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IRM > SEC Filings for IRM > Form 8-K on 4-Aug-2014All Recent SEC Filings

Show all filings for IRON MOUNTAIN INC

Form 8-K for IRON MOUNTAIN INC


4-Aug-2014

Other Events, Financial Statements and Exhibits


Item 8.01. Other Events.

Merger

As previously disclosed, on June 25, 2014, Iron Mountain's board of directors unanimously approved our conversion to a real estate investment trust ("REIT") for federal income tax purposes effective for our taxable year commencing January 1, 2014 (the "REIT Conversion"). As such, we intend to elect REIT status effective January 1, 2014.

As one of the steps in the REIT Conversion, we intend to merge with and into Iron Mountain REIT, Inc., our new, wholly owned, direct subsidiary formed under Delaware law ("Iron Mountain REIT"), pursuant to an Agreement and Plan of Merger to be entered into between us and Iron Mountain REIT (the "Merger Agreement"), with Iron Mountain REIT succeeding to and continuing to operate the existing business of Iron Mountain (the "Merger"). Effective at the time of the Merger, Iron Mountain REIT will be renamed "Iron Mountain Incorporated."

We expect that the Merger will facilitate our compliance with REIT tax rules by ensuring the effective adoption of the charter provisions that implement share ownership and transfer restrictions required by the REIT tax rules. We intend to hold a special meeting of stockholders in the second half of 2014 at which our stockholders will have the opportunity to vote on the proposed Merger (the "Special Meeting"). Iron Mountain REIT has filed a registration statement on Form S-4 with the Securities and Exchange Commission (the "SEC"), which will include a definitive proxy statement of Iron Mountain and prospectus of Iron Mountain REIT (when available) that will describe in further detail the proposed Merger and the REIT ownership restrictions in connection therewith.

If the Merger Agreement is adopted and approved by the required vote of our stockholders and the Merger is completed, upon the effectiveness of the Merger, the outstanding shares of our common stock ("Iron Mountain Common Stock") will be converted into the right to receive the same number of shares of common stock of Iron Mountain REIT ("Iron Mountain REIT Common Stock"), which will be governed by the Certificate of Incorporation of Iron Mountain REIT, Inc. (the "Iron Mountain REIT Charter"). Except as described in the sections below entitled "Restrictions on Ownership and Transfer" and "Exclusive Forum Bylaw," the rights as a holder of Iron Mountain REIT Common Stock, which are governed by the Iron Mountain REIT Charter and the bylaws of Iron Mountain REIT (the "Iron Mountain REIT Bylaws"), are substantially the same as the rights as a holder of Iron Mountain Common Stock, which are governed by the Amended and Restated Certificate of Incorporation of Iron Mountain Incorporated (the "Iron Mountain Charter") and the bylaws of Iron Mountain Incorporated (the "Iron Mountain Bylaws"). The material difference between the rights as a holder of Iron Mountain Common Stock and the rights as a holder of Iron Mountain REIT Common Stock is that, in order to facilitate compliance with requirements under the Internal Revenue Code of 1986, as amended (the "Code"), that are applicable to REITs in general, as described in the section below entitled "Material Federal Income Tax Considerations," the Iron Mountain REIT Charter generally prohibits any stockholder from owning more than 9.8% of the outstanding shares of Iron Mountain REIT Common Stock or any other class or series of Iron Mountain REIT stock. These limitations are subject to waiver or modification by the board of directors of Iron Mountain REIT. In addition, the Iron Mountain REIT Bylaws include a bylaw


that designates, with certain exceptions, Delaware, as the exclusive forum for certain legal actions (the "Exclusive Forum Bylaw").

2014 Special Distribution

As summarized in the section below entitled "Material Federal Income Tax Considerations," to qualify as a REIT, we must continually satisfy various qualification tests imposed under the Code, concerning, among other things, the sources of our income, the nature and diversification of our assets and the amounts we distribute to our stockholders. In connection with such qualification tests, and in accordance with tax rules applicable to REIT conversions, for us to be eligible to elect REIT status for federal income tax purposes effective for our taxable year commencing January 1, 2014, we anticipate making a special distribution in the second half of 2014 to our stockholders of our previously undistributed accumulated earnings and profits attributable to all taxable periods ending on or prior to December 31, 2013 (the "2014 Special Distribution"). The 2014 Special Distribution also will include some other items of taxable income that we expect to recognize in 2014, such as depreciation recapture in respect of accounting method changes commenced in our pre-REIT period as well as foreign earnings and profits repatriated as dividend income. We expect to pay the 2014 Special Distribution of between $600 million and $700 million in a single distribution in the second half of 2014, with at least 80% of the 2014 Special Distribution in the form of our Common Stock and up to 20% in cash. We may decide, based on our cash flows and strategic plans, leverage and other factors, to pay the 2014 Special Distribution entirely in cash or a different mix of cash and Common Stock. The timing, amount and form of the planned payment of the 2014 Special Distribution, which may or may not occur, will be determined by our board of directors and may be impacted by potential tax law changes and other factors beyond our control; provided, however, that if we declare the 2014 Special Distribution prior to the completion of the Merger, then we will pay the 2014 Special Distribution prior to the completion of the Merger. The 2014 Special Distribution will follow an initial earnings and profits distribution of $700 million paid on November 21, 2012 and will result in a total payout of our accumulated earnings and profits distributions associated with the REIT Conversion, as well as the other items of taxable income described above, of an estimated $1,300 to $1,400 million. We will publicly announce a record date and payment date for the 2014 Special Distribution after such dates are determined by our board of directors. Our obligations with respect to any dividends or other distributions to our stockholders that we declare with a record date prior to the effective time of the Merger, including any dividends that our stockholders have chosen to receive in the form of Common Stock, but not paid prior to the effective time of the Merger will be paid by Iron Mountain REIT as the surviving corporation in the Merger in accordance with the terms of the Merger Agreement and provided that, in the case of any dividends that our stockholders have chosen to receive in the form of Common Stock, such dividends will be paid by Iron Mountain REIT as the surviving corporation in the Merger in the form of Iron Mountain REIT Common Stock.

Restrictions on Ownership and Transfer

To facilitate compliance with the ownership limitations applicable to a REIT under the Code, the Iron Mountain REIT Charter contains restrictions on stock ownership and stock transfers. These ownership and transfer restrictions could delay, defer or prevent a transaction or a change in control that might involve a premium price for the Iron Mountain REIT Common Stock or otherwise be in the best interest of the stockholders. All certificates representing shares of capital stock, if any, will bear legends describing or referring to these restrictions. The following discussion of the Iron Mountain REIT Charter assumes that the Merger has been approved by our stockholders and the Merger has been completed.

For us to qualify as a REIT under the Code, our stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year (other than the first year for which an election to be a REIT has been made). Also, not more


than 50% of the value of the outstanding shares of our stock may be owned, directly or indirectly, by five or fewer "individuals" (as defined in the Code to include certain entities such as private foundations) during the last half of a taxable year (other than the first taxable year for which an election to be a REIT has been made). See the section below entitled "Material Federal Income Tax Considerations." To facilitate compliance with these ownership requirements and other requirements for continued qualification as a REIT and to otherwise protect us from the consequences of a concentration of ownership among Iron Mountain REIT's stockholders, the Iron Mountain REIT Charter contains provisions restricting the ownership or transfer of shares of Iron Mountain REIT stock. Our current REIT Status Protection Rights Agreement, which, as previously disclosed, we entered into on December 9, 2013 (the "Rights Agreement"), is designed to similarly facilitate compliance with these ownership requirements and protect us from the consequences of a concentration of ownership for the period before the effectiveness of the Merger.

The relevant sections of the Iron Mountain REIT Charter provide that, subject to the exceptions and the constructive ownership rules described below, no person (as defined in the Iron Mountain REIT Charter) may beneficially or constructively own more than 9.8% in value of the aggregate of Iron Mountain REIT's outstanding shares of stock, including Iron Mountain REIT's common stock and preferred stock, or more than 9.8% in value or number (whichever is more restrictive) of the outstanding shares of any class or series of Iron Mountain REIT stock. We refer to these restrictions as the "ownership limits."

The applicable constructive ownership rules under the Code are complex and may cause stock owned actually or constructively by an individual or entity to be treated as owned by another individual or entity. As a result, the acquisition of less than 9.8% in value of Iron Mountain REIT's outstanding stock or less than 9.8% in value or number of Iron Mountain REIT's outstanding shares of any class or series of stock (including through the acquisition of an interest in an entity that owns, actually or constructively, any class or series of Iron Mountain REIT stock) by an individual or entity could nevertheless cause that individual or entity, or another individual or entity, to own, constructively or beneficially, in excess of 9.8% in value of Iron Mountain REIT's outstanding stock or 9.8% in value or number of Iron Mountain REIT's outstanding shares of any class or series of stock.

In addition to the ownership limits, the Iron Mountain REIT Charter prohibits any person from actually or constructively owning shares of Iron Mountain REIT stock to the extent that such ownership would cause any of our income that would otherwise qualify as "rents from real property" for purposes of
Section 856(d) of the Code to fail to qualify as such.

Our board of directors may, in its sole discretion, exempt a person from the ownership limits and certain other REIT limits on ownership and transfer of Iron Mountain REIT stock described above, and may establish a different limit on ownership for any such person. However, our board of directors may not exempt any person whose ownership of outstanding stock in violation of these limits would result in our failing to qualify as a REIT. In order to be considered by our board of directors for exemption or a different limit on ownership, a person must make such representations and undertakings as are reasonably necessary to ascertain that such person's beneficial or constructive ownership of Iron Mountain REIT stock will not now or in the future jeopardize our ability to qualify as a REIT under the Code and must generally agree that any violation or attempted violation of such representations or undertakings (or other action that is contrary to the ownership limits and certain other REIT limits on ownership and transfer of Iron Mountain REIT stock described above) will result in the shares of stock being automatically transferred to a trust as described below. As a condition of its waiver, our board of directors may require an opinion of counsel or U.S. Internal Revenue Service ("IRS") ruling satisfactory to our board of directors with respect to our qualification as a REIT and may impose such other conditions as it deems appropriate in connection with the granting of the exemption or a different limit on ownership.


In connection with the waiver of the ownership limits or at any other time, our board of directors may from time to time increase the ownership limits for one or more persons and decrease the ownership limits for all other persons; provided that the new ownership limits may not, after giving effect to such increase and under certain assumptions stated in the Iron Mountain REIT Charter, result in us being "closely held" within the meaning of Section 856(h) of the Code (without regard to whether the ownership interests are held during the last half of a taxable year). Reduced ownership limits will not apply to any person whose percentage ownership of Iron Mountain REIT's total shares of stock or of the shares of a class or series of Iron Mountain REIT stock, as applicable, is in excess of such decreased ownership limits until such time as such person's percentage of total shares of stock or of the shares of a class or series of stock, as applicable, equals or falls below the decreased ownership limits, but any further acquisition of Iron Mountain REIT stock in excess of such percentage will be in violation of the ownership limits.

The Iron Mountain REIT Charter further prohibits:

. . .



Item 9.01. Financial Statements and Exhibits.

(b) Pro Forma Financial Information.

Attached as Exhibit 99.1 and incorporated herein by reference are (i) the unaudited pro forma consolidated statement of operations for the year ended December 31, 2013, (ii) the unaudited pro forma


consolidated statement of operations for the six months ended June 30, 2014 and
(iii) the unaudited pro forma consolidated balance sheet as of June 30, 2014, after giving effect to the Merger and the REIT Conversion described herein, including the qualification or formation of our QRSs and TRSs. The unaudited pro forma balance sheet is based on Iron Mountain Incorporated's historical financial statements and gives effect to the 2014 Special Distribution and the Merger as if they had occurred on June 30, 2014. The unaudited pro forma statements of operations are based on Iron Mountain Incorporated's historical financial statements and give effect to the REIT Conversion and the Merger as if they had occurred on January 1, 2013. The historical financial information has been adjusted to give effect to pro forma events that are (i) directly attributable to the REIT Conversion and the Merger, (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on the consolidated results of Iron Mountain Incorporated.

(d) Exhibits.

Exhibit No.                               Exhibit
8.1           Opinion of Sullivan & Worcester LLP as to tax matters.
23.1          Consent of Sullivan & Worcester LLP (contained in Exhibit 8.1).
99.1          Unaudited Pro Forma Financial Information


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