Company and First Bank National Association, as Trustee, as the same may be amended or modified, without prejudice to the provisions of Section 9.20 hereof. "Statutory Reserve Rate" shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which Chase is subject for new negotiable nonpersonal time deposits in dollars of over Credit Agreement - 22 - $100,000 with maturities approximately equal to three months. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Stock Consideration" shall mean, with respect to any Acquisition, the aggregate amount of consideration paid by the Company and its Subsidiaries in connection therewith consisting of the Company's common stock or with proceeds of the issuance of the Company's common stock within twelve months prior to the date of such Acquisition. For purposes hereof, the amount of Stock Consideration paid by the Company in respect of any Acquisition shall be deemed to be equal to the fair market value of the Company's common stock so paid, determined in good faith by the Company at the time of such Acquisition. "Subordinated Indebtedness" shall mean, collectively, (a) Senior Subordinated Debt and (b) Additional Subordinated Indebtedness. "Subsidiary" shall mean, with respect to any Person, any corporation, partnership, limited liability company or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership, limited liability company or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership, limited liability company or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person. "Subsidiary Guarantor" shall mean (i) each of the Subsidiaries of the Company listed in Part 1 of Schedule III hereto other than those Subsidiaries identified in Part 1 of Schedule III as not being a Subsidiary Guarantor and (ii) each other Subsidiary of the Company that from time to time becomes a party to the Subsidiary Guaranty or otherwise guarantees the obligations of the Company hereunder pursuant to Section 9.22. "Subsidiary Guaranty" shall mean the Subsidiary Guaranty dated as of the Closing Date, in substantially the form of Exhibit B hereto, as said agreement shall be modified and supplemented and in effect from time to time. "Subsidiary Pledge Agreement" shall mean a Pledge Agreement substantially in the form of Exhibit D hereto between the Subsidiary Guarantors and the Administrative Agent, as the Credit Agreement - 23 - same shall be modified and supplemented and in effect from time to time. "Three-Month Secondary CD Rate" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day is not a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day) or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Administrative Agent from three negotiable certificate of deposit dealers of recognized standing selected by it. "Type" shall have the meaning assigned to such term in Section 1.03 hereof. "Unfunded Liabilities" shall mean, with respect to any Plan, at any time, the amount (if any) by which (a) the present value of all benefits under such Plan exceeds (b) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of the Company or any member of the Controlled Group to the PBGC or such Plan under Title IV of ERISA. "Voting Stock" shall mean, with respect to any Person, any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency). "Wholly-Owned Subsidiary" shall mean as to any Person, a Subsidiary of such Person all of whose outstanding shares of Capital Stock (except directors' qualifying shares) are directly or indirectly owned by such Person. 1.02 Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial Credit Agreement - 24 - statements and certificates and reports as to financial matters required to be delivered hereunder shall be prepared, in accordance with GAAP; provided that if any change in GAAP proposed after the Closing Date in itself materially affects the calculation of any financial covenant in Section 9, the Company may by notice to the Administrative Agent, or the Administrative Agent (at the request of the Majority Lenders) may by notice to the Company, require that such covenant thereafter be calculated in accordance with GAAP as in effect, and applied by the Company, immediately before such change in GAAP occurs. If such notice is given, the compliance certificates delivered pursuant to Section 9.01 after such change occurs shall be accompanied by reconciliations of the difference between the calculation set forth therein and a calculation made in accordance with GAAP as in effect from time to time after such change occurs. To enable the ready determination of compliance with the covenants set forth in Section 9 hereof, the Company will not change from December 31 in each year the date on which its fiscal year ends, nor from March 31, June 30 and September 30 the dates on which the first three fiscal quarters in each fiscal year end. 1.03 Types of Loans. Loans hereunder are distinguished by "Type". The "Type" of a Loan refers to the determination whether such Loan is a Eurodollar Loan or an ABR Loan. Section 2. Loans, Etc. 2.01 Loans. Each Lender severally agrees, on the terms and conditions of this Agreement, to make loans to the Company in Dollars during the period from and including the Closing Date to but not including the Commitment Termination Date in an aggregate principal amount at any one time outstanding up to but not exceeding the amount of the Commitment of such Lender as in effect from time to time, provided that in no event shall the aggregate principal amount of all Loans, together with the aggregate amount of all Letter of Credit Liabilities, exceed the aggregate amount of the Commitments as in effect from time to time. Subject to the terms and conditions of this Agreement, during such period the Company may borrow, repay and reborrow the amount of the Commitments by means of ABR Loans and Eurodollar Loans and may convert Loans of one Type into Loans of the other Type (as provided in Section 3.02(a) hereof) or continue Eurodollar Loans for subsequent Interest Periods. 2.02 Reductions of Commitments. (a) Mandatory. The Commitments shall terminate on the Commitment Termination Date. In addition, the Commitments shall be reduced in the amount and on the date of each prepayment Credit Agreement - 25 - applied to the Loans (or to reduce Commitments) pursuant to Section 3.02(b). (b) Optional. The Company shall have the right to terminate or reduce the unused Commitments (for which purpose use of the Commitments shall be deemed to include the aggregate amount of Letter of Credit Liabilities) at any time or from time to time, provided that (i) the Company shall give notice of each such termination or reduction to the Administrative Agent as provided in Section 5.05 hereof and (ii) each partial reduction shall be in an aggregate amount at least equal to $1,000,000. (c) No Reinstatement. Commitments once terminated or reduced may not be reinstated. 2.03 Fees. The Company shall pay to the Administrative Agent for the account of each Lender commitment fees on the daily average unused amount of such Lender's Commitment (for which purpose the aggregate amount of any Letter of Credit Liabilities shall be deemed to be a pro rata (based on the Commitments) use of each Lender's Commitment) for the period from the Closing Date to and including the earlier of the date the Commitments are terminated and the Commitment Termination Date, at a rate per annum equal to the Applicable Commitment Fee Rate in effect from time to time. Accrued commitment fees under this Section 2.03 shall be payable on the Quarterly Dates and on the earlier of the date the Commitments are terminated and the Commitment Termination Date. The Company shall pay to Chase on the Closing Date syndication, agency and additional commitment fees in the amounts heretofore mutually agreed in writing. The Company shall pay to the Administrative Agent on the Closing Date and on each anniversary thereof, so long as any of the Commitments are in effect and until payment in full of all Loans hereunder, all interest thereon and all other amounts payable hereunder, an annual agency fee in the amount heretofore mutually agreed in writing. 2.04 Lending Offices. The Loans of each Type made by each Lender shall be made and maintained at such Lender's Applicable Lending Office for Loans of such Type. 2.05 Several Obligations; Remedies Independent. The ----------------------------------------- failure of any Lender to make any Loan to be made by it on the date specified therefor shall not relieve any other Lender of its obligation to make its Loan on such date, but neither the Administrative Agent nor any Lender shall be responsible for the failure of any other Lender to make a Loan to be made by such other Lender. The amounts payable by the Company at any time hereunder and under the Notes to each Lender shall be a separate and independent debt and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and the Credit Agreement - 26 - Notes, and it shall not be necessary for any other Lender or the Administrative Agent to consent to, or be joined as an additional party in, any proceedings for such purposes. 2.06 Notes. The Loans made by each Lender shall be evidenced by a single promissory note of the Company (each, a "Note") in substantially the form of Exhibit A hereto, dated the Closing Date, payable to such Lender in a principal amount equal to such Lender's Commitment as in effect on the Closing Date and otherwise duly completed. Each Lender is hereby authorized by the Company to endorse on the schedule (or a continuation thereof) attached to each Note of such Lender, to the extent applicable, the date, amount and Type of and the Interest Period (if any) for each Loan made by such Lender to the Company hereunder, and the date and amount of each payment or prepayment of principal of such Loan received by such Lender, provided that any failure by such Lender to make any such endorsement shall not affect the obligations of the Company under such Note or hereunder in respect of such Loan. 2.07 Use of Proceeds. The proceeds of the Loans shall be used for the general corporate purposes of the Company and its Subsidiaries, including, without limitation, the making of Permitted Acquisitions and the refinancing of existing Indebtedness of the Company and its Subsidiaries. Neither the Administrative Agent nor any Lender shall have any responsibility as to the use of any of the proceeds of any of the Loans or Letters of Credit. 2.08 Letters of Credit. Subject to the terms and conditions of this Agreement, the Commitments may be utilized, upon the request of the Company, in addition to the Loans provided for by Section 2.01 hereof, by the issuance by the Issuing Bank of standby letters of credit (collectively with the Existing Letters of Credit, "Letters of Credit") for account of the Company or any of its Subsidiaries (as specified by the Company), provided that in no event shall (i) the aggregate amount of all Letter of Credit Liabilities, together with the aggregate outstanding principal amount of the Loans, exceed the aggregate amount of the Commitments as in effect from time to time, (ii) the aggregate outstanding amount of all Letter of Credit Liabilities exceed $2,000,000 and (iii) the expiration date of any Letter of Credit extend beyond the earlier of the Commitment Termination Date and the date twelve months following the issuance of such Letter of Credit (provided that any Letter of Credit with a twelve-month tenor may provide for the renewal thereof for additional twelve-month periods, which periods shall in any event not extend beyond the Commitment Termination Date). On the Closing Date, all Existing Letters of Credit shall automatically, without any action on the part of any Person, be deemed to be Letters of Credit issued and outstanding hereunder. Credit Agreement - 27 - The following additional provisions shall apply to Letters of Credit: (a) The Company shall give the Administrative Agent at least three Business Days' irrevocable prior notice (effective upon receipt) specifying the Business Day (which shall be no later than 30 days preceding the Commitment Termination Date) on which each Letter of Credit is to be issued and the account party or parties therefor and describing in reasonable detail the proposed terms of such Letter of Credit (including the beneficiary thereof) and the nature of the transactions or obligations proposed to be supported thereby (including whether such Letter of Credit is to be a commercial letter of credit or a standby letter of credit). Upon receipt of any such notice, the Administrative Agent shall advise the Issuing Bank of the contents thereof. (b) On each day during the period commencing with the issuance by the Issuing Bank of any Letter of Credit and until such Letter of Credit shall have expired or been terminated, the Commitment of each Lender shall be deemed to be utilized for all purposes of this Agreement in an amount equal to such Lender's Commitment Percentage of the then undrawn face amount of such Letter of Credit. Each Lender (other than the Issuing Bank) agrees that, upon the issuance of any Letter of Credit hereunder, it shall automatically acquire a participation in the Issuing Bank's liability under such Letter of Credit in an amount equal to such Lender's Commitment Percentage of such liability, and each Lender (other than the Issuing Bank) thereby shall automatically absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and be unconditionally obligated to the Issuing Bank to pay and discharge when due, its Commitment Percentage of the Issuing Bank's liability under such Letter of Credit. (c) Upon receipt from the beneficiary of any Letter of Credit of any demand for payment under such Letter of Credit, the Issuing Bank shall promptly notify the Company (through the Administrative Agent) of the amount to be paid by the Issuing Bank as a result of such demand and the date on which payment is to be made by the Issuing Bank to such beneficiary in respect of such demand. Notwithstanding the identity of the account party of any Letter of Credit, the Company hereby unconditionally agrees to pay and reimburse the Administrative Agent for account of the Issuing Bank for the amount of each demand for payment under such Letter of Credit that is in substantial compliance with the provisions of such Letter of Credit at or prior to the date on which payment is to be made by the Issuing Bank to the beneficiary Credit Agreement - 28 - thereunder, without presentment, demand, protest or other formalities of any kind. (d) Forthwith upon its receipt of a notice referred to in paragraph (c) of this Section 2.08, the Company shall advise the Administrative Agent whether or not the Company intends to borrow hereunder to finance its obligation to reimburse the Issuing Bank for the amount of the related demand for payment and, if it does, submit a notice of such borrowing as provided in Section 4.05 hereof. (e) Each Lender (other than the Issuing Bank) shall pay to the Administrative Agent for account of the Issuing Bank at an account in New York, New York specified by the Administrative Agent in Dollars and in immediately available funds the amount of such Lender's Commitment Percentage of any payment under a Letter of Credit upon notice by the Issuing Bank (through the Administrative Agent) to such Lender requesting such payment and specifying such amount. Each such Lender's obligation to make such payment to the Administrative Agent for account of the Issuing Bank under this paragraph (e), and the Issuing Bank's right to receive the same, shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the failure of any other Lender to make its payment under this paragraph (e), the financial condition of the Company (or any other account party), any failure to satisfy any condition precedent to any Loan, the existence of any Default or the termination of the Commitments. Each such payment to the Issuing Bank shall be made without any offset, abatement, withholding or reduction whatsoever. If any Lender shall default in its obligation to make any such payment to the Administrative Agent for account of the Issuing Bank, for so long as such default shall continue the Administrative Agent may at the request of the Issuing Bank withhold from any payments received by the Administrative Agent under this Agreement or any Note for account of such Lender the amount so in default and, to the extent so withheld, pay the same to the Issuing Bank in satisfaction of such defaulted obligation. (f) Upon the making of each payment by a Lender to the Issuing Bank pursuant to paragraph (e) above in respect of any Letter of Credit, such Lender shall, automatically and without any further action on the part of the Administrative Agent, the Issuing Bank or such Lender, acquire (i) a participation in an amount equal to such payment in the Reimbursement Obligation owing to the Issuing Bank by the Company hereunder and under the Letter of Credit Documents relating to such Letter of Credit and (ii) a participation in a percentage equal to such Lender's Commitment Percentage Credit Agreement - 29 - in any interest or other amounts payable by the Company hereunder and under such Letter of Credit Documents in respect of such Reimbursement Obligation (other than the commissions, charges, costs and expenses payable to the Issuing Bank pursuant to paragraph (g) of this Section 2.08). Upon receipt by the Issuing Bank from or for account of the Company of any payment in respect of any Reimbursement Obligation or any such interest or other amount (including by way of setoff or application of proceeds of any collateral security) the Issuing Bank shall promptly pay to the Administrative Agent for account of each Lender entitled thereto such Lender's Commitment Percentage of such payment, each such payment by the Issuing Bank to be made in the same money and funds in which received by the Issuing Bank. In the event any payment received by the Issuing Bank and so paid to the Lenders hereunder is rescinded or must otherwise be returned by the Issuing Bank, each Lender shall, upon the request of the Issuing Bank (through the Administrative Agent), repay to the Issuing Bank (through the Administrative Agent) the amount of such payment paid to such Lender, with interest at the rate specified in paragraph (j) of this Section 2.08. (g) The Company shall pay to the Administrative Agent for account of each Lender (ratably in accordance with their respective Commitment Percentages) a letter of credit fee in respect of each Letter of Credit in an amount equal to the Applicable L/C Percentage of the daily average undrawn face amount of such Letter of Credit for the period from and including the date of issuance of such Letter of Credit (i) in the case of a Letter of Credit that expires in accordance with its terms, to and including such expiration date and (ii) in the case of a Letter of Credit that is drawn in full or is otherwise terminated other than on the stated expiration date of such Letter of Credit, to but excluding the date such Letter of Credit is drawn in full or is terminated (such fee to be non-refundable, to be paid in arrears on each Quarterly Date and on the Commitment Termination Date and on the date of expiry or termination or full utilization of such Letter of Credit and to be calculated for any day after giving effect to any payments made under such Letter of Credit on such day). In addition, the Company shall pay to the Administrative Agent for account of the Issuing Bank a fronting fee in respect of each Letter of Credit in an amount equal to 0.25% per annum of the daily average undrawn face amount of such Letter of Credit for the period from and including the date of issuance of such Letter of Credit (i) in the case of a Letter of Credit that expires in accordance with its terms, to and including such expiration date and (ii) in the case of a Letter of Credit that is drawn in full or is otherwise Credit Agreement - 30 - terminated other than on the stated expiration date of such Letter of Credit, to but excluding the date such Letter of Credit is drawn in full or is terminated (such fee to be non-refundable, to be paid in arrears on each Quarterly Date and on the Commitment Termination Date and to be calculated for any day after giving effect to any payments made under such Letter of Credit on such day) plus all commissions, charges, costs and expenses in the amounts customarily charged by the Issuing Bank from time to time in like circumstances with respect to the issuance of each Letter of Credit and drawings and other transactions relating thereto. (h) Promptly following the end of each calendar month, the Issuing Bank shall deliver (through the Administrative Agent) to each Lender and the Company a notice describing the aggregate amount of all Letters of Credit outstanding at the end of such month. Upon the request of any Lender from time to time, the Issuing Bank shall deliver any other information reasonably requested by such Lender with respect to each Letter of Credit then outstanding. (i) The issuance by the Issuing Bank of each Letter of Credit shall, in addition to the conditions precedent set forth in Section 7 hereof, be subject to the conditions precedent that (i) such Letter of Credit shall be in such form, contain such terms and support such transactions as shall be satisfactory to the Issuing Bank consistent with its then current practices and procedures with respect to letters of credit of the same type and (ii) the Company shall have executed and delivered such applications, agreements and other instruments relating to such Letter of Credit as the Issuing Bank shall have reasonably requested consistent with its then current practices and procedures with respect to letters of credit of the same type, provided that in the event of any conflict between any such application, agreement or other instrument and the provisions of this Agreement or any Security Document, the provisions of this Agreement and the Security Documents shall control. (j) To the extent that any Lender shall fail to pay any amount required to be paid pursuant to paragraph (e) or (f) of this Section 2.08 on the due date therefor, such Lender shall pay interest to the Issuing Bank (through the Administrative Agent) on such amount from and including such due date to but excluding the date such payment is made at a rate per annum equal to the Federal Funds Effective Rate, provided that if such Lender shall fail to make such payment to the Issuing Bank within three Business Days of such due date, then, retroactively to the due date, such Lender shall Credit Agreement - 31 - be obligated to pay interest on such amount at the Post-Default Rate. (k) The issuance by the Issuing Bank of any modification or supplement to any Letter of Credit hereunder shall be subject to the same conditions as are applicable under this Section 2.08 to the issuance of new Letters of Credit, and no such modification or supplement shall be issued hereunder unless either (i) the respective Letter of Credit affected thereby would have complied with such conditions had it originally been issued hereunder in such modified or supplemented form or (ii) each Lender shall have consented thereto. The Company hereby indemnifies and holds harmless each Lender (including the Issuing Bank) and the Administrative Agent from and against any and all claims and damages, losses, liabilities, costs or expenses that such Lender or the Administrative Agent may incur (or that may be claimed against such Lender or the Administrative Agent by any Person whatsoever) by reason of or in connection with the execution and delivery or transfer of or payment or refusal to pay by the Issuing Bank under any Letter of Credit; provided that the Company shall not be required to indemnify any Lender or the Administrative Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct or gross negligence of the Issuing Bank in determining whether a request presented under any Letter of Credit complied with the terms of such Letter of Credit or (y) in the case of the Issuing Bank, such Lender's failure to pay under any Letter of Credit after the presentation to it of a request strictly complying with the terms and conditions of such Letter of Credit. Nothing in this Section 2.08 is intended to limit the other obligations of the Company, any Lender or the Administrative Agent under this Agreement. Section 3. Borrowings, Conversions and Prepayments. 3.01 Borrowings. The Company shall give the Administrative Agent notice of each Loan to be made hereunder as provided in Section 5.05 hereof. Not later than 11:00 a.m. New York time on the date specified for each such borrowing hereunder, each Lender shall make available the amount of the Loan to be made by it on such date to the Administrative Agent, at an account in New York, New York specified by the Administrative Agent, in immediately available funds, for account of the Company. The amount so received by the Administrative Agent shall, subject to the terms and conditions of this Agreement, be made available to the Company by depositing the same, in immediately available funds, in an account of the Credit Agreement - 32 - Company designated by the Company and maintained with Chase in New York, New York. 3.02 Prepayments and Conversions. (a) Optional Prepayments and Conversions. The Company shall have the right to prepay Loans and to convert Loans of one Type into Loans of the other Type, at any time or from time to time, provided that: (i) the Company shall give the Administrative Agent notice of each such prepayment as provided in Section 5.05 hereof and (ii) except to the extent required pursuant to Section 3.02(b) hereof, Eurodollar Loans may be prepaid or converted only on the last day of an Interest Period for such Loans. (b) Mandatory Prepayments. (1) Casualty Events; Condemnation Awards. On the date twelve months following the receipt by the Company or any of its Subsidiaries of any proceeds of insurance, condemnation award or other compensation in respect of any Casualty Event affecting any property of the Company or any of its Subsidiaries (or upon such earlier date as the Company or such Subsidiary, as the case may be, shall have determined not to repair or replace the property affected by such Casualty Event), the Company shall prepay the Loans (and/or provide cover for Letter of Credit Liabilities as specified in paragraph (c) below), and the Commitments shall be subject to automatic reduction, in an aggregate amount, if any, equal to 100% of the Net Cash Proceeds of such Casualty Event not theretofore applied to the repair or replacement of such property. (2) Issuance of Indebtedness. The Company shall prepay the Loans (and/or provide cover for Letter of Credit Liabilities as specified in paragraph (c) below) in the amount of and on the date of each receipt by the Company or any Subsidiary of the Company of Net Cash Proceeds from issuance subsequent to the Closing Date of Indebtedness other than Indebtedness incurred pursuant to Section 9.08 (it being understood that this Section 3.02(b)(2) shall not constitute a waiver of any provision of Section 9.08). (3) Asset Dispositions. During each fiscal year of the Company, the Company shall prepay the Loans (and/or provide cover for Letter of Credit Liabilities as specified in paragraph (c) below), in an amount equal to the excess of (a) the sum of (x) the Net Cash Proceeds received by the Company or any Subsidiary of the Company from any disposition by such Person of any assets during such fiscal year, other than a disposition permitted by clause (i) or Credit Agreement - 33 - (ii) of Section 9.12 plus (y) any payments with respect to receivables retained by such Person arising from the sale of goods or services at facilities disposed of in asset dispositions during such fiscal year over (b) $1,000,000. Such prepayments shall be made from time to time on the first Business Day that the excess amount referred to above (less all amounts previously applied to the prepayment of the Loans pursuant to this paragraph (3) during such fiscal year) is $100,000 or more. Any prepayment pursuant to paragraphs (1) through (3) above shall automatically reduce the Commitments in an amount equal to the amount specified in such paragraphs (and to the extent that, after giving effect to such reduction, the aggregate principal amount of Loans and the aggregate amount of Letter of Credit Liabilities would exceed the Commitments, the Company shall, first, prepay Loans and, second, provide cover for Letter of Credit Liabilities as specified in paragraph (c) below, in an aggregate amount equal to such excess). The Company shall notify the Administrative Agent promptly upon the occurrence of any event giving rise to a prepayment or Commitment reduction under this Section 3.02(b). (c) Cover for Letter of Credit Liabilities. In the event that the Loans have been repaid in full, amounts payable under Section 3.02(b) shall be applied to provide cash cover for outstanding Letters of Credit, in which event the Company shall effect the same by paying to the Administrative Agent immediately available funds in an amount equal to the required amount, which funds shall be retained by the Administrative Agent in the Collateral Account as collateral security in the first instance for the Letter of Credit Liabilities until such time as the Letters of Credit shall have been terminated and all of the Letter of Credit Liabilities paid in full. Section 4. Payments of Principal and Interest. 4.01 Repayment of Loans. The Company hereby promises to pay to the Administrative Agent for account of each Lender the entire outstanding principal amount of such Lender's Loans, and each Loan shall mature, on the Commitment Termination Date. 4.02 Interest. The Company will pay to the Administrative Agent for the account of each Lender interest on the unpaid principal amount of each Loan made by such Lender for the period commencing on the date of such Loan to but excluding the date such Loan shall be paid in full, at the following rates per annum: (a) if such Loan is an ABR Loan, the Alternate Base Rate plus the Applicable Margin; and Credit Agreement - 34 - (b) if such Loan is a Eurodollar Loan, the Eurodollar Rate plus the Applicable Margin. Notwithstanding the foregoing, the Company hereby promises to pay to the Administrative Agent for account of each Lender interest at the applicable Post-Default Rate (x) on any principal of any Loan made by such Lender, on any Reimbursement Obligation held by such Lender and on any other amount payable by the Company hereunder or under the Note held by such Lender to or for account of such Lender (but, if such amount is interest, only to the extent legally enforceable), that shall not be paid in full when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full and (y) on any principal of any Loan made by such Lender during any period when an Event of Default shall have occurred under Section 10.01(a) hereof and for so long as such Event of Default shall be continuing. Accrued interest on each Loan shall be payable (i) if such Loan is an ABR Loan, on each Quarterly Date, (ii) if such Loan is a Eurodollar Loan, on the last day of each Interest Period for such Loan (and, if such Interest Period exceeds three months' duration, quarterly, commencing on the first quarterly anniversary of the first day of such Interest Period), and (iii) in any event, upon the payment, prepayment or conversion thereof, but only on the principal so paid or prepaid or converted; provided that interest payable at the Post-Default Rate shall be payable from time to time on demand of the Administrative Agent or the Majority Lenders. Promptly after the determination of any interest rate provided for herein or any change therein, the Administrative Agent shall notify the Lenders and the Company thereof. Notwithstanding the foregoing provisions of this Section 4.02, if at any time the rate of interest set forth above on any Loan of any Lender (the "Stated Rate" for such Loan) exceeds the maximum non-usurious interest rate permissible for such Lender to charge commercial borrowers under applicable law (the "Maximum Rate" for such Lender), the rate of interest charged on such Loan of such Lender hereunder shall be limited to the Maximum Rate for such Lender. In the event the Stated Rate for any Loan of a Lender that has theretofore been subject to the preceding paragraph at any time is less than the Maximum Rate for such Lender, the principal amount of such Loan shall bear interest at the Maximum Credit Agreement - 35 - Rate for such Lender until the total amount of interest paid to such Lender or accrued on its Loans hereunder equals the amount of interest which would have been paid to such Lender or accrued on such Lender's Loans hereunder if the Stated Rate had at all times been in effect. In the event, upon payment in full of all amounts payable hereunder, the total amount of interest paid to any Lender or accrued on such Lender's Loans under the terms of this Agreement is less than the total amount of interest which would have been paid to such Lender or accrued on such Lender's Loans if the Stated Rate had, at all times, been in effect, then the Company shall, to the extent permitted by applicable law, pay to the Administrative Agent for the account of such Lender an amount equal to the difference between (a) the lesser of (i) the amount of interest which would have accrued on such Lender's Loans if the Maximum Rate for such Lender had at all times been in effect or (ii) the amount of interest which would have accrued on such Lender's Loans if the Stated Rate had at all times been in effect and (b) the amount of interest actually paid to such Lender or accrued on its Loans under this Agreement. In the event any Lender ever receives, collects or applies as interest any sum in excess of the Maximum Rate for such Lender, such excess amount shall be applied to the reduction of the principal balance of its Loans or to other amounts (other than interest) payable hereunder, and if no such principal is then outstanding, such excess or part thereof remaining shall be paid to the Company. Section 5. Payments; Pro Rata Treatment; Computations; Etc. 5.01 Payments. Except to the extent otherwise provided herein, all payments of principal, interest, Reimbursement Obligations and other amounts to be made by the Company hereunder and under the Notes shall be made in Dollars, in immediately available funds, to the Administrative Agent at an account in New York, New York specified by the Administrative Agent, not later than 11:00 a.m. New York time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). The Administrative Agent, or any Lender for whose account any such payment is made, may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Company with the Administrative Agent or such Lender, as the case may be. The Company shall, at the time of making each payment hereunder or under any Note, specify to the Administrative Agent the Loans or other amounts payable by the Company hereunder to which such payment is to be applied (and in the event that it Credit Agreement - 36 - fails to so specify, or if an Event of Default has occurred and is continuing, the Administrative Agent may apply such payment for the benefit of the Lenders as it may elect in its sole discretion, but subject to the other terms and conditions of this Agreement, including without limitation, Section 5.02 hereof). Each payment received by the Administrative Agent hereunder or under any Note for the account of a Lender shall be paid promptly to such Lender, in immediately available funds, for the account of such Lender's Applicable Lending Office. If the due date of any payment hereunder or under any Note would otherwise fall on a day which is not a Business Day such date shall be extended to the next succeeding Business Day and interest shall be payable for any principal so extended for the period of such extension. 5.02 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) each borrowing from the Lenders under Section 2.01 hereof shall be made from the Lenders, each payment of commitment fees under Section 2.03 hereof shall be made for the account of the Lenders, and each termination or reduction of the Commitments under Section 2.02 hereof shall be applied to the Commitments of the Lenders, pro rata according to the Lenders' respective percentages of the Commitments, (b) each payment by the Company of principal of or interest on Loans of a particular Type (other than payments in respect of Loans of individual Lenders provided for by Section 6 hereof) shall be made to the Administrative Agent for the account of the Lenders pro rata in accordance with the respective unpaid principal amounts of such Loans held by the Lenders and (c) each conversion of Loans of a particular Type (other than conversions of Loans of individual Lenders pursuant to Section 6.04 hereof) shall be made pro rata among the Lenders in accordance with the respective principal amounts of such Loans held by the Lenders. 5.03 Computations. Interest and fees shall be computed on the basis of a year of 360 days (or 365 or 366 days, as the case may be, in the case of ABR Loans the interest rate payable on which is then based on the Prime Rate) and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable. 5.04 Minimum and Maximum Amounts; Types. Except for prepayments made pursuant to Section 3.02(b) hereof, each borrowing, conversion and prepayment of principal of Loans shall be in an aggregate principal amount equal to (a) in the case of Eurodollar Loans, $1,000,000 or a larger multiple of $100,000, and (b) in the case of ABR Loans, $500,000 or a larger multiple of $100,000 (borrowings, conversions or prepayments of Loans of different Types or, in the case of Eurodollar Loans, having different Interest Periods, at the same time hereunder to be deemed separate borrowings, conversions and prepayments for purposes of the foregoing, one for Type or Interest Period); Credit Agreement - 37 - provided that (i) any Loan may be in the aggregate amount of the unused portion of the relevant Commitments, (ii) Loans may be prepaid in full and (ii) any borrowing or prepayment of Loans that are ABR Loans may be in an aggregate principal amount equal to $100,000 or a larger multiple of $100,000. 5.05 Certain Notices. Notices to the Administrative Agent of terminations or reductions of Commitments, of borrowings, conversions and prepayments of Loans and of the duration of Interest Periods shall be irrevocable and shall be effective only if received by the Administrative Agent not later than 1:00 p.m. New York time on the number of Business Days prior to the date of the relevant termination, reduction, borrowing, conversion and/or prepayment specified below: Number of Business Notice Days Prior Termination or reduction of Commitments 3 Borrowing or prepayment of ABR Loans 1 Borrowing or prepayment of, conversion of or into, or duration of Interest Period for, Eurodollar Loans 3 Prepayments required pursuant to Section 3.02(b) 1 Each such notice of termination or reduction shall specify the amount thereof to be terminated or reduced. Each such notice of borrowing, conversion or prepayment shall specify the amount and Type of the Loans to be borrowed, converted or prepaid (subject to Sections 3.02(a) and 5.04 hereof), the date of borrowing, conversion or prepayment (which shall be a Business Day) and, in the case of Eurodollar Loans, the duration of the Interest Period therefor (subject to the definition of Interest Period). Each such notice of duration of an Interest Period shall specify the Loans to which such Interest Period is to relate. The Administrative Agent shall promptly notify the affected Lenders of the contents of each such notice. In the event that the Company fails to select the duration of any Interest Period for any Eurodollar Loans within the time period and otherwise as provided in this Section 5.05, such Loans (if outstanding as Eurodollar Loans) will be automatically converted into ABR Loans on the last day of the then current Interest Period for such Credit Agreement - 38 - Loans or (if outstanding as ABR Loans) will remain as, or (if not then outstanding) will be made as, ABR Loans. 5.06 Non-Receipt of Funds by the Administrative Agent. Unless the Administrative Agent shall have been notified by a Lender or the Company (the "Payor") prior to the date on which such Lender is to make payment to the Administrative Agent of the proceeds of a Loan to be made by it hereunder or the Company is to make a payment to the Administrative Agent for the account of one or more of the Lenders, as the case may be (such payment being herein called the "Required Payment"), which notice shall be effective upon receipt, that the Payor does not intend to make the Required Payment to the Administrative Agent, the Administrative Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient on such date and, if the Payor has not in fact made the Required Payment to the Administrative Agent, the recipient of such payment shall, on demand, pay to the Administrative Agent the amount made available to it together with interest thereon in respect of the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at a rate per annum equal to the Federal Funds Effective Rate for such period. 5.07 Sharing of Payments; Waiver of Enforcement Without Consent, Etc. (a) The Company agrees that, in addition to (and without limitation of) any right of set-off, banker's lien or counterclaim a Lender may otherwise have, each Lender shall be entitled, at its option, to offset balances held by it for the account of the Company at any of its offices, in Dollars or in any other currency, against any principal of or interest on any of such Lender's Loans or Reimbursement Obligations to the Company hereunder, or any other obligation of the Company hereunder, which is not paid when due (regardless of whether such balances are then due to the Company), in which case it shall promptly notify the Company and the Administrative Agent thereof, provided that such Lender's failure to give such notice shall not affect the validity thereof. The Company agrees, to the fullest extent it may effectively do so under applicable law, that any Person purchasing a participation in the Loans made, or other obligations held, by another Person, whether or not acquired pursuant to the foregoing arrangements, may exercise all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans or other obligations in the amount of such participation. (b) If a Lender shall obtain payment of any principal of or interest on any Loan made by it under this Agreement, or on Credit Agreement - 39 - any other obligation then due to such Lender hereunder, through the exercise of any right of set-off, banker's lien, counterclaim or similar right, or otherwise, it shall promptly notify the Administrative Agent and purchase from the other Lenders participations in the Loans made, or other obligations held, by the other Lenders in such amounts, and make such other adjustments from time to time as shall be equitable to the end that all the Lenders shall share the benefit of such payment (net of any expenses which may be incurred by such Lender in obtaining or preserving such benefit) pro rata in accordance with the unpaid principal and interest on the Loans or other obligations then due to each of them. To such end all the Lenders shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored (including the payment of interest to the extent that the Lender obligated to return such funds is obligated to return interest). (c) Nothing contained herein shall require any Lender to exercise any right of set-off, banker's lien, counterclaim or similar right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Company. (d) This Section 5.07 is for the benefit of the Lenders only and does not constitute a waiver of any rights against the Company or any of its Subsidiaries or against any property held as security for any obligations hereunder or under any other Basic Document. 5.08 Withholding Tax Exemption. At least five Business Days prior to the first date on which interest or fees are payable hereunder for the account of any Lender, each Lender that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to each of the Company and the Administrative Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that such Lender is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes. Each Lender which so delivers a Form 1001 or 4224 further undertakes to deliver to each of the Company and the Administrative Agent two additional copies of such form (or a successor form) on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Company or the Administrative Agent, in each case certifying that such Lender is entitled to receive payments under this Agreement and the Notes without deduction or Credit Agreement - 40 - withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender advises the Company and the Administrative Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. Section 6. Yield Protection and Illegality. 6.01 Additional Costs. (a) The Company shall pay to the Administrative Agent for the account of each Lender from time to time such amounts as such Lender may determine to be necessary to compensate it for any costs incurred by such Lender which such Lender determines are attributable to its making or maintaining of any Eurodollar Loans hereunder or its obligation to make any of such Loans hereunder, or any reduction in any amount receivable by such Lender in respect of any of such Loans or such obligation (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), in each case resulting from any Regulatory Change which: (i) changes the basis of taxation of any amounts payable to such Lender under this Agreement or its Notes in respect of any of such Loans (other than changes which affect taxes measured by or imposed on the overall net income of such Lender or of its Applicable Lending Office for any of such Loans by the jurisdiction in which such Lender has its principal office or such Applicable Lending Office); or (ii) imposes or modifies any reserve, special deposit or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Lender (including any of such Loans or any deposits referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof); or (iii) imposes any other condition affecting this Agreement (or any of such extensions of credit or liabilities). Each Lender will notify the Company through the Administrative Agent of any event occurring after the date of this Agreement which will entitle such Lender to compensation pursuant to this Section 6.01(a) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, and (if so requested by the Company through the Administrative Agent) will designate a different Applicable Lending Office for Credit Agreement - 41 - the Eurodollar Loans of such Lender if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Lender, be disadvantageous to such Lender (provided that such Lender shall have no obligation to so designate an Applicable Lending Office located in the United States of America). Each Lender will furnish the Company with a statement setting forth the basis and amount of each request by such Lender for compensation under this Section 6.01(a). If any Lender requests compensation from the Company under this Section 6.01(a), the Company may, by notice to such Lender through the Administrative Agent, suspend the obligation of such Lender to make additional Eurodollar Loans to the Company until the Regulatory Change giving rise to such request ceases to be in effect (in which case the provisions of Section 6.04 hereof shall be applicable). (b) Without limiting the effect of the foregoing provisions of this Section 6.01, in the event that, by reason of any Regulatory Change, any Lender either (i) incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of such Lender which includes deposits by reference to which the interest rate on Eurodollar Loans is determined as provided in this Agreement or a category of extensions of credit or other assets of such Lender which includes Eurodollar Loans or (ii) becomes subject to restrictions on the amount of such a category of liabilities or assets which it may hold, then, if such Lender so elects by notice to the Company (with a copy to the Administrative Agent), the obligation of such Lender to make Eurodollar Loans hereunder shall be suspended until the date such Regulatory Change ceases to be in effect (in which case the provisions of Section 6.04 hereof shall be applicable). (c) Determinations and allocations by any Lender for purposes of this Section 6.01 of the effect of any Regulatory Change on its costs of maintaining its obligations to make Loans or of making or maintaining Loans or on amounts receivable by it in respect of Loans, and of the additional amounts required to compensate such Lender in respect of any Additional Costs, shall be conclusive absent manifest error, provided that such determinations and allocations are made on a reasonable basis. (d) If any Lender demands compensation under this Section, the Company may, at any time upon at least three (3) Business Days' prior notice to such Lender through the Administrative Agent, convert in full the then outstanding Eurodollar Loans of such Lender (in which case the Company shall be obligated, if such conversion is made on a day that is not the last day of the then current Interest Period applicable to such affected Eurodollar Loan, to reimburse such Lender, in accordance Credit Agreement - 42 - with Section 6.05, for any resulting loss or expense incurred by it) to an ABR Loan. 6.02 Limitation on Types of Loans. Anything herein to the contrary notwithstanding, if, with respect to any Eurodollar Loans: (a) the Administrative Agent determines (which determination shall be conclusive) that quotations of interest rates for the relevant deposits referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof are not being provided by the Reference Lenders in the relevant amounts or for the relevant maturities for purposes of determining the rate of interest for such Loans for Interest Periods therefor as provided in this Agreement; or (b) the Majority Lenders determine (which determination shall be conclusive) and notify the Administrative Agent that the relevant rates of interest referred to in the definition of "Eurodollar Base Rate" in Section 1.01 thereof upon the basis of which the rates of interest for such Loans are to be determined do not accurately reflect the cost to such Lenders of making or maintaining such Loans for Interest Periods therefor; then the Administrative Agent shall promptly notify the Company and each Lender thereof, and so long as such condition remains in effect, the Lenders shall be under no obligation to make Eurodollar Loans or to convert ABR Loans into Eurodollar Loans and the Company shall, on the last day(s) of the then current Interest Period(s) for the outstanding Eurodollar Loans, either prepay such Loans or convert such Loans into ABR Loans in accordance with Section 3.02 hereof. 6.03 Illegality. Notwithstanding any other provision of this Agreement to the contrary, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to (a) honor its obligation to make Eurodollar Loans hereunder, or (b) maintain Eurodollar Loans hereunder, then such Lender shall promptly notify the Company thereof through the Administrative Agent and such Lender's obligation to make Eurodollar Loans hereunder shall be suspended until such time as such Lender may again make and maintain Eurodollar Loans (in which case the provisions of Section 6.04 hereof shall be applicable). 6.04 Substitute ABR Loans. If the obligation of any Lender to make Eurodollar Loans shall be suspended pursuant to Section 6.01, 6.02 or 6.03 hereof, all Loans which would otherwise be made by such Lender as Eurodollar Loans shall be made instead as ABR Loans (and, if an event referred to in Section 6.01(b) or 6.03 hereof has occurred and such Lender so Credit Agreement - 43 - requests by notice to the Company with a copy to the Administrative Agent, each Eurodollar Loan of such Lender then outstanding shall be automatically converted into an ABR Loan on the date specified by such Lender in such notice) and, to the extent that Eurodollar Loans are so made as (or converted into) ABR Loans, all payments of principal which would otherwise be applied to such Eurodollar Loans shall be applied instead to such ABR Loans. 6.05 Compensation. The Company shall pay to the Administrative Agent for the account of each Lender, upon the request of such Lender through the Administrative Agent, such amount or amounts as shall be sufficient (in the reasonable opinion of such Lender) to compensate it for any loss, cost or expense incurred by it as a result of: (a) any payment, prepayment or conversion of a Eurodollar Loan made by such Lender on a date other than the last day of an Interest Period for such Loan; or (b) any failure by the Company to borrow a Eurodollar Loan to be made by such Lender on the date for such borrowing specified in the relevant notice of borrowing under Section 5.05 hereof but excluding, in any event, loss of margin for the period after any such payment, prepayment or conversion or failure to borrow; provided that such Lender shall have delivered to the Company a certificate as to the amount of such loss and expense along with the basis for calculation thereof. 6.06 Capital Adequacy. If any Lender shall determine that the adoption or implementation of any applicable law, rule, regulation or treaty regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Lender or any Person controlling such Lender (a "Parent") as a consequence of its obligations hereunder to a level below that which such Lender (or its Parent) could have achieved but for such adoption, change or compliance (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within 15 days after demand by such Lender (with a copy to the Administrative Agent), the Company shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. A Credit Agreement - 44 - statement of any Lender claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive absent manifest error; provided that the determination thereof is made on a reasonable basis; and provided further that the Company shall not be obligated to compensate such Lender for any such reduction occurring more than 180 days prior to the time such Lender first notifies the Company of such adoption, implementation, change or compliance. In determining such amount, such Lender may use any reasonable averaging and attribution methods. 6.07 Substitution of Lender. If (i) the obligation of any Lender to make Eurodollar Loans or the right of the Company to convert ABR Loans of any Lender to Eurodollar Loans has been suspended pursuant to Section 6.03, or (ii) any Lender has demanded compensation under Section 6.01 or 6.06, the Company shall have the right, with the assistance of the Administrative Agent, to seek a substitute bank or banks (which may be one or more of the Lenders) satisfactory to the Company and the Administrative Agent to purchase the Notes and assume the Commitments of such Lender. Any such Lender shall be obligated to sell the Notes for cash without recourse to such substitute bank or banks and to execute and deliver an appropriately completed assignment and assumption agreement reasonably satisfactory to the Administrative Agent and the Company and any other document or perform any act reasonably necessary to effect the assumption of the rights and obligations of such substitute bank or banks. 6.08 Additional Costs in Respect of Letters of Credit. Without limiting the obligations of the Company under Section 6.01 hereof (but without duplication), if as a result of any Regulatory Change or any risk-based capital guideline or other requirement heretofore or hereafter issued by any government or governmental or supervisory authority implementing at the national level the Basle Accord there shall be imposed, modified or deemed applicable any tax, reserve, special deposit, capital adequacy or similar requirement against or with respect to or measured by reference to Letters of Credit issued or to be issued hereunder and the result shall be to increase the cost to any Lender or Lenders of issuing (or purchasing participations in) or maintaining its obligation hereunder to issue (or purchase participations in) any Letter of Credit hereunder or reduce any amount receivable by any Lender hereunder in respect of any Letter of Credit (which increases in cost, or reductions in amount receivable, shall be the result of such Lender's or Lenders' reasonable allocation of the aggregate of such increases or reductions resulting from such event), then, upon demand by such Lender or Lenders (through the Administrative Agent), the Company shall pay immediately to the Administrative Agent for account of such Lender or Lenders, from time to time as specified Credit Agreement - 45 - by such Lender or Lenders (through the Administrative Agent), such additional amounts as shall be sufficient to compensate such Lender or Lenders (through the Administrative Agent) for such increased costs or reductions in amount. A statement as to such increased costs or reductions in amount incurred by any such Lender or Lenders, submitted by such Lender or Lenders to the Company, shall be conclusive in the absence of manifest error as to the amount thereof. Section 7. Conditions Precedent. 7.01 Initial Extension of Credit. The obligation of any Lender to make its initial extension of credit hereunder (whether by making a Loan or issuing a Letter of Credit) is subject to the conditions precedent that (i) such extension of credit shall be made on or before October 31, 1996, and (ii) the Administrative Agent shall have received the following documents and other evidence (with, in the case of clauses (a), (b), (c) and (d) below, sufficient copies for each Lender), each of which shall be satisfactory to the Administrative Agent (and to the extent specified below, to each Lender) in form and substance (delivery to the Administrative Agent by a Lender of a signature page hereto constituting conclusive evidence of such Lender's satisfaction as to the fulfillment of the conditions precedent hereto): (a) Corporate Documents. Certified copies of the charter and by-laws (or equivalent documents) of each Obligor and of all corporate authority for each Obligor (including, without limitation, board of director resolutions and evidence of the incumbency, including specimen signatures, of officers) with respect to the execution, delivery and performance of such of the Basic Documents to which such Obligor is intended to be a party and each other document to be delivered by such Obligor from time to time in connection herewith and the extensions of credit hereunder (and the Administrative Agent and each Lender may conclusively rely on such certificate until it receives notice in writing from such Obligor to the contrary). (b) Officer's Certificate. A certificate of a senior officer of the Company, dated the Closing Date, to the effect set forth in the first sentence of Section 7.02 hereof. (c) Opinion of Special New York Counsel to the Obligors. An opinion, dated the Closing Date, of Sullivan & Worcester, special New York counsel to the Obligors, substantially in the form of Exhibit E hereto and covering Credit Agreement - 46 - such other matters as the Administrative Agent or any Lender may reasonably request. (d) Opinion of Special New York Counsel to the Administrative Agent. An opinion, dated the Closing Date, of Milbank, Tweed, Hadley & McCloy, special New York counsel to the Administrative Agent, substantially in the form of Exhibit F hereto. (e) Notes. The Notes, duly completed and executed for each Lender. (f) Counterparts. This Agreement, duly executed and delivered by the Company and each of the Lenders. (g) Subsidiary Guaranty. The Subsidiary Guaranty, duly executed and delivered by each Subsidiary Guarantor and the Administrative Agent. (h) Security Documents. (i) The Company Pledge Agreement, duly executed and delivered by the Company and the Administrative Agent, together with the certificates identified in Annex I thereto, accompanied by undated stock powers executed in blank. (ii) The Subsidiary Pledge Agreement duly executed and delivered by each Subsidiary Guarantor and the Administrative Agent, in each case together with the certificates identified in Annex I thereto under the names of the respective Subsidiary Guarantor, in each case accompanied by undated stock powers executed in blank. In addition, each of the Obligors shall have taken such other action (including, without limitation, delivering to the Administrative Agent, for filing, appropriately completed and duly executed copies of Uniform Commercial Code financing statements) as the Administrative Agent shall have requested in order to perfect the security interests created pursuant to the Company Pledge Agreement and the Subsidiary Pledge Agreement. (i) Senior Subordinated Debt. Evidence that the Senior Subordinated Debt Documents shall have been duly authorized, executed and delivered, and that the Notes evidencing the Senior Subordinated Debt shall have been duly issued at par, in each case containing terms in form and substance satisfactory to each Lender, and the Administrative Agent shall have received copies of each of Credit Agreement - 47 - the Senior Subordinated Debt Documents certified by a senior financial officer of the Company. In addition, the Administrative Agent shall have received a certificate of a senior financial officer of the Company to the effect that the Company has received net cash proceeds (prior to the payment of any transaction expenses) from the issuance of the Senior Subordinated Debt pursuant to the Senior Subordinated Debt Documents in an aggregate amount at least equal to $125,000,000. (j) Repayment of Existing Indebtedness. Evidence that the principal of and interest on, and all other amounts owing in respect of, the Indebtedness (including, without limitation, any contingent or other amounts payable in respect of letters of credit, but excluding Existing Letters of Credit) indicated on Schedule IV hereto that is to be repaid on the Closing Date shall have been (or shall be simultaneously) paid in full, that any commitments to extend credit under the agreements or instruments relating to such Indebtedness shall have been canceled or terminated and that all Guarantees in respect of, and all Liens securing, any such Indebtedness shall have been released (or arrangements for such release satisfactory to the Majority Lenders shall have been made); in addition, the Administrative Agent shall have received from any Person holding any Lien securing any such Indebtedness, such Uniform Commercial Code termination statements, mortgage releases and other instruments, in each case in proper form for recording, as the Administrative Agent shall have requested to release and terminate of record the Liens securing such Indebtedness (or arrangements for such release and termination satisfactory to the Majority Lenders shall have been made). (k) Insurance. Certificates of insurance evidencing the existence of all insurance required to be maintained by the Company pursuant to Section 9.03 hereof, such certificates to be in such form and contain such information as is specified in said Section 9.03. In addition, the Company shall have delivered a certificate of a senior financial officer of the Company setting forth the insurance obtained by it in accordance with the requirements of said Section 9.03 and stating that such insurance is in full force and effect and that all premiums then due and payable thereon have been paid. (l) Other Documents. Such other documents as the Administrative Agent or any Lender or special New York counsel to the Administrative Agent may reasonably request. The obligation of any Lender to make its initial extension of credit hereunder is also subject to the payment by the Company of Credit Agreement - 48 - such fees as the Company shall have agreed to pay or deliver to any Lender or the Administrative Agent in connection herewith, including, without limitation, the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel to the Administrative Agent, in connection with the negotiation, preparation, execution and delivery of this Agreement and the Notes and the other Basic Documents and the extensions of credit hereunder (to the extent that statements for such fees and expenses have been delivered to the Company). 7.02 Initial and Subsequent Loans. The obligation of each Lender to make any Loan to be made by it hereunder, and the obligation of the Issuing Bank to issue any Letter of Credit hereunder, is subject to the conditions precedent that, as of the date of such Loan or such issuance, and before and after giving effect thereto: (a) no Default shall have occurred and be continuing; (b) the representations and warranties made by each of the Company and the Subsidiary Guarantors in each Basic Document to which it is a party shall be true on and as of the date of the making of such Loan or such issuance, with the same force and effect as if made on and as of such date; provided that the representations and warranties set forth in Section 8.10 hereof need only be true as of the Closing Date; and (c) the borrowing of such Loan by the Company hereunder or the issuance of such Letter of Credit, as the case may be, and the related incurrence of obligations by the Company, does not violate the provisions of the Senior Subordinated Debt Indenture or any other Senior Subordinated Debt Document. Each notice of borrowing by the Company hereunder shall constitute a certification by the Company to the effect set forth in the preceding sentence (both as of the date of such notice and, unless the Company otherwise notifies the Administrative Agent prior to the date of such borrowing or issuance, as of the date of such borrowing or issuance). Section 8. Representations and Warranties. The Company represents and warrants to the Lenders and the Administrative Agent as follows: 8.01 Corporate Existence. Each of the Company and its Subsidiaries: (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) has all requisite corporate power, and has all governmental licenses, authorizations, consents, permits Credit Agreement - 49 - and approvals (including any license, authorization, consent, permit and approval required under any Environmental Law) necessary to own its assets and carry on its business as now being or as proposed to be conducted (except such licenses, authorizations, consents and approvals the lack of which, in the aggregate, will not have a Material Adverse Effect); and (c) is qualified to do business in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify would have a Material Adverse Effect. 8.02 Information. (a) The Company has heretofore furnished to each of the Lenders consolidated balance sheets of the Company and its Subsidiaries as at December 31, 1994 and December 31, 1995 and the related consolidated statements of income, retained earnings and cash flows of the Company and its Subsidiaries for the fiscal years respectively ended on said dates, with the opinion thereon of Arthur Andersen L.L.P., and the unaudited consolidated balance sheets of the Company and its Subsidiaries as at March 31, 1996 and June 30, 1996 and the related consolidated statements of income, retained earnings and cash flows of the Company and its Subsidiaries for the three and six month periods respectively ended on such dates. All such financial statements are complete and correct and fairly present the consolidated financial condition of the Company and its Subsidiaries as at said dates and the consolidated results of their operations for the fiscal years and three and six month periods ended on said dates (subject, in the case of such financial statements as at March 31, 1996 and June 30, 1996, to normal year-end audit adjustments), all in accordance with generally accepted accounting principles and practices applied on a consistent basis. (b) The Company has disclosed to the Lenders in writing any and all facts (other than general economic conditions) which materially and adversely affect or may materially and adversely affect (to the extent it can reasonably foresee) the business, assets, property, condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole, or the ability of the Company or any of the Subsidiary Guarantors to perform its obligations under each Basic Document to which it is a party or the ability of the Company or any Subsidiary of the Company to conduct its activities or operations in the normal course of business at any of its owned or leased properties. The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of the Obligors to the Administrative Agent or any Lender in connection with the negotiation, preparation or delivery of this Agreement and the other Basic Documents or included herein Credit Agreement - 50 - or therein or delivered pursuant hereto or thereto, when taken as a whole do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished after the date hereof by the Company and its Subsidiaries to the Administrative Agent and the Lenders in connection with this Agreement and the other Basic Documents and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified. (c) Since December 31, 1995, there has been no material adverse change in the business, assets, property, condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole or, to the knowledge of the Company, in the ability of the Company or any of the Subsidiary Guarantors to perform its obligations under each Basic Document to which it is a party. 8.03 Litigation. There are no legal or arbitral proceedings or any proceedings by or before any governmental or regulatory authority or agency, now pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries in which there is a reasonable possibility of an adverse decision which could have a Material Adverse Effect or, to the knowledge of the Company, which could have a material adverse effect on the ability of the Company or any of the Subsidiary Guarantors to perform its obligations under each Basic Document to which it is a party. 8.04 No Breach. None of the execution and delivery of the Basic Documents, the consummation of the transactions therein contemplated or compliance with the terms and provisions thereof will conflict with or result in a breach of, or require any consent under, the certificate of incorporation or by-laws of the Company or any of its Subsidiaries, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any Basic Document, any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which it is bound or to which it is subject, or constitute a default under any such lease, agreement or instrument, or (except for the Liens created pursuant to, or permitted by, this Agreement and the Security Documents) result in the creation or imposition of any Lien upon any of the revenues or assets of the Company or any of its Subsidiaries pursuant to the terms of any such agreement or instrument. Credit Agreement - 51 - 8.05 Corporate Action. Each of the Company and the Subsidiary Guarantors has all necessary corporate power and authority to execute, deliver and perform its obligations under the Basic Documents to which it is a party; the execution, delivery and performance by the Company and the Subsidiary Guarantors of the Basic Documents to which they are parties have been duly authorized by all necessary corporate action; and this Agreement has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company and each of the other Basic Documents to which the Company or any of the Subsidiary Guarantors is to be a party constitute its legal, valid and binding obligation, in each case enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization or moratorium or other similar laws relating to the enforcement of creditors' rights generally and by general equitable principles. 8.06 Approvals. Each of the Company and the Subsidiary Guarantors has obtained all authorizations, approvals and consents of, and has made all filings and registrations with, any governmental or regulatory authority or agency necessary for the execution, delivery or performance by it of any Basic Document to which it is a party, or for the validity or enforceability thereof, except for filings and recordings of the Liens created pursuant to, or permitted by, the Security Documents. 8.07 Regulations U and X. None of the Company or any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U or X of the Board of Governors of the Federal Reserve System) and no part of the proceeds of any Loan hereunder will be used to purchase or carry any such margin stock. 8.08 ERISA. The Company and each member of the Controlled Group have fulfilled their obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and are in compliance in all material respects with the presently applicable provisions of ERISA and the Code, and have not incurred any liability to the PBGC or a Plan under Title IV of ERISA (other than to make contributions or premium payments in the ordinary course). 8.09 Taxes. Each of the Company and its Subsidiaries has filed all United States Federal income tax returns and all other material tax returns which are required to be filed by it and has paid all taxes due pursuant to such returns or pursuant to any assessment received by it, except to the extent the same Credit Agreement - 52 - may be contested as permitted by Section 9.02 hereof. The charges, accruals and reserves on the books of such Persons in respect of taxes and other governmental charges are, in the opinion of the Company, adequate. 8.10 Subsidiaries; Agreements; Etc. (a) Schedule III hereto is a complete and correct list of all Subsidiaries of the Company and of all Investments held by the Company or any of its Subsidiaries in any joint venture or other Person. Except for the Liens created by the Security Documents, the Company owns, free and clear of Liens, all outstanding shares of such Subsidiaries and all such shares are validly issued, fully paid and non-assessable and the Company (or the respective Subsidiary of the Company) also owns, free and clear of Liens, all such Investments. (b) Schedule IV hereto is a complete and correct list of all credit agreements, indentures, capitalized leases, obligations in respect of letters of credit, guaranties, joint venture agreements, and other material instruments in effect as of the date hereof providing for, evidencing, securing or otherwise relating to any Indebtedness or any Material Lease Obligations (as hereinafter defined) of the Company or any of its Subsidiaries, and all obligations of the Company or any of its Subsidiaries to issuers of surety or appeal bonds issued for account of the Company or any of its Subsidiaries, and such list correctly sets forth the names of the debtor or lessee and creditor or lessor with respect to the Indebtedness or Material Lease Obligations outstanding or to be outstanding and the property subject to any Lien securing such Indebtedness or Material Lease Obligation. The Company has heretofore delivered to the Administrative Agent a complete and correct copy of all such credit agreements, indentures, capitalized leases, letter of credit obligations, guaranties, joint venture agreements and other material instruments, including any modifications or supplements thereto, as in effect on the date hereof. As used herein, the term "Material Lease Obligations" shall mean any operating lease which requires aggregate annual rentals during any period of twelve months during the term of such lease in an amount in excess of $100,000. (c) None of the Subsidiaries of the Company is, on the date hereof, subject to any indenture, agreement, instrument or other arrangement of the type described in Section 9.22(d) hereof (other than the Senior Subordinated Debt Indenture). 8.11 Investment Company Act. None of the Company or its Subsidiaries is an investment company within the meaning of the Investment Company Act of 1940, as amended, or, directly or Credit Agreement - 53 - indirectly, controlled by or acting on behalf of any Person which is an investment company, within the meaning of said Act. 8.12 Public Utility Holding Company Act. None of the Company or its Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 8.13 Ownership and Use of Properties. Each of the Company and its Subsidiaries will at all times have legal title to or ownership of, or the right to use pursuant to enforceable and valid agreements or arrangements, all tangible property, both real and personal, and all franchises, licenses, copyrights, patents and know-how which are material to the operation of its business as proposed to be conducted. 8.14 Environmental Compliance. (i) No notice, notification, demand, request for information, citation, summons, complaint or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending or, to the Company's knowledge, threatened by any governmental or other entity with respect to any (A) alleged violation by the Company or any Subsidiary of any Environmental Law, (B) alleged failure by the Company or any Subsidiary to have any environmental permit, certificate, license, approval, registration or authorization required in connection with the conduct of its business or (C) generation, treatment, storage, recycling, transportation or disposal or Release (each a "Regulated Activity") of any Hazardous Substances; (ii) neither the Company nor any Subsidiary has engaged in any Regulated Activity other than as a generator (as such term is used in RCRA) in compliance with all applicable Environmental Laws, and no Regulated Activity, other than generation by the Company or any Subsidiary in compliance with all applicable Environmental Laws, has occurred on any property now or previously owned or leased by the Company or any Subsidiary. No polychlorinated biphenyls, urea formaldehyde, lead, asbestos or asbestos-containing material is or has been present at any property now or previously owned or leased by the Company or any other Subsidiary. There are no underground storage tanks for Hazardous Substances, active or abandoned, at any property now or previously owned or leased by the Company or any Subsidiary. No Hazardous Substance has been Released at, on or under any property now or previously owned or leased by the Company or any Subsidiary. No Hazardous Substance is present in a reportable or threshold planning quantity where such a Credit Agreement - 54 - quantity has been established by any Environmental Law at, on or under, any property now or previously owned or leased by the Company or any Subsidiary; (iii) no real property now or previously owned or leased by the Company or any Subsidiary is listed or, to the Company's knowledge, proposed for listing, on the National Priorities List promulgated pursuant to CERCLA, on CERCLIS, as defined in CERCLA, or on any similar state list of sites requiring investigation or clean-up; (iv) neither the Company nor any Subsidiary has transported or arranged for the transportation (directly or indirectly) of any Hazardous Substance to any location which is listed or to the Company's knowledge, proposed for listing, under CERCLA (including on CERCLIS, as defined in CERCLA) or on any similar state list or which is the subject of federal, state or local enforcement actions or to the Company's knowledge, other investigations which may lead to claims against the Company or any Subsidiary for clean-up costs, remedial work, damages to natural resources or for personal injury claims, including, but not limited to, claims under CERCLA; (v) there are no liens under Environmental Laws on any of the real property or other assets owned or leased by the Company or any Subsidiary, and no government actions have been taken or are in process which could subject any of such properties or assets to such liens. Neither the Company nor any Subsidiary would be required to place any notice or restriction relating to Hazardous Substances at any property owned by it in any deed to such property; (vi) there has been no environmental investigation, study, audit, test, review or other analysis conducted of which the Company has knowledge in relation to the current or prior business of the Company or any property or facility now or previously owned or leased by the Company or any Subsidiary, which has not been delivered to the Lenders prior to the date hereof; and (vii) neither the Company nor any Subsidiary has assumed from any third party, or indemnified any third party for, any Environmental Liability, except for Environmental Liabilities of the Company and its Subsidiaries (without duplication) that relate to or result from any matter referred to in clauses (i) through (vii) (without duplication), which do not exceed in the aggregate, at any time, $6,000,000. Credit Agreement - 55 - 8.15 Solvency. At the Closing Date and after giving effect to the consummation of the transactions contemplated by this Agreement, the Company will (i) have capital, cash flows and sources of working capital financing sufficient to carry on its business and transactions and all business and transactions in which it is about to engage, (ii) be able to pay its debts as they mature, and (iii) have assets (tangible and intangible) whose fair salable value exceeds its total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities). 8.16 Capitalization. The authorized Capital Stock of the Company consists, on the date hereof, of an aggregate of 16,000,000 shares consisting of (i) 13,000,000 shares of Common Stock, par value $0.01 per share, of which 9,627,141 shares are duly and validly issued and outstanding, (ii) 1,000,000 shares of Nonvoting Common Stock, par value $0.01 per share, of which 500,000 shares are duly and validly issued and outstanding and (iii) 2,000,000 shares of Preferred Stock, par value $0.01 per share, none of which is outstanding. As of the date hereof, except as disclosed on Schedule V hereto, (x) there are no outstanding Equity Rights with respect to the Company and (y) there are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem, or otherwise acquire any shares of Capital Stock of the Company nor are there any outstanding obligations of the Company or any of its Subsidiaries to make payments to any Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market value or equity value of the Company or any of its Subsidiaries. 8.17 Senior Debt. The Indebtedness of the Company to the Lenders hereunder and the Guarantees of such Indebtedness by the Subsidiaries of the Company under the Subsidiary Guaranty constitute "Senior Debt" and "Senior Bank Debt" (and, accordingly, "Designated Senior Debt") under and as defined in, and for all purposes of, the Senior Subordinated Debt Indenture and the other Senior Subordinated Debt Documents. Section 9. Covenants. The Company agrees that, so long as any of the Commitments are in effect and until payment in full of all Loans hereunder, all interest thereon and all other amounts payable hereunder, unless the Majority Lenders shall agree otherwise pursuant to Section 12.05 hereof: 9.01 Financial Statements and Other Information. The Company shall deliver to each of the Lenders: (a) as soon as available and in any event within 90 days after the end of each fiscal year of the Company, Credit Agreement - 56 - consolidated statements of income, retained earnings and cash flow of the Company and its Subsidiaries for such year and the related consolidated balance sheet as at the end of such year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, and accompanied by an opinion thereon of Arthur Andersen L.L.P. or other independent certified public accountants of recognized national standing, which opinion shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of the Company and its Subsidiaries as at the end of, and for, such fiscal year, and stating (or indicating in a footnote to such financial statements) that, in making the examination necessary for their above-described opinion (but without any special or additional procedures for that purpose), they obtained no knowledge, except as specifically stated, of any Default; (b) as soon as available and in any event within 45 days after the end of each fiscal quarter of the Company (or, in the case of the last fiscal quarter in each fiscal year, within 90 days) consolidated statements of income, retained earnings and cash flow of the Company and its Subsidiaries for such fiscal quarter and for the portion of the fiscal year ended at the end of such fiscal quarter, and the related consolidated balance sheet as at the end of such fiscal quarter, setting forth in each case in comparative form the corresponding figures from the Company's operating budget for such fiscal year and accompanied, in each case, by a certificate of the chief financial officer or vice president-treasurer of the Company which certificate shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of the Company in accordance with GAAP (except for the absence of footnotes) consistently applied as at the end of, and for, such fiscal quarter (subject to normal year-end audit adjustments); (c) within 30 days after the beginning of each fiscal year of the Company, a copy of the consolidated operating budget, including, without limitation, projection of the anticipated cash flow, of the Company and its Subsidiaries for such fiscal year, such budget to be accompanied by a certificate of the chief financial officer or vice president-treasurer of the Company specifying the assumptions on which such budget was prepared, stating that such officer has no reason to question the reasonableness of any material assumptions on which such budget was prepared and providing such other details as the Administrative Agent may reasonably request; Credit Agreement - 57 - (d) promptly upon the mailing thereof to the shareholders or creditors of the Company generally, copies of all financial statements, reports and proxy statements so mailed; (e) promptly upon the filing thereof, copies of all registration statements (other than any registration statements on Form S-8 or its equivalent) and any reports which the Company shall have filed with the Securities and Exchange Commission; (f) if and when the Company or any member of the Controlled Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA, a copy of such notice; or (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer the Plan, a copy of such notice; (g) promptly following the delivery thereof to the Company or to the Board of Directors or management of the Company, a copy of any management letter or similar written report by independent public accountants with respect to the financial condition, operations, business or prospects of the Company; (h) promptly after management of the Company knows or has reason to know that any Default has occurred and is continuing, a notice of such Default, describing the same in reasonable detail; (i) within 45 days after the end of each fiscal quarter of the Company, a report, certified by the Chief Financial Officer of the Company, specifying the Capital Expenditures made by the Company during the previous fiscal quarter (broken down to identify Maintenance Capital Expenditures and other Capital Expenditures) and the Additional Expenditures made by the Company during the previous fiscal quarter; and (j) from time to time such other information regarding the financial condition, operations, prospects or business of the Company as the Administrative Agent or any Lender through the Administrative Agent may reasonably request. Credit Agreement - 58 - The Company will furnish to each Lender, at the time it furnishes each set of financial statements pursuant to paragraph (a) or (b) above, a certificate of its chief executive officer, chief financial officer or vice president-treasurer (i) to the effect that, to the best of such Person's knowledge after due inquiry, no Default has occurred and is continuing (or, if any Default has occurred and is continuing, describing the same in reasonable detail) and (ii) setting forth in reasonable detail the computations necessary to determine the Applicable Leverage Ratio and to determine whether it was in compliance with Sections 9.08 through 9.15 and 9.19 hereof as of the end of the respective fiscal quarter or fiscal year. 9.02 Taxes and Claims. The Company will pay and discharge, and will cause each of its Subsidiaries to pay and discharge, all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any property belonging to it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become a Lien upon the property of the Company or such Subsidiary, provided that neither the Company nor such Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim the payment of which is being contested in good faith and by proper proceedings if it maintains adequate reserves with respect thereto. 9.03 Insurance. The Company will maintain, and will cause each of its Subsidiaries to maintain, insurance with responsible companies in such amounts and against such risks as is usually carried by owners of similar businesses and properties in the same general areas in which the Company and its Subsidiaries operate, provided that in any event the Company shall maintain or cause to be maintained: (1) Property Insurance -- insurance against loss or damage covering all of the tangible real and personal property and improvements of the Company and its Subsidiaries, by reason of any Peril (as defined below), in amounts as shall be reasonable and customary, but in no event less than the greater of (A) the functional replacement cost of all such real and personal property and improvements and (B) the amounts necessary to avoid the insured named therein from becoming a co-insurer of any loss under such policy, except that (x) the minimum annual aggregate limits for earthquake perils shall be $5,000,000 in California, and $5,000,000 in all other states and (y) the minimum aggregate limit for flood perils shall be $5,000,000. Such insurance shall be subject to the following maximum deductibles: In the case of earthquake perils in California, the greater of 10% of the insurable value of the property insured and $500,000 per occurrence; Credit Agreement - 59 - in the case of earthquake perils outside California and flood perils in all places, the greater of 3% of the insurable value of the property insured and $350,000 per occurrence; and in all other cases $300,000 per occurrence. (2) Business Interruption Insurance -- insurance against loss of operating income earned from the operation of the business of the Company and its Subsidiaries, by reason of any Peril affecting the operation thereof, and insurance against any other insurable loss of operating income by reason of any business interruption affecting the Company to the extent covered by standard business interruption policies in the States in which the Properties are located, but in any event in an amount of at least $5,000,000 per policy period, which insurance shall in each case cover gross earnings by reason of the particular Peril or other insurable business interruption and with a deductible (or self-insured amount) not in excess of $300,000 or, in California, 5% of the insured value of the property. Such insurance shall be written by financially responsible companies selected by the Company, having an A.M. Best rating of "A-" or better and in a financial size category acceptable to the Majority Lenders, or by other companies acceptable to the Majority Lenders. For purposes hereof, the term "Peril" shall mean, collectively, (i) earthquake, (ii) fire, lightning, flood, windstorm, hail, explosion, riot and civil commotion, vandalism and malicious mischief, damage from aircraft, vehicles and smoke and (iii) all other perils covered by the "all-risk" endorsement then in use in the States in which the Properties are located. 9.04 Maintenance of Existence; Conduct of Business. The Company will preserve and maintain, and will cause each of its Subsidiaries to preserve and maintain, its corporate existence and all of its rights, privileges and franchises necessary or desirable in the normal conduct of its business, and will conduct its business in a regular manner; provided that nothing herein shall prevent (i) the merger and dissolution of any Subsidiary of the Company into the Company or any Wholly-Owned Subsidiary of the Company so long as the Company or such Wholly-Owned Subsidiary is the surviving corporation or (ii) the abandonment of any right, privilege or franchise (including any lease) not material in the aggregate to the business of the Company and its Subsidiaries. Credit Agreement - 60 - 9.05 Maintenance of and Access to Properties. (a) The Company will keep, and will cause each of its Subsidiaries to keep, all of its properties necessary in its business in good working order and condition (having regard to the condition of such properties at the time such properties were acquired by the Company or such Subsidiary), ordinary wear and tear excepted, and will permit representatives of the Lenders to inspect such properties and, upon reasonable notice and at reasonable times, to examine and make extracts and copies from the books and records of the Company and any such Subsidiary. (b) The Company will, and will cause its Subsidiaries to, do all things necessary to preserve and keep in full force and effect all trademarks, patents, service marks, trade names, copyrights, franchises and Licenses, and any rights with respect thereto, which are necessary for and material to the conduct of the business of the Company and its Subsidiaries taken as a whole. 9.06 Compliance with Applicable Laws. The Company will comply, and will cause each of its Subsidiaries to comply, with the requirements of all applicable laws, rules, regulations and orders of any governmental body or regulatory authority (including, without limitation, ERISA and all Environmental Laws), a breach of which would have a Material Adverse Effect, except where contested in good faith and by proper proceedings. 9.07 Litigation. The Company will promptly give to the Administrative Agent (which shall promptly notify each Lender) notice in writing of (i) all judgments against it or any of its Subsidiaries (other than judgments fully covered by insurance) which individually exceed $100,000 or in the aggregate exceed $1,000,000 and (ii) all litigation and of all proceedings of which it is aware before any courts, arbitrators or governmental or regulatory agencies affecting the Company or any of its Subsidiaries except litigation or proceedings which, if adversely determined, would not in the reasonable opinion of the Company have a Material Adverse Effect. 9.08 Indebtedness. The Company will not, and will not permit any of its Subsidiaries to, create, incur or suffer to exist any Indebtedness except: (i) Indebtedness to the Lenders hereunder; (ii) the Indebtedness existing on the Closing Date and set forth in Schedule IV hereto (including any extensions, renewals or refunding of such Indebtedness, so long as the principal amount of such Indebtedness is not increased); (iii) Senior Subordinated Debt in an aggregate outstanding principal amount not exceeding $165,000,000; and (iv) so long as no Default shall have occurred or be continuing hereunder at the time of such creation or incurrence, Permitted Indebtedness. Credit Agreement - 61 - 9.09 Leverage Ratio. The Company will not, as at the end of any fiscal quarter, permit the ratio, calculated as at the end of such fiscal quarter for the four fiscal quarters then ended, of (i) the excess of (x) the aggregate outstanding principal amount of Funded Indebtedness of the Company and its Subsidiaries at such date over (y) the aggregate amount of cash and Liquid Investments of the Company and Subsidiaries as of such date to (ii) EBITDA for such period (the "Leverage Ratio") to exceed the ratio set forth below for the period in which such fiscal quarter ends: Period Leverage Ratio From the Closing Date through December 31, 1996 5.00 to 1 From January 1, 1997 through December 31, 1997 5.00 to 1 From January 1, 1998 through December 31, 1998 4.75 to 1 From January 1, 1999 through December 31, 1999 4.50 to 1 From January 1, 2000 through December 31, 2000 4.00 to 1 From January 1, 2001 and at all times thereafter 3.50 to 1 9.10 Interest Coverage Ratio. The Company will not, as at the end of any fiscal quarter, permit the ratio, calculated as at the end of such fiscal quarter for the four fiscal quarters then ended, of (i) EBITDA for such period to (ii) Interest Expense for such period to be less than the ratio set forth below for the period in which such fiscal quarter ends: Period Interest Coverage Ratio From the Closing Date through December 31, 1996 1.80 to 1 From January 1, 1997 through December 31, 1997 1.80 to 1 From January 1, 1998 through September 30, 1998 1.90 to 1 From October 1, 1998 through December 31, 1998 2.00 to 1 Credit Agreement - 62 - From January 1, 1999 through June 30, 1999 2.00 to 1 From July 1, 1999 through December 31, 1999 2.25 to 1 From January 1, 2000 through June 30, 2000 2.35 to 1 From July 1, 2000 through December 31, 2000 2.50 to 1 From January 1, 2001 and at all times thereafter 2.50 to 1 For purposes of calculating any ratio set forth in this Section, if the Company elects pursuant to the penultimate sentence of the definition of EBITDA to include in EBITDA for the period to which such ratio relates the pro forma amounts referred to in such sentence, there shall be included in Interest Expense for such period, on a pro forma basis, interest accruing during such period on Indebtedness (and the interest portion of payments under Capitalized Lease Obligations) assumed or incurred by the Company and its Subsidiaries (on a consolidated basis) in connection with any Permitted Acquisition having Acquisition Consideration of more than $750,000 during such period. 9.11 Fixed Charges Coverage Ratio. The Company will not, as at the end of any fiscal quarter, permit the ratio, calculated as at the end of such fiscal quarter for the four fiscal quarters then ended, of (i) Adjusted EBITDA for such period to (ii) Fixed Charges for such period to be less than the ratio set forth below for the period in which such fiscal quarter ends: Fixed Charges Period Coverage Ratio From the Closing Date through December 31, 1996 1.20 to 1 From January 1, 1997 through December 31, 1997 1.20 to 1 From January 1, 1998 through December 31, 1998 1.20 to 1 From January 1, 1999 through December 31, 1999 1.40 to 1 Credit Agreement - 63 - From January 1, 2000 through December 31, 2000 1.75 to 1 From January 1, 2001 and at all times thereafter 1.75 to 1 For purposes of calculating any ratio set forth in this Section, if the Company elects pursuant to the penultimate sentence of the definition of EBITDA to include in EBITDA for the period to which such ratio relates the pro forma amounts referred to in such sentence, there shall be included in Fixed Charges for such period, on a pro forma basis, principal payable and interest accruing during such period on Indebtedness (and the interest portion of payments under Capitalized Lease Obligations) assumed or incurred by the Company and its Subsidiaries (on a consolidated basis) in connection with any Permitted Acquisition having Acquisition Consideration of more than $750,000 during such period. 9.12 Mergers, Asset Dispositions, Etc. Except as expressly permitted by Section 9.04, the Company will not, and will not permit any of its Subsidiaries to, be a party to any merger or consolidation, or sell, lease, assign, transfer or otherwise dispose of any assets, or acquire assets from any Person, except: (i) dispositions and acquisitions of inventory in the ordinary course of business; (ii) dispositions of worn out or obsolete tools or equipment no longer used or useful in the business of the Company and its Subsidiaries, provided that no single disposition of tools or equipment shall have a fair market value (determined in good faith by the Company at the time of such disposition) in excess of $1,000,000; (iii) Capital Expenditures to the extent permitted under Section 9.19 hereof; (iv) acquisitions of Investments permitted under Section 9.14 hereof and dispositions thereof (other than (x) dispositions of Investments in any Subsidiary of the Company not otherwise permitted hereunder and (y) dispositions of Investments referred to in clause (viii) of said Section 9.14); (v) other dispositions of assets during any fiscal year having an aggregate fair market value (determined in good faith at the time of such disposition by the Board of Directors of the Company) not exceeding $5,000,000 in Credit Agreement - 64 - respect of Qualifying Sale-Leaseback Transactions or $5,000,000 in respect of all other dispositions; (vi) subject to compliance with the provisions of Section 9.22(b) hereof, the sale, lease, assignment, transfer or other disposition of any assets by any Subsidiary of the Company to the Company or any Wholly-Owned Subsidiary thereof; (vii) Large Volume Account Capitalized Expenditures; and (viii) so long as no Default shall have occurred or be continuing hereunder at the time of such Acquisition, Permitted Acquisitions and related Additional Expenditures. For purposes of this Section 9.12, "Permitted Acquisition" shall mean Acquisitions complying with the following: (a) Maximum Periodic Consideration. Without the consent of the Majority Lenders, the aggregate amount of Acquisition Consideration paid in respect of Acquisitions shall not exceed $75,000,000 in any Calculation Period (provided that the aggregate amount of Acquisition Consideration (excluding, for purposes of this proviso, Stock Consideration) paid in respect of Acquisitions shall not exceed $50,000,000 in any Calculation Period). (b) Maximum Individual Consideration. Without the consent of the Majority Lenders, the Acquisition Consideration payable in respect of any single Acquisition or series of related Acquisitions shall not exceed $30,000,000. (c) Lines of Business, Etc. All such Acquisitions shall be of assets relating to the records management business (or of 100% of the stock of corporations whose assets consist substantially of such assets) or through the merger of such a corporation into a Subsidiary of the Company, which shall be the surviving corporation. For purposes of this definition, any deferred non-contingent consideration payable in respect of an Acquisition shall be discounted to net present value at the rate of 10% per annum. 9.13 Liens. The Company will not, and will not permit any of its Subsidiaries to, create or suffer to exist any Lien upon any property or assets, now owned or hereafter acquired, securing any Indebtedness or other obligation, except: (i) the Liens created pursuant to the Security Documents; (ii) the Liens Credit Agreement - 65 - existing on the Closing Date set forth in Schedule IV and Liens arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any Lien set forth on Schedule IV, provided that the principal amount of such Indebtedness is not increased and is not secured by any additional assets; (iii) Liens contemplated by clauses (ii), (iv) and (v) of the definition of Permitted Indebtedness; (iv) attachment, judgment or other similar Liens arising in connection with litigation or other legal proceedings, provided that either (A) the claims in respect of such Liens are fully covered by insurance or (B) the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are in an amount not to exceed $1,000,000 in the aggregate and are being contested in good faith by appropriate proceedings diligently prosecuted; (v) Liens on properties or assets of an Excluded Subsidiary securing Indebtedness of such Excluded Subsidiary permitted hereunder; and (vi) other Liens arising in the ordinary course of the business of the Company or such Subsidiary which are not incurred in connection with the borrowing of money or the obtaining of advances or credit and which do not materially detract from the value of its property or assets or materially impair the use thereof in the operation of its business. 9.14 Investments. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, make or permit to remain outstanding any advances, loans or other extensions of credit or capital contributions (other than prepaid expenses in the ordinary course of business) to (by means of transfers of property or assets or otherwise), or purchase or own any stocks, bonds, notes, debentures or other securities of, any Person (all such transactions being herein called "Investments"), except: (i) operating deposit accounts with any bank or financial institution; (ii) Liquid Investments (including Liquid Investments in the name and under the control of the Administrative Agent (or a collateral sub-agent for the Administrative Agent) as contemplated by the Security Documents); (iii) subject to Section 9.16 hereof, Investments in accounts and chattel paper as defined in the Uniform Commercial Code) and notes receivable acquired in the ordinary course of business as presently conducted; (iv) Investments in an insurer required as a condition to the provision by such insurer of insurance coverage contemplated by Section 9.03; provided that the aggregate amount of Investments outstanding pursuant to this Credit Agreement - 66 - clause (iv) during the term of this Agreement shall not exceed $1,500,000; (v) (x) equity Investments in Wholly-Owned Subsidiaries of the Company, (y) additional equity Investments in Subsidiaries of the Company (other than Wholly-Owned Subsidiaries) with the prior written consent of the Majority Lenders, and (z) Investments in the form of loans, advances or other obligations owed by any Wholly-Owned Subsidiary to the Company, and Investments in the form of loans, advances or other obligations owed by the Company to any Wholly-Owned Subsidiary; provided that the aggregate amount of Investments by the Company permitted by subclauses (x) or (z) of this clause (v) in any Subsidiary of the Company that is a mortgagor under any Permitted Mortgage shall not exceed, in the aggregate for all such Subsidiaries, $10,000,000 at any one time outstanding; (vi) Investments consisting of loans or advances to officers and directors of the Company and its Subsidiaries in an amount not to exceed $350,000 in the aggregate during any fiscal year (and in any event not to exceed $750,000 at any one time outstanding) and loans or advances made to employees of the Company to permit such employees to exercise options to purchase Capital Stock of the Company; (vii) (x) Investments in Persons that are not Subsidiaries or Affiliates of the Company, (y) Investments in Excluded Subsidiaries, and guarantees by the Company of Indebtedness of Excluded Subsidiaries to the extent such Indebtedness is permitted hereunder and (z) other Investments in Subsidiaries of the Company (to the extent such Investments are not permitted under clause (v) of this Section 9.14); provided that the aggregate outstanding amount of Investments made pursuant to this clause (vii) shall not at any time exceed $5,000,000; (viii) Investments consisting of Permitted Acquisitions under Section 9.12 hereof; (ix) subject to Section 9.16 hereof and on terms and pursuant to documentation in all respects reasonably satisfactory to the Administrative Agent, Investments in Affiliates of the Company (which are not Wholly-Owned Subsidiaries of the Company) to facilitate the construction or acquisition of records management facilities including, without limitation, the acquisition of real estate for development purposes; and Credit Agreement - 67 - (x) subordinated Guarantees of Senior Subordinated Debt by Subsidiaries of the Company pursuant to the Senior Subordinated Debt Documents. 9.15 Restricted Payments. The Company will not, and will not permit any of its Subsidiaries to, declare or make any Restricted Payment, except that the Company may: (i) provided that no Default has occurred and is continuing, purchase shares of any class of Capital Stock, or options to purchase such shares, of the Company from employees or former employees of the Company or its Subsidiaries in amounts not to exceed $500,000 in any fiscal year and $1,000,000 in the aggregate after the Closing Date; (ii) make additional Restricted Payments constituting the purchase, redemption, retirement or other acquisition of shares of any class of Capital Stock of the Company (such Restricted Payments, "Stock Repurchases"), subject to the satisfaction of each of the following conditions on the date of such Stock Repurchase and after giving effect thereto: (a) no Default shall have occurred and be continuing; and (b) the aggregate amount of Stock Repurchases made during each period set forth in the schedule below shall not exceed the amount set forth below opposite such period: Cumulative Period Amount From the Closing Date to and including December 31, 1997 $ 5,000,000 From the Closing Date to and including December 31, 1998 $10,000,000 From the Closing Date to and including December 31, 1999 $15,000,000 In addition, the aggregate amount of all Stock Repurchases made after the Closing Date shall not in any event exceed $20,000,000. Nothing herein shall be deemed to prohibit the payment of dividends by any Subsidiary of the Company to the Company or to any other Subsidiary of the Company. Credit Agreement - 68 - 9.16 Transactions with Affiliates. Except as otherwise expressly permitted by this Agreement, the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly: (i) make any Investment in an Affiliate of the Company; (ii) transfer, sell, lease, assign or otherwise dispose of any assets to an Affiliate of the Company; (iii) merge into or consolidate with or purchase or acquire assets from an Affiliate of the Company; or (iv) enter into any other transaction directly or indirectly with or for the benefit of an Affiliate of the Company (including, without limitation, guarantees and assumptions of obligations of an Affiliate of the Company); provided that (a) any Affiliate of the Company who is an individual may serve as a director, officer or employee of the Company and receive reasonable compensation or indemnification in connection with his or her services in such capacity; (b) the Company or a Subsidiary of the Company may enter into any transaction with an Affiliate of the Company providing for the leasing of property, the rendering or receipt of services or the purchase or sale of inventory and other assets in the ordinary course of business if the monetary or business consideration arising therefrom would be substantially as advantageous to the Company or such Subsidiary as the monetary or business consideration which would obtain in a comparable arm's length transaction with a Person similarly situated to the Company but not an Affiliate of the Company; and (c) the Company may make Investments in Affiliates permitted by Section 9.14(ix) hereof and may create Residual Assurances for the benefit of an Affiliate permitted by Section 9.24 hereof in either case in connection with the construction and/or acquisition of records management facilities to be leased to the Company or a Subsidiary, so long as, taking such transaction as a whole (giving effect to such Investment or Residual Assurance, and the lease of such facility to the Company or such Subsidiary) such Affiliate is not disproportionately benefitted. 9.17 Subordinated Indebtedness. The Company will not, nor will it permit any of its Subsidiaries to, purchase, redeem, retire or otherwise acquire for value, or set apart any money for a sinking, defeasance or other analogous fund for the purchase, redemption, retirement or other acquisition of, or make any voluntary payment or prepayment of the principal of or interest on, or any other amount owing in respect of, any Subordinated Indebtedness, except for: Credit Agreement - 69 - (i) regularly scheduled payments or prepayments of principal and interest in respect thereof required pursuant to the instruments evidencing such Subordinated Indebtedness; and (ii) so long as no Default has occurred and is continuing, scheduled payments of principal of (not to exceed $2,000,000 during each fiscal year of the Company) and interest on, and expenses and indemnities incurred in connection with, Additional Subordinated Indebtedness. 9.18 Lines of Businesses. Neither the Company nor any of its Subsidiaries shall engage to any substantial extent in any business activity other than the records management business or activities related thereto. 9.19 Capital Expenditures. The Company will not permit the aggregate amount of Capital Expenditures made in any fiscal year of the Company to exceed $25,000,000. If the aggregate amount of Capital Expenditures for any fiscal year shall be less than the amount permitted to be made in such fiscal year, then the shortfall shall be added to the amount of Capital Expenditures permitted for the immediately succeeding fiscal year. 9.20 Modification of Other Agreements. The Company will not request or consent to any modification, supplement or waiver of any of the provisions of any instrument or document evidencing or governing Subordinated Indebtedness except on terms and pursuant to documentation in all respects reasonably satisfactory to the Administrative Agent. 9.21 Interest Rate Protection. The Company shall at all times maintain a program reasonably acceptable to the Administrative Agent providing for the hedging or mitigation of interest rate risk. 9.22 Certain Obligations Respecting Subsidiaries. (a) The Company will, and will cause each of its Subsidiaries to, take such action from time to time as shall be necessary to ensure that the Company and each of its Subsidiaries at all times owns (subject only to the Lien of the Security Documents) all of the issued and outstanding shares of each class of Capital Stock of each of such Person's Subsidiaries (other than, in each case, Capital Stock of Excluded Subsidiaries). Without limiting the generality of the foregoing, the Company shall not, and shall not permit any of its Subsidiaries to, sell, transfer or otherwise dispose of any shares of stock in any Subsidiary (other than an Excluded Subsidiary) owned by them, nor permit any Subsidiary of the Company (other than an Excluded Credit Agreement - 70 - Subsidiary) to issue any shares of Capital Stock of any class whatsoever to any Person (other than to the Company or to another Wholly-Owned Subsidiary or pursuant to Section 9.12 hereof). In the event that any such additional shares of Capital Stock shall be issued by any Subsidiary of the Company, the Company agrees forthwith to deliver to the Administrative Agent pursuant to the Security Documents the certificates evidencing such shares of stock, accompanied by undated stock powers executed in blank and shall take such other action as the Administrative Agent shall request to perfect the security interest created therein pursuant to the Security Documents. (b) The Majority Lenders shall have the right from time to time to require the Company, pursuant to a written request from the Administrative Agent, to cause such Subsidiaries of the Company as may be specified in such request to become parties to the Subsidiary Guaranty or to execute and deliver such other guaranties, in form and substance satisfactory to the Majority Lenders, guaranteeing payment of the Company's obligations hereunder. Any such request shall be made by the Majority Lenders in the good faith and reasonable exercise of their discretion. Within 30 days after any such request, the Company shall, and shall cause the appropriate Subsidiaries of the Company to, (i) execute and deliver to the Administrative Agent such number of copies as the Administrative Agent may specify of documents creating such guaranties and (ii) do all other things which may be necessary or which the Administrative Agent may reasonably request in order to confer upon and confirm to the Lenders the benefits of such security. (c) Notwithstanding anything to the contrary in this Section 9.22, if: (x) the obligations of an Excluded Subsidiary under the Subsidiary Guaranty; or (y) the pledge by the Company or any of its Subsidiaries of more than 66% of the aggregate Voting Stock of an Excluded Subsidiary would, as determined in a resolution of the Board of Directors of the Company delivered to the Administrative Agent, create a tax disadvantage that is material in relation to the aggregate amount of the Investment or proposed Investment therein by the Company and its Subsidiaries, then: (I) such Excluded Subsidiary shall not be required to be or become a party to the Subsidiary Guaranty or otherwise Guarantee the obligations of the Company hereunder; and Credit Agreement - 71 - (II) the Company and its Subsidiaries shall not be required to pledge more than 66% of the aggregate Voting Stock of such Excluded Subsidiary to the Administrative Agent under the Security Documents. (d) The Company will not permit any of its Subsidiaries (other than Excluded Subsidiaries) to enter into, after the date hereof, any indenture, agreement, instrument or other arrangement (other than the Senior Subordinated Debt Indenture) that, directly or indirectly, prohibits or restrains, or has the effect of prohibiting or restraining, or imposes materially adverse conditions upon, the incurrence or payment of Indebtedness, the granting of Liens, the declaration or payment of dividends, the making of loans, advances or Investments or the sale, assignment, transfer or other disposition of Property. 9.23 Environmental Matters. The Company will promptly give to the Lenders notice in writing of any complaint, order, citation, notice or other written communication from any Person with respect to, or if the Company becomes aware after due inquiry of, (i) the existence or alleged existence of a violation of any applicable Environmental Law or the incurrence of any liability, obligation, remedial action, loss, damage, cost, expense, fine, penalty or sanction resulting from any air emission, water discharge, noise emission, asbestos, Hazardous Substance or any other environmental, health or safety matter at, upon, under or within any property now or previously owned, leased, operated or used by the Company or any of its Subsidiaries or any part thereof, or due to the operations or activities of the Company, any Subsidiary or any other Person on or in connection with such property or any part thereof (including receipt by the Company or any Subsidiary of any notice of the happening of any event involving the Release or cleanup of any Hazardous Substance), (ii) any Release on such property or any part thereof in a quantity that is reportable under any applicable Environmental Law, (iii) the commencement of any cleanup pursuant to or in accordance with any applicable Environmental Law of any Hazardous Substances on or about such property or any part thereof and (iv) any pending or threatened proceeding for the termination, suspension or non-renewal of any permit required under any applicable Environmental Law, in each of the cases (i), (ii), (iii) and (iv), (x) which could result in liability or expenses in excess of $1,000,000 or (y) which individually or in the aggregate could have a Material Adverse Effect. 9.24 Residual Assurances. The Company will not, and will not permit any of its Subsidiaries to, create, incur or suffer to exist any Residual Assurances, except that (notwithstanding Sections 9.08 and 9.14) the Company may create a Residual Assurance with respect of the construction or Credit Agreement - 72 - acquisition of any records management facility by any Affiliate of the Company so long as (a) the maximum liability of the Company in respect of such Residual Assurance does not exceed 15% of the fair market value (as determined in good faith by the Board of Directors of the Company) of the completed records management facility, and (b) the maximum liability of the Company in respect of all Residual Assurances does not exceed $3,000,000 in the aggregate. Section 10. Defaults. 10.01 Events of Default. If one or more of the following events (herein called "Events of Default") shall occur and be continuing: (a) default in the payment of any principal of or interest on any Loan, any Reimbursement Obligation or any other amount payable hereunder when due; or (b) the Company or any of its Subsidiaries shall default in the payment when due of any principal of or interest on any Indebtedness having an outstanding principal amount of at least $1,000,000 (other than the Loans); or any event or condition shall occur which results in the acceleration of the maturity of any such Indebtedness or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of any such Indebtedness or any Person acting on such holder's behalf to accelerate the maturity thereof; or (c) any representation or warranty made or deemed made by the Company or any Subsidiary Guarantor in any Basic Document, or in any certificate or financial information furnished to any Lender or the Administrative Agent pursuant to the provisions of any Basic Document, shall prove to have been false or misleading in any material respect as of the time made or furnished; or (d) (i) the Company shall default in the performance of any of its obligations under Sections 9.08 through 9.24 hereof; (ii) any Subsidiary Guarantor shall default in the performance of any of its obligations under the Subsidiary Guaranty beyond any applicable grace period; (iii) the Company or any Subsidiary Guarantor shall default in the performance of any of its other obligations in any Basic Document, and such default described in this subclause (iii) shall continue unremedied for a period of 25 days after notice thereof to the Company by the Administrative Agent or the Majority Lenders (through the Administrative Agent); or Credit Agreement - 73 - (e) the Company or any of its Subsidiaries shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due; or (f) the Company or any of its Subsidiaries shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code, or (vi) take any corporate action for the purpose of effecting any of the foregoing; or (g) a proceeding or case shall be commenced, without the application or consent of the Company or any of its Subsidiaries in any court of competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of such Person or of all or any substantial part of its assets, or (iii) similar relief in respect of such Person under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 60 days; or an order for relief against such Person shall be entered in an involuntary case under the Bankruptcy Code; or (h) a final judgment or judgments for the payment of money shall be rendered by a court or courts against the Company or any of its Subsidiaries in excess of $500,000 in the aggregate, and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof, or the Company or such Subsidiary shall not, within said period of 30 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal; or (i) the Company or any member of the Controlled Group shall fail to pay when due an amount or amounts aggregating in excess of $500,000 which it shall have become liable to Credit Agreement - 74 - pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Liabilities in excess of $500,000 shall be filed under Title IV of ERISA by the Company or any member of the Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any such Plan or Plans or a proceeding shall be instituted by a fiduciary of any such Plan or Plans against the Company or any member of the Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any such Plan or Plans must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause the Company or one or more members of the Controlled Group to incur a current payment obligation in excess of $500,000; or (j) without limiting the generality of clause (d) above, any of the insurance required to be maintained (or caused to be maintained) by the Company under Section 9.03 hereof shall be terminated and not simultaneously replaced with other insurance satisfactory to the Majority Lenders; or (k) any Change of Control shall occur; or (l) (i) any Security Document or the Subsidiary Guaranty shall cease, for any reason, to be in full force and effect (other than as provided therein) or any party thereto (other than the Lenders) shall so assert in writing; or (ii) any Security Document shall cease to be effective to grant a Lien on the collateral described therein with the priority purported to be created thereby; or (m) the Company and/or any Subsidiary of the Company has incurred or incurs Environmental Liabilities (without duplication) in excess of $5,000,000 in the aggregate at any time, which Environmental Liabilities would, under GAAP, be reflected in the financial statements (or the footnotes thereto) of the Company. THEREUPON: the Administrative Agent may (and, if directed by the Majority Lenders, shall) (a) declare the Commitments terminated (whereupon the Commitments shall be terminated) and/or (b) declare the principal amount then outstanding of and the accrued interest on the Loans, the Reimbursement Obligations, and commitment fees and all other amounts payable hereunder and under Credit Agreement - 75 - the Notes to be forthwith due and payable, whereupon such amounts shall be and become immediately due and payable, without notice (including, without limitation, notice of intent to accelerate), presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Company; provided that in the case of the occurrence of an Event of Default with respect to the Company referred to in clause (f) or (g) of this Section 10.01, the Commitments shall be automatically terminated and the principal amount then outstanding of and the accrued interest on the Loans, the Reimbursement Obligations, and commitment fees and all other amounts payable hereunder and under the Notes shall be and become automatically and immediately due and payable, without notice (including, without limitation, notice of intent to accelerate), presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Company. In addition, upon the occurrence and during the continuance of any Event of Default (if the Administrative Agent has declared the principal amount then outstanding of, and accrued interest on, the Loans and all other amounts payable by the Company hereunder and under the Notes to be due and payable), the Company agrees that it shall, if requested by the Administrative Agent or the Majority Lenders through the Administrative Agent (and, in the case of any Event of Default referred to in clause (f) or (g) of this Section 10.01 with respect to the Company, forthwith, without any demand or the taking of any other action by the Administrative Agent or such Lenders) provide cover for the Letter of Credit Liabilities by paying to the Administrative Agent immediately available funds in an amount equal to the then aggregate undrawn face amount of all Letters of Credit, which funds shall be held by the Administrative Agent in the Collateral Account as collateral security in the first instance for the Letter of Credit Liabilities. Section 11. The Administrative Agent. 11.01 Appointment, Powers and Immunities. Each Lender hereby irrevocably appoints and authorizes the Administrative Agent to act as its agent hereunder and under the other Basic Documents with such powers as are specifically delegated to the Administrative Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto. The Administrative Agent (which term as used in this Section 11 shall include reference to its affiliates and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Basic Documents, and shall not by reason of this Agreement or any other Credit Agreement - 76 - Basic Document be a trustee for any Lender; (b) shall not be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement or any other Basic Document, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Basic Document, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Basic Document or any other document referred to or provided for herein or therein or for any failure by the Company or any of the Subsidiary Guarantors or any other Person to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or under any other Basic Document except to the extent requested by the Majority Lenders; and (d) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other Basic Document or any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct. The Administrative Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. 11.02 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Administrative Agent. As to any matters not expressly provided for by this Agreement or any other Basic Document, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and thereunder in accordance with instructions signed by the Majority Lenders and such instructions of the Majority Lenders and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. 11.03 Defaults. The Administrative Agent shall not be deemed to have knowledge of the occurrence of a Default unless the Administrative Agent has received notice from a Lender or the Company specifying such Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall (subject to Section 11.07 hereof) take such action with respect to such Default as shall be directed by the Majority Lenders, provided that, unless and until the Administrative Agent shall have Credit Agreement - 77 - received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Lenders. The Administrative Agent shall deliver to the Lenders a copy of any written declaration made pursuant to the last paragraph of Section 10.01 hereof. 11.04 Rights as a Lender. With respect to its Commitments and the Loans made by it, Chase in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Administrative Agent and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent may (without having to account therefor to any Lender) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Company and the Subsidiary Guarantors (and their respective Affiliates) as if it were not acting as the Administrative Agent, and the Administrative Agent may accept fees and other consideration from the Company (in addition to the agency fees and arrangement fees heretofore agreed to between the Company and the Administrative Agent) for services in connection with this Agreement or otherwise without having to account for the same to the Lenders. 11.05 Indemnification. The Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed under Section 12.03 or 12.04 hereof, but without limiting the obligations of the Company under said Sections 12.03 and 12.04), ratably in accordance with the principal amount of their respective Loans and Reimbursement Obligations outstanding, or if no Loans or Reimbursement Obligations are outstanding, ratably in accordance with their respective Commitments, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any other Basic Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including, without limitation, the costs and expenses which the Company is obligated to pay under Sections 12.03 and 12.04 hereof but excluding, unless a Default has occurred and is continuing, normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified. Credit Agreement - 78 - 11.06 Non-Reliance on Administrative Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Company and decision to enter into this Agreement and that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Basic Documents. The Administrative Agent shall not be required to keep itself informed as to the performance or observance by the Company and the Subsidiary Guarantors of this Agreement or any of the other Basic Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of the Company or any of the Subsidiary Guarantors. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent hereunder or the other Basic Documents, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Company or any of the Subsidiary Guarantors (or any of their affiliates) which may come into the possession of the Administrative Agent. 11.07 Failure to Act. Except for action expressly required of the Administrative Agent hereunder and under the other Basic Documents, the Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction by the Lenders of their indemnification obligations under Section 11.05 hereof against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. 11.08 Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Company and the Administrative Agent may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal the Majority Lenders shall have the right to appoint a successor Administrative Agent reasonably acceptable to the Company. Upon any such resignation or removal, the Administrative Agent that resigned or was removed shall, to the extent that its annual agency fee was paid in advance, pay to the Company an amount equal to such fee multiplied by a fraction the numerator of which shall be the number of days remaining on the date of such resignation or removal until the next anniversary of the Closing Date, and the denominator of which Credit Agreement - 79 - shall be 365. If no successor Administrative Agent shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent (the "Notice Date"), then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent reasonably acceptable to the Company. Any successor Administrative Agent shall be (i) a Lender or (ii) if no Lender has accepted such appointment within 30 days after the Notice Date, a bank which has an office in New York, New York with a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Section 11 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent. 11.09 Consents under Basic Documents. Without the prior written consent of the Majority Lenders, the Administrative Agent will not consent to any modification, supplement or waiver under any of the Basic Documents or any of the other documents described in Section 9.20 hereof. 11.10 Collateral Sub-Agents. Each Lender by its execution and delivery of this Agreement agrees, as contemplated by the Security Documents, that, in the event it shall hold any Liquid Investments referred to therein, such Liquid Investments shall be held in the name and under the control of such Lender and such Lender shall hold such Liquid Investments as a collateral sub-agent for the Administrative Agent thereunder. Section 12. Miscellaneous. 12.01 Waiver. No failure on the part of the Administrative Agent or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under any Basic Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided in the Basic Documents are cumulative and not exclusive of any remedies provided by law. Credit Agreement - 80 - 12.02 Notices. All notices and other communications provided for herein (including, without limitation, any modifications of, or waivers or consents under, this Agreement) shall be given or made by telecopy or other writing and telecopied, mailed or delivered to the intended recipient at the "Address for Notices" specified below its name on Schedule II hereto; or, as to any party, at such other address as shall be designated by such party in a notice to the Company and the Administrative Agent given in accordance with this Section 12.02. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopier (and receipt is electronically confirmed), personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. 12.03 Expenses, Etc. The Company agrees to pay or reimburse each of the Lenders and the Administrative Agent for paying: (a) the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special counsel to the Administrative Agent, in connection with (i) the preparation, execution and delivery of this Agreement (including the Exhibits hereto) and the Security Documents and the making of the Loans hereunder and (ii) any modification, supplement or waiver of any of the terms of this Agreement or any other Basic Document (including, without limitation, the amendment and restatement evidenced hereby); (b) all reasonable costs and expenses of the Lenders and the Administrative Agent (including reasonable counsels' fees in connection with the enforcement of this Agreement or any other Basic Document or any bankruptcy, insolvency or other proceedings); (c) all mortgage, intangible, transfer, stamp, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement or any other Basic Document or any other document referred to herein or therein; and (d) all costs, expenses, taxes, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any security interest contemplated by this Agreement, any Security Document or any document referred to herein or therein. 12.04 Indemnification. The Company shall indemnify the Administrative Agent, the Lenders and each affiliate thereof and their respective directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims or damages to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of, relate to or result from any (i) Loan by any Lender hereunder or (ii) breach by the Company of this Agreement or any other Basic Document or (iii) any Environmental Liabilities (whether known or unknown) or (iv) any investigation, litigation or other proceeding (including any threatened investigation or Credit Agreement - 81 - proceeding) relating to the foregoing, and the Company shall reimburse the Administrative Agent and each Lender, and each affiliate thereof and their respective directors, officers, employees and agents, upon demand for any reasonable expenses (including legal fees) incurred in connection with any such investigation or proceeding; but excluding any such losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified. 12.05 Amendments, Etc. No amendment or waiver of any provision of this Agreement or the Notes, nor any consent to any departure by the Company therefrom, shall in any event be effective unless the same shall be agreed or consented to by the Majority Lenders and the Company, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders, do any of the following: (i) increase any Commitment of any of the Lenders or subject the Lenders to any additional obligations; (ii) reduce the principal of, or interest on, any Loan or fees hereunder; (iii) postpone any date fixed for any payment of principal of, or interest on, any Loan, or fee hereunder pursuant to Sections 2.03, 2.08, 4.01 or 4.02 hereof; (iv) change the percentage of any of the Commitments or of the aggregate unpaid principal amount of any of the Loans, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Agreement; (v) change any provision contained in Sections 2.07, 6, 7.01, 12.03 or 12.04 hereof or this Section 12.05 or Section 12.08 hereof; (vi) change any provision of Section 3.02(b) hereof; (vii) release all or substantially all of the security for the obligations of the Company under this Agreement or any Note; or (viii) release all or substantially all of the Subsidiary Guarantors from their obligations under the Subsidiary Guaranty. Notwithstanding anything in this Section 12.05 to the contrary, no amendment, waiver or consent shall be made with respect to Section 11 without the consent of the Administrative Agent. 12.06 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns except that the Company may not assign its rights or obligations hereunder or under the Notes without the prior written consent of all of the Lenders. Each Lender may assign all or a portion of its rights and obligations under this Agreement and the Notes (i) to any affiliate thereof, (ii) to any other Lender, (iii) with the consent of the Administrative Agent, of the Issuing Bank and of the Company, which consents shall not be unreasonably withheld, to any other bank or financial institution (provided that any such partial assignment shall not, unless the Company and the Credit Agreement - 82 - Administrative Agent otherwise agree, be less than $5,000,000) or (iv) to a Federal Reserve Bank. Upon execution by the assignor and the assignee of an instrument pursuant to which the assignee assumes such rights and obligations, payment by such assignee to such assignor of an amount equal to the purchase price agreed between such assignor and such assignee and delivery to the Administrative Agent and the Company of an executed copy of such instrument together with payment by such assignee to the Administrative Agent of a processing fee of $2,500, such assignee shall have, to the extent of such assignment (unless otherwise provided therein), the same rights and benefits as it would have if it were a Lender hereunder and the assignor shall be, to the extent of such assignment (unless otherwise provided therein), released from its obligations under this Agreement. Each Lender may (without the consent of any other party to this Agreement) sell participations in all or any part of any Loan or Loans made by it to another bank or other entity, in which event the participant shall not have any rights under this Agreement (except as provided in the next succeeding sentence hereof), or in the case of a Loan, such Lender's Note (the participant's rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the participant relating thereto, which agreement shall not give the participant the right to consent to any modification, amendment or waiver other than one described in clause (i), (ii), (iii) or (vi) of Section 12.05 hereof). The Company agrees that each participant shall be entitled to the benefits of Sections 5.07 and 6 with respect to its participation; provided that no participant shall be entitled to receive any greater amount pursuant to such Sections than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such participant had no such transfer occurred. Each Lender may furnish any information concerning the Company and its Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants) which have agreed in writing to be bound by the provisions of Section 12.07 hereof. The Administrative Agent and the Company may, for all purposes of this Agreement, treat any Lender as the holder of any Note drawn to its order (and owner of the Loans evidenced thereby) until written notice of assignment, participation or other transfer shall have been received by them from such Lender. 12.07 Confidentiality. Each Lender agrees to exercise all reasonable efforts to keep any information delivered or made available by the Company to it which has not been publicly disclosed confidential from anyone other than persons employed or retained by such Lender who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans; provided that nothing herein shall prevent any Lender from Credit Agreement - 83 - disclosing such information (i) to any other Lender, (ii) to its officers, directors, employees, agents, attorneys and accountants who have a need to know such information in accordance with customary banking practices and who receive such information having been made aware of the restrictions set forth in this Section, (iii) upon the order of any court or administrative agency, (iv) upon the request or demand of any regulatory agency or authority having jurisdiction over such Lender, (v) to the extent reasonably required in connection with any litigation to which the Administrative Agent, any Lender, the Company, any Subsidiary Guarantor or their respective affiliates may be a party, (vi) to the extent reasonably required in connection with the exercise of any remedy hereunder, (vii) to such Lender's legal counsel and independent auditors, and (viii) to any actual or proposed participant or assignee of all or part of its rights hereunder which has agreed in writing to be bound by the provisions of this Section 12.07. 12.08 Survival. The obligations of the Company under Sections 6.01, 6.05, 6.06, 6.08, 12.03 and 12.04 hereof and the obligations of the Lenders under Section 11.05 shall survive the repayment of the Loans and the termination of the Commitments. 12.09 Captions. Captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. 12.10 Counterparts; Integration. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral and written, relating to the subject matter hereof. 12.11 Additional Lenders. The Company, each of the Lenders and the Administrative Agent may at any time agree to add one or more lenders to this Agreement pursuant to an instrument in writing specifying such new lender's Commitments (and the reduction in Commitments of the existing Lenders as a result thereof in such manner as the Company, each of the Lenders and the Administrative Agent agree) and under which such new lender would agree to be bound by the provisions of this Agreement. Upon the execution of such instrument (and the satisfaction of such conditions and other terms as shall therein be specified) such additional lender or lenders shall be deemed a "Lender" or "Lenders" for the purposes of this Agreement and shall enjoy all rights and assume all obligations on the part of the Lenders set forth in this Agreement and the Lenders whose Commitments are Credit Agreement - 84 - then being reduced shall be released from their Commitments to the extent of such reduction. 12.12 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. THE COMPANY HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE COMPANY, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Credit Agreement - 85 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. IRON MOUNTAIN INCORPORATED By___________________________________ Title: Address for Notices: 745 Atlantic Avenue Boston, Massachusetts 02111 Attention: Eugene B. Doggett, Executive Vice President and Chief Financial Officer Telecopy Number: (617) 350-7881 Copy to: Sullivan & Worcester One Post Office Square Boston, Massachusetts 02109 Attention: Harry E. Ekblom, Jr. Telecopy Number: (617) 338-2880 Credit Agreement - 86 - THE LENDERS THE CHASE MANHATTAN BANK By________________________ Title: [OTHERS] Credit Agreement - 87 - THE ADMINISTRATIVE AGENT THE CHASE MANHATTAN BANK, as Administrative Agent By________________________ Title: Address for Notices: The Chase Manhattan Bank Agent Bank Services Group 140 East 45th Street, 29th Floor New York, New York 10017 Attention: Sandra Miklave Telecopier No.: (212) 622-0122 Telephone No.: (212) 622-0004 Credit Agreement EX-21 15 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 LIST OF SUBSIDIARIES OF REGISTRANT Subsidiary of Registrant 1. Iron Mountain Records Management, Inc. State of incorporation -- Delaware In California, also does business as Metro Records Management Subsidiaries of Iron Mountain Records Management, Inc. 1. Metro Business Archives, Inc. State of incorporation -- New York Doing business as Metro Business Archives 2. Criterion Atlantic Property, Inc. State of incorporation -- Delaware 3. Criterion Property, Inc. State of incorporation -- Delaware 4. Hollywood Property, Inc. State of incorportion -- California 5. IM San Diego, Inc. State of incorporation -- Delaware 6. Iron Mountain Information Partners, Inc. State of incorporation -- Delaware 7. Iron Mountain Data Protection Services, Inc. State of incorporation -- Massachusetts 8. Iron Mountain Records Management of Maryland, Inc. State of incorporation -- Delaware 9. Iron Mountain Records Management of Ohio, Inc. State of incorporation -- Delaware 10. Iron Mountain Wilmington, Inc. State of incorporation -- Delaware 11. Data Storage Systems, Inc. State of incorporation -- Delaware 12. Iron Mountain Records Management of Missouri LLC State of organization -- Delaware 13. Iron Mountain Records Management of Boston, Inc. State of incorporation -- Massachusetts 14. Data Archive Services, Inc. State of incorporation -- Delaware -----END PRIVACY-ENHANCED MESSAGE-----