<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
LOOMIS, FARGO & CO.
(Exact name of registrant as specified in its charter)
Delaware 333-24689 76-0521092
(State or other Jurisdiction (Commission (IRS Employer
of Incorporation or Organization) File Number) Identification No.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
File No. 333-24689-01 File No. 333-24689-02 File No. 333-24689-03 File No. 333-24689-04
LFC Holding Corporation Loomis, Fargo & Co. LFC Armored Loomis, Fargo & Co.
(Exact Name of Registrant (Exact Name of Registrant of Texas Inc. of Puerto Rico
as Specified in its Charter) as Specified in its Charter) (Exact Name of Registrant (Exact Name of Registrant
as specified in its Charter) as Specified in its Charter)
Delaware Texas Texas Tennessee
(State or other jurisdiction of (State or other jurisdiction of (State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization) incorporation or organization) incorporation or organization)
75-2371825 75-0117200 58-1884701 66-0215016
(I.R.S. Employer (I.R.S Employer (I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.) Identification No.) Identification No.)
</TABLE>
2500 CityWest Blvd., Suite 900
Houston, Texas 77042
(Address of principal executive offices) (ZIP Code)
Registrants' telephone number, including area code: (713) 435-6700
Indicate by check mark whether the registrants: (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
As of November 13, 1997, 10,000,000 shares of the common stock, $0.01 par
value, of Loomis, Fargo & Co., 2,652,705 shares of the class A common stock,
$0.01 par value, of LFC Holding Corporation, 1,000 shares of the common stock,
$10.00 par value, of Loomis, Fargo & Co. (a Texas corporation), 100 shares of
common stock, $1.00 par value, of LFC Armored of Texas Inc., and 250 shares of
common stock, no par value, of Loomis, Fargo & Co. of Puerto Rico, were
outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LOOMIS, FARGO & CO.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
($000S)
DECEMBER 31, SEPTEMBER 30,
1996 1997
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents, including restricted
cash and cash equivalents of $1,536 at
December 31, 1996 $ 2,469 $ 4,455
Accounts receivable, net 10,939 49,172
Prepaid expenses and other assets 2,253 7,083
--------- ---------
Total current assets 15,661 60,710
Property and equipment, net 16,816 43,523
Intangible assets 7,851 112,528
Other assets 2,718 5,004
--------- ---------
Total assets $ 43,046 $ 221,765
========= =========
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 5,439 $ 18,538
Accrued expenses and other current liabilities 11,759 40,919
Short-term debt 1,022 -
Current portion, long-term debt 1,500 -
Current portion, capital lease obligations 496 704
--------- ---------
Total current liabilities 20,216 60,161
Long-term liabilities:
Long-term debt 20,950 160,210
Capital lease obligations 966 590
Accrued management fees 1,575 -
Other long-term liabilities 3,838 5,204
--------- ---------
Total long-term liabilities 27,329 166,004
Redeemable preferred stock 3,500 -
Redeemable common stock warrants 355 -
Common stockholders' deficit:
Class A common stock 15 -
Class B common stock - -
Common stock - 100
Common stock warrants 304 -
Additional paid-in capital 1,485 24,755
Accumulated deficit (10,158) (29,255)
--------- ---------
Total common stockholders' deficit (8,354) (4,400)
--------- ---------
Total liabilities and common stockholders' deficit $ 43,046 $ 221,765
========= =========
See accompanying notes.
<PAGE>
LOOMIS, FARGO & CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($000S, EXCEPT PER SHARE DATA)
Nine Months Nine Months
Ended Ended
SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
------------------ ------------------
REVENUES $ 93,939 $ 273,288
COST OF OPERATIONS:
Payroll and related expense 63,310 166,269
Vehicle expense 10,729 37,257
Facilities expense 3,880 11,547
Other operating expenses 13,085 47,936
Expenses relating to the business
combination - 3,213
Gains associated with benefit plans (954) -
--------- ---------
90,050 266,222
--------- ---------
OPERATING INCOME 3,889 7,066
INTEREST EXPENSE 2,158 11,686
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 1,731 (4,620)
INCOME TAXES 78 274
--------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 1,653 (4,894)
EXTRAORDINARY ITEM (NET OF PROVISION FOR
INCOME TAXES OF $1) - (124)
--------- ---------
NET INCOME (LOSS) $ 1,653 $ (5,018)
========= =========
NET INCOME (LOSS) PER SHARE:
BEFORE EXTRAORDINARY ITEM $ 0.32 $ (0.51)
EXTRAORDINARY ITEM - (0.01)
--------- ---------
NET INCOME (LOSS) $ 0.32 $ (0.52)
========= =========
See accompanying notes.
<PAGE>
LOOMIS, FARGO & CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($000S, EXCEPT PER SHARE DATA)
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
------------------ ------------------
REVENUES $ 32,290 $ 98,551
COST OF OPERATIONS:
Payroll and related expense 21,365 60,266
Vehicle expense 3,703 13,677
Facilities expense 1,317 4,310
Other operating expenses 4,346 16,846
Expenses relating to the business combination - 841
-------- --------
30,731 95,940
-------- --------
OPERATING INCOME 1,559 2,611
INTEREST EXPENSE 707 4,399
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES 852 (1,788)
INCOME TAXES 25 168
-------- --------
NET INCOME (LOSS) $ 827 $ (1,956)
======== ========
NET INCOME (LOSS) PER SHARE $ 0.16 $ (0.20)
======== ========
See accompanying notes.
<PAGE>
LOOMIS, FARGO & CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($000s)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
------------------ ------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 1,653 $ (5,018)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization expense 3,439 12,775
Amortization of financing costs - 702
Accretion of discount on NOL note - 368
(Gain) loss on disposal of property and equipment 9 (8)
Change in restricted cash 12 1,536
Provision for allowance for doubtful accounts 19 2,792
Accrued management fees 262 23
Postretirement benefits other than pensions (954) -
Changes in current assets and liabilities (net
of the effects of the acquisition):
Trade accounts receivable (558) (15,480)
Prepaid expenses (1,600) (2,230)
Accounts payable 1,226 904
Accrued expenses 575 7,841
--------- ---------
Net cash provided by operating activities 4,083 4,205
INVESTING ACTIVITIES
Purchase of Wells Fargo Armored - (105,756)
Capital expenditures (2,091) (5,093)
Proceeds from sale of property and equipment 10 42
--------- ---------
Net cash used in investing activities (2,081) (110,807)
FINANCING ACTIVITIES
Borrowings of debt 104,441 196,081
Issuance of senior subordinated notes - 85,000
Repayments of debt and capital lease obligations (105,297) (151,827)
Payment of accrued management fees - (1,598)
Financing costs related to debt (673) (5,391)
Redemption of preferred stock - (3,500)
Exercise of common stock warrants - 96
Distributions to stockholders - (8,737)
--------- ---------
Net cash provided by (used in) financing activities (1,529) 110,124
--------- ---------
Net increase in cash and cash equivalents 473 3,522
Cash and cash equivalents at beginning of period * 274 933
--------- ---------
Cash and cash equivalents at end of period * $ 747 $ 4,455
========= =========
</TABLE>
* Excludes restricted cash and cash equivalents of $1,523, $1,511 and $1,536 at
December 31, 1995, September 30, 1996 and December 31, 1996, respectively
See accompanying notes.
<PAGE>
LOOMIS, FARGO & CO.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(UNAUDITED)
($000s)
<TABLE>
<CAPTION>
Common Common Common Additional
Stock Stock Stock Common Paid-in Accumulated
Class A Class B Warrants Stock Capital Deficit
------- ------- -------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996 $ 15 $ - $ 304 $ - $ 1,485 $ (10,158)
Exercise of common stock warrants 9 3 (304) 743
Exchange common stock of Loomis
Holding Corporation for common
stock of Loomis, Fargo & Co. (24) (3) 51 (24)
Distribution to stockholders (14,079)
Issuance of common stock as part
of the purchase consideration
for Wells Fargo Armored 49 22,551
Net loss (5,018)
----- ---- ----- ---- ------- ---------
Balances at September 30, 1997 $ - $ - $ - $100 $24,755 $ (29,255)
===== ==== ===== ==== ======= =========
</TABLE>
See accompanying notes.
<PAGE>
LOOMIS, FARGO & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 1. BASIS OF PRESENTATION
Loomis, Fargo & Co., together with its subsidiaries, (the Company), a Delaware
corporation, was incorporated in August 1996. On January 24, 1997, Loomis
Holding Corporation (a Delaware corporation) completed its reorganization into
Loomis, Fargo & Co. and the acquisition of certain assets and the assumption of
certain liabilities of Wells Fargo Armored Service Corporation (Wells Fargo
Armored), a wholly owned subsidiary of Borg-Warner Security Corporation. The
reorganization involved the exchange of all outstanding common stock of Loomis
Holding Corporation for 5,100,000 shares of the common stock of the Company,
which concurrently were transferred to a business trust owned by the former
shareholders of Loomis Holding Corporation (the Business Trust.) Earnings per
share have been restated to reflect retroactively the effects of the
reorganization.
The Company owns LFC Holding Corporation (formerly Loomis Holding Corporation),
which in turn owns Loomis, Fargo & Co., a Texas corporation (formerly Loomis
Armored Inc. which was originally incorporated in 1928). Loomis, Fargo & Co.
(the Texas corporation) has two subsidiaries, LFC Armored of Texas Inc., a Texas
corporation, and Loomis, Fargo & Co. of Puerto Rico, a Tennessee corporation.
The common stock of these two subsidiaries was contributed to the Company by
Wells Fargo Armored as part of the assets transferred by Wells Fargo Armored in
the business combination.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. For further information, refer to the audited consolidated
financial statements of Loomis Holding Corporation and Wells Fargo Armored as of
December 31, 1996 included in Amendment No. 2 to the Form S-1 Registration
Statement filed with the Securities and Exchange Commission on June 18, 1997.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine-month period ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997.
Certain prior period amounts have been reclassified to conform with the 1997
presentation.
<PAGE>
NOTE 2. DEBT
Long-term debt consists of the following at September 30, 1997:
Bank credit facility $ 69,500
10% senior subordinated notes 85,000
Non-interest bearing NOL note 5,710
----------
$ 160,210
==========
Concurrent with the purchase of the assets of Wells Fargo Armored on January 24,
1997, the exchange of the common stock of Loomis Holding Corporation and the
financing transactions discussed below, substantially all of the then-existing
Loomis Holding Corporation indebtedness (other than capital leases) was repaid.
Deferred financing costs associated with the retired debt were written off as an
extraordinary item in the accompanying consolidated statements of operations.
The Company also entered into a five-year step-down revolving bank credit
facility agreement which provides for aggregate initial commitments of up to
$115 million. Aggregate commitments are reduced by $2.5 million per quarter in
1998, by an additional $3.75 million per quarter in 1999, by an additional
$4.375 million per quarter in 2000 and for the first two quarters of 2001, and
$31.875 million per quarter for the final two quarters of the agreement. The
interest rate of the credit facility is a variable rate based on either LIBOR or
a base rate tied to the bank's prime rate. At September 30, 1997, the interest
rates on the Company's borrowings were 9.75% on base-rate borrowings of $13.5
million, and 7.97 - 8.06% on LIBOR borrowings totaling $56 million. Interest on
base-rate borrowings is payable on a quarterly basis. Interest on LIBOR
borrowings is due at the end of the repayment term, ranging from 30 to 90 days.
Borrowings under the credit facility are secured by substantially all of the
assets of the Company and its subsidiaries. The agreement contains restrictive
covenants regarding the levels of net worth and working capital, the issuance of
additional debt, the compensation of officers, the payment of dividends, capital
expenditures, new capital leases, and the maintenance of certain financial
ratios. At September 30, 1997 there were no retained earnings available for the
payment of dividends.
During the third quarter of 1997, the Company entered into an interest rate cap
agreement with the bank credit facility lender. The agreement limits the
maximum LIBOR base interest rate to 7% on borrowings of up to $30 million, and
expires on January 31, 1999. The cost of the agreement was not material to the
Company.
The 10% senior subordinated notes were issued on January 24, 1997, in a private
placement, and were subsequently exchanged and registered with the Securities
and Exchange Commission. The notes mature in January 2004, and provide for
semiannual interest payments of $4.25 million which began in July 1997. The
notes are subordinated to borrowings under the credit facility and contain
certain restrictive covenants.
On January 24, 1997, the Company issued a $6,000,000 NOL note to the Business
Trust. The NOL note does not accrue interest and has a term of fifteen years,
subject to mandatory prepayments as, and to the extent that, the Company
realizes a tax benefit attributable to the utilization of net operating losses
of Loomis Holding Corporation available at the date of the reorganization and
acquisition of Wells Fargo Armored. The NOL note was discounted at 10% over the
Company's expected period of repayment of the principal. The Company expects
that its utilization of net operating losses will result in the NOL note being
repaid in full in 1999.
Interest of $2,154,500, and $8,306,900, respectively, was paid during the nine
months ended September 30, 1996 and 1997.
<PAGE>
NOTE 3. LEASES
At September 30, 1997, the scheduled future minimum lease payments under capital
leases are as follows for years ending September 30 (in thousands):
1998 $ 793
1999 489
2000 126
2001 37
2002 5
-------
Total minimum lease payments 1,450
Less amount representing interest 156
-------
Present value of capital lease obligations 1,294
Less current portion of capital lease obligations 704
-------
Long-term capital lease obligations $ 590
=======
The Company leases various office space and equipment under noncancelable
operating leases expiring on various dates through 2006. The following is a
schedule of future minimum lease payments under noncancelable operating leases
with terms exceeding one year for years ending September 30:
1998 $ 12,536
1999 9,586
2000 6,637
2001 4,425
2002 2,212
Thereafter 1,475
--------
$ 36,871
========
Rent expense was $2,447,000, and $11,980,000, respectively, for the nine months
ended September 30, 1996 and 1997, and $862,000 and $4,428,000, respectively,
for the three months ended September 30, 1996 and 1997.
The Company has certain operating leases which contain (i) rent escalation
clauses, some of which are fixed annual increases with others tied to the
Consumer Price Index and (ii) the passthrough of operating expenses and property
taxes. In addition, certain leases contain renewal options.
<PAGE>
NOTE 4. PURCHASE OF WELLS FARGO ARMORED SERVICE CORPORATION
On January 24, 1997, the Company purchased certain assets and assumed certain
liabilities of Wells Fargo Armored, a wholly-owned subsidiary of Borg-Warner
Security Corporation. (See Note 1.) The acquisition was accounted for using
the purchase method of accounting. The aggregate purchase price for the assets
acquired and the liabilities assumed was approximately $128,356,000, which
included cash payments of $105,756,000 and the issuance of 4,900,000 shares of
the common stock of the Company. The purchase price has been preliminarily
allocated to the net assets acquired and liabilities assumed. The purchase
price allocation will be finalized when all fair market value appraisals and
reviews of acquired contracts are completed and severance, relocation and
leasehold abandonment costs are finalized.
The excess of the purchase price over the net tangible assets acquired,
approximately $107,316,000, has been allocated primarily to identifiable
intangible assets (principally $60,000,000 for customer lists, which are being
amortized over 25 years, pending completion of a third party valuation which may
result in an adjustment of the amortization period). The remaining amount is
being amortized over 40 years.
The balance sheet reflects adjustments to record acquired assets and assumed
liabilities at their fair market values and to conform certain accounting
policies of Wells Fargo Armored to the policies of the Company. Accruals
totalling approximately $5,466,000 have been recorded for costs associated with
consolidating headquarters and branch facilities, related relocation costs and
severance payments, and obligations under noncancelable leases for space,
vehicles and equipment that extend beyond the expected periods of use by the
Company. At September 30, 1997, charges of $1,474,000 have been taken against
these accruals. The Company anticipates charges of $2,000,000 against these
purchase accounting accruals in the next twelve months, all of which will
represent cash outflows. Substantially all reorganization and consolidation
activities are expected to be completed by December 31, 1997.
In connection with the allocation of purchase price to assets and liabilities
acquired from Wells Fargo Armored, the Company reviewed all of the acquired
contracts to determine whether any contracts generated revenues that were less
than the direct variable costs associated with servicing the contracts (e.g.,
payroll and related expense, vehicle expense). To the extent that the Company
is required to provide services under a contract where direct variable costs
exceed revenues (a "loss contract"), the Company has assumed a liability that
must be recorded at fair value in connection with the purchase price allocation.
The aggregate liability for loss contracts assumed from Wells Fargo Armored is
approximately $7,900,000, against which operating losses on related acquired
loss contracts will be charged. This represents a revision to the $4,520,000
estimate recorded at June 30, 1997, based on the near completion of extensive
analyses of the contracts during the third quarter. Charges have been recorded
against the reserve for losses of $7,400,000 during the nine months ended
September 30, 1997.
Concurrent with the acquisition, the Company repaid substantially all of the
long-term obligations of Loomis Holding Corporation, replaced its existing lines
of credit with a $115,000,000 revolving bank credit facility and issued
$85,000,000 of 10% unsecured subordinated notes due in 2004 in a private
placement. (See Note 2.)
The consolidated statements of operations and cash flows presented for the nine
months ended September 30, 1996 are those of Loomis Holding Corporation,
predecessor to the Company. The statements of operations and cash flows
presented for the nine months ended September 30, 1997 include the transactions
of Loomis Holding Corporation for the twenty-three days before the business
combination on January 24, 1997, and those of the Company for the remainder of
the nine-month period.
<PAGE>
NOTE 4. PURCHASE OF WELLS FARGO ARMORED SERVICE CORPORATION (CONTINUED)
The pro forma unaudited results of operations for the three and nine month
periods ended September 30, 1996 and September 30, 1997, assuming consummation
of the purchase and the restructuring of the Company's debt and capital
structure as of January 1, 1996, are as follows (in thousands, except per share
data):
<TABLE>
<CAPTION>
1996 1997
---------------------- -----------------------
Third Year -to- Third Year -to-
Quarter Date Quarter Date
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenues $94,835 $276,221 $98,551 $288,618
======== ========= ========= =========
Net income (loss) $ (237) $ 511 $(1,956) $ (5,122)
======== ========= ========= =========
Net income (loss) per
common share $ (0.02) $ 0.05 $ (0.20) $ (0.51)
======== ========= ========= =========
</TABLE>
The net income (loss) presented above includes pro forma adjustments to (i)
interest expense to reflect the Company's revised capital structure after the
business combination (ii) depreciation and (iii) amortization of goodwill to
reflect the effects of purchase accounting.
NOTE 5. EMPLOYEE COMPENSATION PLANS
Before the reorganization of Loomis Holding Corporation into the Company,
certain key employees of Loomis Holding Corporation were compensated under a
Management Equity Growth and Appreciation Plan (the MEGA Plan), under which
Loomis Holding Corporation issued participation units representing unfunded,
unsecured, potential rights to receive deferred compensation. The units vested
over a five-year schedule and required the occurrence of a triggering event (as
defined) before they became exercisable.
Upon the reorganization of the Company and the acquisition of Wells Fargo
Armored, the MEGA Plan was terminated and all of its units canceled. The Loomis,
Fargo & Co. Unitholders Option Plan (the Option Plan) was established, under
which options to purchase shares of the Company's common stock were issued to
the holders of units under the MEGA Plan that were substantially equivalent to
the canceled units. Options under the Option Plan are subject to vesting
requirements and other limitations that are substantially similar to those that
existed with respect to the units under the MEGA Plan. The Option Plan also
requires a triggering event before the options may be exercised. A triggering
event is the first to occur of (i) any sale or disposition of more than
1,250,000 shares of common stock of the Company by the majority shareholder to a
non-affiliate, (ii) any sale or disposition of substantially all of the assets
of the Company to a non-affiliate, (iii) a merger of the Company with or into a
non-affiliated entity, or (iv) a public offering or series of offerings
producing aggregate gross proceeds of at least $100 million.
As of September 30, 1997, there are 623,945 options outstanding under the Option
Plan, 478,804 of which are vested. These shares are exercisable at approximately
$1.96 per share.
On August 15, 1997, the Board of Directors and stockholders of the Company
adopted the Loomis, Fargo & Co. 1997 Stock Option Plan (the Plan), pursuant to
which the Board of Directors (or authorized committee thereof) is authorized to
grant options (the Options) to purchase up to 1,000,000 shares of the Company's
common stock, $0.01 par value (Common Stock), subject to adjustment upon stock
splits, stock dividends, reclassifications and similar changes to the capital
structure of the Company. Options granted under the Plan may be subject to
vesting requirements and exercisability restrictions as may be determined by the
Board of Directors or authorized committee thereof.
<PAGE>
NOTE 5. EMPLOYEE COMPENSATION PLANS (CONTINUED)
Upon adoption of the Plan, the Board of Directors granted Options to purchase up
to 665,000 shares of Common Stock (the Initial Stock Options). The Initial
Stock Options have an exercise price of $7.50 per share. This exercise price
exceeded the fair value of the stock at the date of grant, therefore no
compensation expense has been recorded. The Initial Stock Options are
exercisable on the tenth anniversary of the grant date, subject to the
acceleration provisions described below, and expire on the eleventh anniversary
of such grant date. The exercisability of the Initial Stock Options shall
accelerate as follows: (i) if, following the date that the Common Stock is
first readily tradeable on a national securities exchange or other market
system, the daily closing price of the Common Stock is equal to or greater than
a scale of prices ranging from $10 to $30 for 80 out of 100 trading days, then a
percentage of the Initial Stock Options shall become exercisable based on such
daily closing prices on a sliding scale from January 24, 1998 to January 24,
2002, (ii) in the event of a Change of Control (as defined in the Plan) prior to
there being a public trading market for the Common Stock, a percentage of the
Initial Stock Option shall become exercisable based upon a $10 to $30 price
range of the weighted average sale price of shares of Common Stock from the date
of grant to the date of the Change of Control, with the remainder (if any) to be
forfeited upon such Change of Control, and (iii) in the event of a Change of
Control after there is a public trading market for the Common Stock, the
Initial Stock Options shall be exercisable for a percentage equal to the greater
of (x) the then current exercisable percentage of such Initial Stock Option as
set forth in clause (i) above, or (y) the percentage that would become
exercisable upon the occurrence of a Change of Control as set forth in clause
(ii) above.
NOTE 6. COMMON STOCK
The capital structure of the Company changed with the reorganization of Loomis
Holding Corporation into Loomis, Fargo & Co. and the acquisition of Wells Fargo
Armored on January 24, 1997. The 3,500,000 outstanding shares of $.01 par value
Loomis Holding Corporation Series 1 Preferred Stock were redeemed out of the
proceeds of the new financing arrangements. The 2,383,911 outstanding shares of
Class A Loomis Holding Corporation common stock and the 268,794 outstanding
shares of Class B Loomis Holding Corporation common stock (both having a par
value of $.01 per share) were exchanged for 5,100,000 shares of common stock of
Loomis, Fargo & Co., which were concurrently transferred to a Business Trust
owned by the former stockholders of Loomis Holding Corporation. (See Note 1.)
Under certain circumstances, shares held by the Business Trust may be provided
subsequent to the exercise of certain stock options. The remaining 4,900,000
outstanding shares of common stock of the Company were issued to Wells Fargo
Armored as part of the purchase price consideration.
The common stock of the Company consists of one class and has a $.01 par value.
Twenty million shares are authorized, ten million of which are issued and
outstanding as described in the preceding paragraph. Ten million shares of $.01
preferred stock are authorized, but none have been issued at September 30, 1997.
In 1991 and 1992, warrants were issued to certain lenders and shareholders of
Loomis Holding Corporation to purchase an aggregate of 877,646 shares of
Loomis's Class A Common Stock and 268,794 shares of Loomis's Class B Common
Stock. On January 23, 1997, all warrant holders exercised their warrants. The
shares issued upon exercise of the warrants were included in the January 24,
1997 exchange of common stock of Loomis Holding Corporation for common stock of
the Company.
Concurrent with the business combination on January 24, 1997, the non-interest
bearing NOL note described in Note 2, having a discounted value at that date of
approximately $5,342,000, and net cash consideration of approximately $8,737,000
were distributed for the benefit of the shareholders of Loomis Holding
Corporation.
<PAGE>
NOTE 7. NET INCOME (LOSS) PER SHARE
Net income (loss) per share amounts are computed by dividing net income (loss)
available to common stockholders by the weighted average number of common shares
and common stock equivalents outstanding during the period. Common stock
equivalents include stock options and warrants and are computed under the
treasury stock method. The numbers of shares outstanding used in the
computation of net income (loss) per share for the nine months ended September
30, 1996 and 1997 were 5,092,171 and 9,586,520, respectively. For the three
months ended September 30, 1996 and 1997, shares outstanding were 5,092,171 and
10,000,000, respectively. Earnings per share have been restated retroactively
to reflect the effects of the recapitalization described in Note 6.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. This change would not impact the net loss per
share of the three and nine months ended September 30, 1997, because the effect
of stock options was antidilutive and therefore excluded from the calculation.
The change in net income per share for the three and nine months ended September
30, 1996 is expected to be immaterial.
NOTE 8. INCOME TAXES
The Company had a federal net operating loss carryforward of $15,100,000 at
December 31, 1996. Accordingly, the Company's income tax expense is limited to
the amount resulting from the computation of the alternative minimum tax.
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
A comparison of the Company's results of operations for the first nine months of
1997 with Loomis Holding Corporation's results of operations for the first nine
months of 1996 is necessarily focused on the significant difference in the size
of the Company before and after the acquisition of certain assets and
liabilities of Wells Fargo Armored. The audited financial statements of the
separate companies as of December 31, 1996 (which were included in Amendment No.
2 to the Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on June 18, 1997) reflect annual 1996 revenues of Wells
Fargo Armored almost twice as large as those of Loomis Holding Corporation,
property and equipment over twice as large, and net assets three times as large.
While this increase in the Company's size offers potential for future growth and
profitability, the business combination tends to dominate any financial
comparison of periods before and after the combination. Results of operations
and related cash flows for the first nine months of 1997 include 23 days of
Loomis Holding Corporation alone before the combination, and 250 days of
combined operations beginning with the January 24, 1997 closing date. For a
condensed comparison of third quarter and year-to-date operations of 1996 and
1997 on a pro forma basis, as if the companies had been combined for the
entirety of the two periods, see Note 4 to the consolidated financial
statements.
Certain of the matters discussed in this discussion and analysis may constitute
forward-looking statements for purposes of the Securities Exchange Act of 1934
and as such may involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, risks
and uncertainties relating to leverage and debt service, risks inherent in the
armored transport industry, general marketplace conditions, restrictions imposed
by the bank credit facility, issues concerning continued integration of the
operations of Wells Fargo Armored, the ability to attract and retain qualified
employees, environmental and other regulatory matters and future legal
proceedings.
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth Loomis' results of operations expressed as a
percentage of revenue.
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- -----------------------
INCOME STATEMENT DATA: 1996 1997 1996 1997
-------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of operations:
Payroll and related expense 67.4 60.8 66.2 61.2
Vehicle expense 11.4 13.6 11.5 13.9
Facilities expense 4.1 4.2 4.1 4.4
Other operating expenses 13.9 17.6 13.4 17.1
Expenses relating to the business
combination - 1.2 - 0.8
Gains associated with benefit plans (1.0) - - -
-------- -------- ---------- ---------
Operating income 4.2 2.6 4.8 2.6
Interest expense 2.3 4.3 2.2 4.4
-------- -------- ---------- ---------
Income (loss) before income taxes
and extraordinary item 1.9 (1.7) 2.6 (1.8)
Income taxes 0.1 0.1 0.1 0.2
-------- -------- ---------- ---------
Income (loss) before extraordinary item 1.8 (1.8) 2.5 (2.0)
Extraordinary item (net of provision
for income taxes) - - - -
-------- -------- ---------- ---------
Net income (loss) 1.8% (1.8)% 2.5% (2.0)%
======== ======== ========== =========
</TABLE>
Nine months ended September 30, 1996 compared with nine months ended September
30, 1997
Revenues. Revenues increased from $93.9 million for the nine months ended
September 30, 1996 to $273.3 million for the nine months ended September 30,
1997, an increase of $179.4 million or 191.1%, of which $164.2 million is due to
the acquisition of the operations of Wells Fargo Armored. Excluding the
increase from the acquisition, revenues increased $15.2 million or 16.2% over
the nine months ended September 30, 1996. The primary reasons for this increase
are the growth in the ATM market and the rate renegotiations discussed below.
The following table analyzes revenues by type of service.
<TABLE>
<CAPTION>
Nine Months Ended
September 30
-----------------
1996 1997 Change Percent
------- -------- ---------- -----------
(Dollars in millions)
<S> <C> <C> <C> <C>
Traditional armored transport services $ 72.0 $ 162.9 $ 90.9 126.3%
ATM Services 13.9 78.9 65.0 467.6%
Cash vault and related services 8.0 31.5 23.5 293.8%
------- -------- ----------
$ 93.9 $ 273.3 $ 179.4 191.1%
======= ======== ==========
</TABLE>
Although the business combination caused all of the revenue categories to
increase, the relative percentages of the three types of services changed
significantly. In the nine months ended September 30, 1996, traditional armored
transport services accounted for 77% of total revenues, with ATM and cash vault
and related services providing 15% and 8%, respectively. In the nine months
ended September 30, 1997, traditional armored transport services provided 60% of
total revenues, ATM services provided 29% and cash vault and related services
11%.
<PAGE>
The significant increase in ATM services revenue reflects both Loomis Holding
Corporation's strategic decision to develop this market segment and the strong
presence of Wells Fargo Armored in the ATM services market. ATM services have
continued to expand dramatically with additional service opportunities in both
the number of ATM locations and the additional items being dispensed through
ATMs. The increase in ATMs served has also benefited armored transport and cash
vault revenues as customers often prefer to use one risk management service
provider. Although the Company's revenues are generally level throughout the
year, revenues vary due to the extent that demand for money increases during the
major holiday seasons.
During the latter part of the second quarter of 1997, the Company started to
convert the acquired Wells Fargo Armored contracts to its improved revenue
management system that identifies those contracts that are inappropriately
priced relative to the cost of service, including changes in existing crew
compliments and employee compensation rate adjustments as discussed below. As a
result of this review, a substantial number of the Wells Fargo Armored contracts
have been renegotiated at rates significantly higher than those in place at the
date of acquisition. A majority of contracts will be renegotiated on a planned
schedule through the end of 1997
Payroll and related expense. Payroll and related expense increased from $63.3
million for the nine months ended September 30, 1996 to $166.3 million for the
nine months ended September 30, 1997, an increase of $103.0 million or 162.7%.
Payroll and related expense as a percent of revenue decreased from 67.4% for the
nine months ended September 30, 1996 to 60.8% for the nine months ended
September 30, 1997. The increase in payroll and related expense was principally
related to the employee wage base of approximately $89.7 million related to the
acquired Wells Fargo Armored operations. The remaining increase relates to
growth in the employee base due to crew compliment changes and to improved wages
and fringe benefits to remain competitive in the marketplace. The decrease of
payroll and related expense as a percentage of revenues reflects the lower wage
rates of the employee base acquired from Wells Fargo Armored during the period
before wage rates were adjusted. Greater efficiency has also been achieved from
the ongoing consolidation of branches and the reworking of routes, which has
allowed some reduction in personnel.
Vehicle expense. Vehicle expense increased from $10.7 million for the nine
months ended September 30, 1996 to $37.3 million for the nine months ended
September 30, 1997, an increase of $26.6 million, or 248.6%, of which $22.9
million was related to the fleet acquired from Wells Fargo Armored. Vehicle
expense as a percent of revenue increased from 11.4% for the nine months ended
September 30, 1996 to 13.6% for the nine months ended September 30, 1997. The
increase as a percentage of revenues can be attributed to the higher
depreciation and lease expenses of the relatively newer fleet of Wells Fargo
Armored acquired in the business combination, and management's emphasis on
preventive maintenance programs for the acquired fleet. The number of armored
vehicles in active service increased from approximately 950 to approximately
2,800 with the business combination.
Facilities expense. Facilities expense increased from $3.9 million for the nine
months ended September 30, 1996 to $11.5 million for the nine months ended
September 30, 1997, an increase of $7.6 million, or 194.9%. Facilities expense
as a percent of revenue slightly increased from 4.1% for the nine months ended
September 30, 1996 to 4.2% for the nine months ended September 30, 1997. The
$7.6 million increase is related to the increased number of operating sites,
from 69 to 170 sites, and the increased division and corporate facility space
requirements associated with the purchase of Wells Fargo Armored.
Other operating expenses. Other operating expenses increased from $13.1 million
for the nine months ended September 30, 1996 to $47.9 million for the nine
months ended September 30, 1997, an increase of $34.8 million, or 265.6%. Other
operating expenses as a percent of revenue increased from 13.9% for the nine
months ended September 30, 1996 to 17.6% for the nine months ended September 30,
1997. Other operating expenses include such expenses as cargo insurance
premiums and losses, costs of a centralized dispatch center, and the testing,
recruiting and training of employees. Other operating costs associated with the
facilities acquired from Wells Fargo Armored were approximately $27.6 million.
Additionally, operating expense increased by $2.5 million for the amortization
of intangible assets related to the business combination. The combined cash-in-
transit insurance premiums and cargo losses totaled $2.7 million and $12.1
million for the nine months ended September 30, 1996 and 1997, respectively,
primarily due to the significant increase in cargo under coverage and the higher
rate of cargo losses at the acquired Wells Fargo Armored facilities.
<PAGE>
Expenses relating to the business combination. Expenses of $3.2 million were
recorded in 1997 for items relating to the purchase of Wells Fargo Armored.
Included are the costs of maintaining the former Wells Fargo Armored corporate
headquarters in Atlanta, temporary personnel and consultants required to convert
the former Wells Fargo Armored systems and branches to the Company's policies
and costs of state registrations and surveys required by the new business
entity. The Company does not anticipate material additional costs related to
the business combination.
Extraordinary item. An extraordinary item of $0.1 million was recorded in the
nine months ended September 30, 1997, resulting from the write-off of deferred
financing costs associated with the debt retired in January 1997.
Three months ended September 30, 1996 compared with three months ended September
30, 1997
Revenues. Revenues increased from $32.3 million for the three months ended
September 30, 1996 to $98.6 million for the three months ended September 30,
1997, an increase of $66.3 million or 205.3%, of which $58.5 million is due to
the acquisition of the assets of Wells Fargo Armored. Excluding the increase
from the acquisition, revenues increased $7.8 million or 24.1% over the three
months ended September 30, 1996. The primary reasons for this increase are the
growth in the ATM market and the contract renegotiation discussed below. The
following table analyzes revenues by type of service.
<TABLE>
<CAPTION>
Three Months Ended
September 30
------------------
1996 1997 Change Percent
------- -------- ---------- -----------
(Dollars in millions)
<S> <C> <C> <C> <C>
Traditional armored transport services $ 24.1 $ 59.5 $ 35.4 146.9%
ATM services 5.4 27.9 22.5 416.7%
Cash vault and related services 2.8 11.2 8.4 300.0%
------- -------- ----------
$ 32.3 $ 98.6 $ 66.3 205.3%
======= ======== ==========
</TABLE>
Although the business combination caused most of the increase in each revenue
category, the relative percentages of the three types of service changed
significantly. In the three months ended September 30, 1996, traditional armored
transport services accounted for 75% of total revenues, with ATM and cash vault
and related services providing 16% and 9%, respectively. In the three months
ended September 30, 1997, armored services provided 60% of total revenues, ATM
provided 28%, and cash vault and related services 12%.
The significant increase in ATM services revenue reflects both Loomis Holding
Corporation's strategic decision to develop this market segment and the strong
presence of Wells Fargo Armored in the ATM services market even before the
combination. ATM services have continued to expand dramatically with additional
service opportunities in both the number of ATM locations and the additional
items being dispensed through ATMs. The increase in ATMs served has also
benefited armored transport and cash vault revenues as customers often prefer to
use one risk management service provider.
During the third quarter of 1997, the Company continued the conversion process
of the acquired Wells Fargo Armored contracts to its improved revenue management
system that identifies those contracts that are inappropriately priced relative
to the cost of service, including changes in existing crew compliments and
employee compensation rate adjustments as discussed below. As a result of this
review, a substantial number of the Wells Fargo Armored contracts have been
renegotiated at rates significantly higher than those in place at the date of
acquisition. A majority of contracts will be renegotiated on a planned schedule
through the end of 1997.
<PAGE>
Payroll and related expense. Payroll and related expense increased from $21.4
million for the three months ended September 30, 1996 to $60.3 million for the
three months ended September 30, 1997, an increase of $38.9 million or 181.8%.
Payroll and related expense as a percent of revenue decreased from 66.2% for the
three months ended September 30, 1996 to 61.2% for the three months ended
September 30, 1997. The increase in payroll and related expense was principally
related to the employee base acquired from Wells Fargo Armored of approximately
$32.6 million. Additional increases for growth in the employee base for new
business and wage increases totaled approximately $3.6 million. The decrease of
payroll and related expense as a percentage of revenues reflects the lower wage
rates of the employee base acquired from Wells Fargo Armored during the period
before wage rates were adjusted. Greater efficiency has also been achieved from
the ongoing consolidation of branches and the reworking of routes, which has
allowed some reduction in personnel.
Vehicle expense. Vehicle expense increased from $3.7 million for the three
months ended September 30, 1996 to $13.7 million for the three months ended
September 30, 1997, an increase of $10.0 million, or 270.3%, of which $8.3
million was related to the fleet acquired from Wells Fargo Armored. Vehicle
expense as a percent of revenue increased from 11.5% for the three months ended
September 30, 1996 to 13.9% for the three months ended September 30, 1997. The
increase as a percentage of revenues can be attributed to the higher
depreciation and lease expenses of the relatively newer fleet of Wells Fargo
Armored acquired in the business combination, and management's emphasis on
preventive maintenance programs on the acquired fleet.
Facilities expense. Facilities expense increased from $1.3 million for the
three months ended September 30, 1996 to $4.3 million for the three months ended
September 30, 1997, an increase of $3.0 million, or 230.8%. Facilities expense
as a percent of revenue increased from 4.1% for the three months ended September
30, 1996 to 4.4% for the three months ended September 30, 1997. The $3.0
million increase is related to the increased number of operating sites, from 69
to 170 sites, and the increased division and corporate facility space
requirements associated with the purchase of Wells Fargo Armored.
Other operating expenses. Other operating expenses increased from $4.3 million
for the three months ended September 30, 1996 to $16.8 million for the three
months ended September 30, 1997, an increase of $12.5 million, or 290.7%. Other
operating expenses as a percent of revenue increased from 13.4% for the three
months ended September 30, 1996 to 17.1% for the three months ended September
30, 1997. Other operating expenses include such expenses as cargo insurance
premiums and losses, costs of a centralized dispatch center, and the testing,
recruiting and training of employees. Other operating costs associated with the
facilities acquired from Wells Fargo Armored were approximately $10.0 million.
Additionally, operating expenses increased by $0.9 million for the amortization
of intangibles related to the business combination. The combined cash-in-
transit insurance premiums and cargo losses totaled $0.8 million and $3.6
million for the three months ended September 30, 1996 and 1997, respectively,
primarily due to the significant increase in cargo under coverage and the higher
rate of cargo losses at the acquired Wells Fargo Armored facilities.
Expenses relating to the business combination. Expenses of $0.8 million were
recorded in the third quarter of 1997 for items relating to the purchase of
Wells Fargo Armored. Included are costs of the former Wells Fargo Armored
corporate headquarters in Atlanta, temporary personnel and consultants required
to convert the former Wells Fargo Armored systems and branches to the Company's
policies and costs of state registrations and surveys required by the new
business entity. The Company does not anticipate material additional costs
related to the business combination.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and capital resources changed significantly as a result
of the business reorganization described in Note 1 and the acquisition of Wells
Fargo Armored described in Note 4. At September 30, 1997 cash and cash
equivalents were $4.5 million. Changes in cash and cash equivalents are
described in the statements of cash flows, which are summarized below.
<TABLE>
<CAPTION>
Nine Months Ended
September 30
---------------------
1996 1997
-------- --------
<S> <C> <C>
(Dollars in millions)
Net cash provided by operating activities $ 4.1 $ 4.2
Net cash used in investing activities (2.1) (110.8)
Net cash provided by (used in) financing activities (1.5) 110.1
-------- --------
Net increase in cash and cash equivalents $ 0.5 $ 3.5
======== ========
</TABLE>
In the nine months ended September 30, 1997 cash used in investing activities
was primarily for the acquisition of the assets of Wells Fargo Armored.
Cash provided by financing activities entered into in connection with the
business combination were borrowings of $73.3 million drawn against the
Company's new credit facility, and $85.0 million of senior subordinated notes
sold in a private placement. Long-term obligations of $26.8 million were
repaid, preferred stock of $3.5 million was redeemed, $8.7 million of cash
distributions were made for the benefit of the stockholders of Loomis Holding
Corporation and $5.4 million of financing costs were paid in connection with the
refinancing of the Company's debt. Net repayments of $3.8 million have been
made on the credit facility since the business combination.
The Company's balance sheet reflected working capital of $0.5 million at
September 30, 1997. The Company is highly leveraged, with long-term liabilities
comprising 75% of total liabilities and common stockholders' deficit at
September 30, 1997.
An aggressive program is under way to increase billing rates to profitable
levels on all customer contracts. Management expects profitability to be
achieved on all fixed-service contracts once the rate-increase program is
completed. This expectation may involve certain known and unknown risks,
discussed previously.
The Company's revolving bank credit facility provides initial aggregate
commitments of $115 million through December 1997. These funds can be borrowed
either for unspecified periods of time at a base rate tied to the bank's prime
rate, or for set periods of time under variable rates tied to LIBOR. The
facility includes guarantees of letters of credit, of which approximately $13.8
million were outstanding at September 30, 1997. The agreement includes a step-
down of commitments over the final four years of the facility, as described in
Note 2. Remaining commitments available under the facility at September 30,
1997 are $31.7 million.
In the nine months ended September 30, 1997, the Company experienced several
material cargo losses. Significant recoveries have been made on some of the
losses, including substantially all of the largest loss. All remaining losses
are currently under investigation. The Company does not expect the losses to
have a material adverse effect on the Company's liquidity or earnings in 1997.
However, such losses could have negative consequences on the Company's insurance
coverage or costs at some future time. Due to the fact that the Company's
premiums on cash-in-transit insurance are influenced by various factors,
including general market conditions and the Company's risk management
performance in future periods, the Company's management is currently unable to
predict the effect such cargo losses will have on the Company's insurance
coverage or costs when its current policies expire.
<PAGE>
By September 1998, total commitments under the agreement will decrease to $107.5
million. It is anticipated that letters of credit requirements, principally for
casualty liabilities, should not exceed $24 million, leaving $83.5 million in
commitments. The cash-in-transit insurance currently contains no requirements
for letters of credit. The Company's management is not certain if requirements
will be added in the future. Management believes that the operating cash flow
and this remaining financing commitment will be more than adequate to fund
future operating needs, capital expenditures, and the anticipated payment of the
NOL note in 1999. See Note 2 to the financial statements.
Planned capital expenditures for the next twelve months are $12 million, which
will depend largely on the growth rate experienced. Committed capital
expenditures of $2.2 million cover vehicles, equipment and the upgrading of
facilities.
As discussed in Note 4 to the financial statements, the Company recorded a
liability for contracts acquired from Wells Fargo Armored that generated
revenues less than the Company's variable expenses ("loss contracts"). The
$4,520,000 liability recorded at June 30, 1997 was increased to $7,900,000 as of
September 30, 1997, based on the estimated liability as of the January 24, 1997
acquisition date. The delay in recognizing the full estimated liability was a
result of the time-consuming process of evaluating acquired contracts to
determine which contracts, if any, represented loss contracts. Through
September 30, 1997, $7,400,000 has been charged against this liability. The
remaining liability of $500,000 is expected to be substantially exhausted by the
end of the year. Management is implementing an aggressive rate-increase program
on all loss contracts to eliminate losses associated with these contracts.
<PAGE>
PART II OTHER INFORMATION
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 15, 1997, the stockholders of the Company, pursuant to unanimous
written consent, adopted the Loomis, Fargo & Co. 1997 Stock Option Plan (the
Plan). All of the holders of the outstanding shares of Common Stock, $0.01 par
value, of the Company entitled to voted thereon voted in favor of adoption of
the Plan. See Note 5 to the unaudited consolidated financial statements of the
Company.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Incorporation of Loomis, Fargo & Co. (Delaware), as
amended (1)
3.2 Bylaws of Loomis, Fargo & Co. (Delaware) (1)
3.3 Certificate of Incorporation of LFC Holding, as amended (1)
3.4 Bylaws of LFC Holding, as amended (1)
3.5 Articles of Incorporation of Loomis, Fargo Texas, as amended (1)
3.6 Bylaws of Loomis, Fargo Texas, as amended (1)
3.7 Articles of Incorporation of LFC Armored of Texas Inc., as amended (1)
3.8 Bylaws of LFC Armored of Texas Inc. (1)
3.9 Amended and Restated Articles of Incorporation of Loomis, Fargo & Co. of
Puerto Rico, as amended (1)
10.1 Loomis, Fargo & Co. 1997 Stock Option Plan*
27.1 Financial Data Schedule for Loomis, Fargo & Co.*
* Filed herewith
(1) Incorporated by reference to the Registration Statement on Form S-1 (File
No. 333-24689) of Loomis, Fargo & Co. initially filed with the Securities
and Exchange Commission on April 7, 1997, as amended.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter for
which this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrants have duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
LOOMIS, FARGO & CO. (DELAWARE)
LFC HOLDING CORPORATION
LOOMIS, FARGO & CO. (TEXAS)
LFC ARMORED OF TEXAS INC.
LOOMIS, FARGO & CO. OF PUERTO
RICO
Date: November 14, 1997 By: /s/ James K. Jennings, Jr.
--------------------------------
James K. Jennings, Jr.
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer of the
Registrants)
<PAGE>
LOOMIS, FARGO & CO.
1997 STOCK OPTION PLAN
1.0 DEFINITIONS
The following terms shall have the following meanings unless the context
indicates otherwise:
1.1 "Board" shall mean the Board of Directors of the Company.
1.2 "Cause" shall mean:
(a) the Participant is convicted of, or pleads nolo contendere to, (i) a
felony or (ii) a misdemeanor involving moral turpitude; or
(b) the Participant engages in conduct that constitutes gross neglect or
willful misconduct in carrying out his or her duties as an employee of the
Company.
1.3 "Change in Control of the Company" shall mean the first to occur of the
following events:
(a) if the Common Stock is not readily tradeable on a national securities
exchange or other market system, any "Person" (as such term is used in
Sections 3(a)(9) and 13(d) of the Exchange Act) or group of Persons
(other than (i) the Loomis Stockholders Trust or any "Affiliate" (as
such term is defined in Rule 12b-2 under the Exchange Act) of its
unitholders, (ii) Wells Fargo Armored Service Corporation or any of its
Affiliates, or (iii) any Subsidiary) becomes a "Beneficial Owner" (as
such term is used in Rule 13d-3 under the Exchange Act) of more than 50
percent of the Voting Stock of the Company;
(b) whether or not the Common Stock is readily tradeable on a national
securities exchange or other market system, (i) the Loomis Stockholders
Trust and/or any Affiliate of its unitholders, or (ii) Wells Fargo
Armored Service Corporation and/or any of its Affiliates becomes a
Beneficial Owner of 80 percent or more of the Voting Stock of the
Company;
(c) if the Common Stock is readily tradeable on a national securities
exchange or other market system, any Person or group of Persons (other
than (i) the Loomis Stockholders Trust or any Affiliate of its
unitholders, (ii) Wells Fargo Armored Service Corporation or any of its
Affiliates, or (iii) any Subsidiary) becomes a Beneficial Owner of more
than 40 percent of the Voting Stock of the Company;
<PAGE>
(d) if the Common Stock is readily tradeable on a national securities
exchange or other market system, the majority of the Board consists of
individuals other than Incumbent Directors;
(e) the Company adopts any plan of liquidation providing for the
distribution of all or substantially all of its assets;
(f) the sale or other disposition of all or substantially all of the assets
or business of the Company and its Subsidiaries taken as a whole; or
(g) the merger, consolidation or combination of the Company with or into
another company (the "Other Company"); provided, however, that
immediately after the merger, consolidation or combination, the
shareholders of the Company immediately prior to the merger,
consolidation or combination hold, directly or indirectly, 50 percent
or less of the Voting Stock of the surviving company (there being
excluded from the number of shares held by such shareholders, but not
from the Voting Stock of the surviving company, any shares received by
any "affiliate" (as such term is defined in Rule 12b-2 under the
Exchange Act) of the Other Company in exchange for stock of the Other
Company).
Notwithstanding anything contained in the Plan to the contrary, a Change in
Control of the Company shall not include an initial public offering of the
Company.
1.4 "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
1.5 "Committee" shall mean (i) the Board or (ii) a committee or subcommittee of
the Board appointed by the Board from among its members. The Committee may
be the Board's Compensation Committee. Unless the Board determines
otherwise, the Committee shall be comprised solely of not less than two
members who each shall qualify as (x) a "Non-Employee Director" within the
meaning of Rule 16b-3(b)(3) (or any successor rule) under the Exchange Act
and (y) an "outside director" within the meaning of Section 162(m) of the
Code and the Treasury Regulations thereunder.
1.6 "Common Stock" shall mean the common stock, $.01 par value per share, of
the Company.
1.7 "Company" shall mean Loomis, Fargo & Co., a Delaware corporation.
1.8 "Disability" shall mean:
(a) a disability as determined under the Company's long-term disability
plan or program in effect on the date the disability first occurs; or
(b) if no such plan or program is in effect on the date the disability
first occurs, a "total and permanent disability" (as such term is defined
in Code Section 22(e)(3)).
1.9 "Effective Date" shall mean the date on which the Plan is adopted by the
Board.
2
<PAGE>
1.10 "Employee" shall mean an employee of the Company or any Subsidiary as
described in Treasury Regulation Section 1.421-7(h).
1.11 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time, including applicable regulations thereunder.
1.12 "Fair Market Value" shall mean:
(a) if the Common Stock is readily tradeable on a national securities
exchange or other market system, the closing price of the Common Stock on
the date of calculation (or on the last preceding trading date if Common
Stock was not traded on such date); or
(b) if the Common Stock is not readily tradeable on a national securities
exchange or other market system, the fair market value of a share of Common
Stock as determined in good faith by the Board.
1.13 "Incumbent Directors" shall mean the members of the Board as of the
Effective Date; provided, however, that any person becoming a director
subsequent to such date whose election or nomination for election was
supported by a majority of the directors who then comprised the Incumbent
Directors shall be considered to be an Incumbent Director.
1.14 "Initial Stock Options" shall mean the Stock Options granted under Section
6.8 below.
1.15 "ISO" shall mean an "incentive stock option" as such term is used in Code
Section 422.
1.16 "Non-employee Director" shall mean a member of the Board who is not an
Employee.
1.17 "Nonqualified Stock Option" shall mean a Stock Option that does not qualify
as an ISO.
1.18 "Participant" shall mean any Employee or Non-employee Director to whom a
Stock Option has been granted by the Committee under the Plan in accordance
with Section 6 below.
1.19 "Plan" shall mean the Loomis, Fargo & Co. 1997 Stock Option Plan.
1.20 "Stock Option" shall mean the grant by the Committee to a Participant of an
option to purchase Common Stock under Section 6 below.
1.21 "Stock Option Agreement" shall mean a written agreement between the Company
and the Participant that establishes the terms, conditions, restrictions
and/or limitations applicable to a Stock Option in addition to those
established by this Plan and by the Committee's exercise of its
administrative powers.
1.22 "Subsidiary" shall mean a corporation of which the Company directly or
indirectly owns more than 50 percent of the Voting Stock or any other
business entity in which the Company directly or indirectly has an
ownership interest of more than 50 percent.
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<PAGE>
1.23 "Treasury Regulations" shall mean the regulations promulgated under the
Code by the United States Department of the Treasury, as amended from time
to time.
1.24 "Voting Stock" shall mean capital stock of any class or classes having
general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2.0 PURPOSE AND TERM OF PLAN
2.1 PURPOSE. The purpose of the Plan is to provide motivation to certain key
Employees and Non-employee Directors to put forth maximum efforts toward
the growth, profitability, and success of the Company and Subsidiaries by
providing incentives to such Employees and Non-employee Directors through
the ownership and performance of the Common Stock. In addition, the Plan is
intended to provide incentives which will attract and retain highly
competent individuals as Employees and Non-employee Directors and to assist
in aligning the interests of such Employees and Non-employee Directors with
those of its stockholders.
2.2 TERM. The Plan shall be effective as of the Effective Date; provided,
however, that the Plan shall be approved by the stockholders of the Company
at an annual meeting or any special meeting of stockholders of the Company
within 12 months before or after the Effective Date, and such approval of
stockholders shall be a condition to the right of each Participant to
receive ISOs hereunder. Any ISO granted under the Plan prior to such
approval of stockholders shall be effective as of the date of grant (unless
the Committee specifies otherwise at the time of grant), but no such ISO
may be exercised or otherwise disposed of prior to such stockholder
approval, and if stockholders fail to approve the Plan as specified
hereunder, any such ISO shall be cancelled. The Plan shall terminate on
the 10th anniversary of the Effective Date (unless sooner terminated by the
Board).
3.0 ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY. All Employees of the Company and any Subsidiary are eligible
to participate in the Plan. In addition, Non-employee Directors shall be
eligible to participate in the Plan.
3.2 PARTICIPATION. Participants shall consist of such Employees and Non-
employee Directors as the Committee in its sole discretion designates to
receive Stock Options under the Plan. Designation of a Participant in any
year shall not require the Committee to designate such person to receive a
Stock Option in any other year or, once designated, to receive the same
type or amount of Stock Option as granted to the Participant in any other
year. The Committee shall consider such factors as it deems pertinent in
selecting Participants and in determining the type and amount of their
respective Stock Options.
4.0 ADMINISTRATION
4.1 RESPONSIBILITY. The Committee shall have the responsibility, in its sole
discretion, to control, operate, manage and administer the Plan in
accordance with its terms.
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4.2 AUTHORITY OF THE COMMITTEE. The Committee shall have all the discretionary
authority that may be necessary or helpful to enable it to discharge its
responsibilities with respect to the Plan, including, but not limited to,
the following:
(a) to determine eligibility for participation in the Plan;
(b) to determine eligibility for and the number of Stock Options granted
under the Plan;
(c) to supply any omission;
(d) to issue administrative guidelines as an aid to administer the Plan and
make changes in such guidelines as it from time to time deems proper;
(e) to make rules for carrying out and administering the Plan and make
changes in such rules as it from time to time deems proper;
(f) to the extent permitted under the Plan, grant waivers of Plan terms,
conditions, restrictions, and limitations;
(g) to accelerate the exercisability of any Stock Option when such action
or actions would be in the best interest of the Company;
(h) to grant Stock Options in replacement of Stock Options previously
granted under this Plan or any other incentive compensation plan of the
Company; and
(i) to take any and all other actions it deems necessary or advisable for
the proper operation or administration of the Plan.
4.3 ACTION BY THE COMMITTEE. The Committee may act only by a majority of its
members. Any determination of the Committee may be made, without a
meeting, by a writing or writings signed by all of the members of the
Committee. In addition, the Committee may authorize any one or more of its
members to execute and deliver documents on behalf of the Committee.
4.4 DELEGATION OF AUTHORITY. The Committee may delegate to one or more of its
members, or to one or more agents, such administrative duties as it may
deem advisable; provided, however, that any such delegation shall be in
writing. In addition, the Committee, or any person to whom it has
delegated duties as aforesaid, may employ one or more persons to render
advice with respect to any responsibility the Committee or such person may
have under the Plan. The Committee may employ such legal or other counsel,
consultants and agents as it may deem desirable for the administration of
the Plan and may rely upon any opinion or computation received from any
such counsel, consultant or agent. Expenses incurred by the Committee in
the engagement of such counsel, consultant or agent shall be paid by the
Company, or the subsidiary or affiliate whose employees have benefitted
from the Plan, as determined by the Committee.
5
<PAGE>
4.5 DETERMINATIONS AND INTERPRETATIONS BY THE COMMITTEE. All determinations
and interpretations made by the Committee shall be binding and conclusive
on all Participants and their legal representatives.
4.6 LIABILITY. No member of the Board, no member of the Committee and no
employee of the Company shall be liable for any act or failure to act
hereunder, except in circumstances involving his or her bad faith, gross
negligence or willful misconduct, or for any act or failure to act
hereunder by any other member or employee or by any agent to whom duties in
connection with the administration of the Plan have been delegated.
4.7 INDEMNIFICATION. The Company shall indemnify members of the Committee and
any agent of the Committee who is an employee of the Company, against any
and all liabilities or expenses to which they may be subjected by reason of
any act or failure to act with respect to their duties on behalf of the
Plan, except in circumstances involving such person's bad faith, gross
negligence or willful misconduct.
5.0 SHARES SUBJECT TO PLAN
5.1 AVAILABLE SHARES. The aggregate number of shares of Common Stock which
shall be available for grants of Stock Options under the Plan during its
term shall be 1,000,000 shares. Such shares of Common Stock available for
issuance under the Plan may be either authorized but unissued shares,
shares of issued stock held in the Company's treasury, or both, at the
discretion of the Company, and subject to any adjustments made in
accordance with Section 5.3 below. Any shares of Common Stock underlying
Stock Options which terminate by expiration, forfeiture, cancellation or
otherwise without the issuance of such shares shall again be available for
grants of Stock Options under the Plan.
5.2 MAXIMUM AGGREGATE NUMBER OF SHARES UNDERLYING ALL STOCK OPTIONS GRANTED
UNDER THE PLAN TO ANY SINGLE PARTICIPANT. The maximum aggregate number of
shares of Common Stock underlying all Stock Options that may be granted to
any single Participant during the life of the Plan shall be 600,000 shares,
subject to adjustment as provided in Section 5.3 below. For purposes of
the preceding sentence, Stock Options that are cancelled or repriced shall
continue to be counted in determining such maximum aggregate number of
shares.
5.2 ADJUSTMENT TO SHARES. If there shall be any change in the Common Stock of
the Company, through merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, reverse stock split, split
up, spinoff, combination of shares, exchange of shares, dividend in kind or
other like change in capital structure or distribution (other than normal
cash dividends) to stockholders of the Company, an adjustment shall be made
to each outstanding Stock Option so that each such Stock Option shall
thereafter be exercisable for such securities, cash and/or other property
as would have been received in respect of the Common Stock subject to such
Stock Option had such Stock Option been exercised in full immediately prior
to such change or distribution, and such an adjustment shall be made
successively each time any such change shall occur. In addition, in the
event of any such change or distribution, in order to prevent dilution or
enlargement of Participants' rights under the Plan, the Committee shall
have the authority to adjust, in an equitable manner, the number and kind
of shares that may be issued under the Plan, the number and kind of shares
subject to outstanding Stock Options, the exercise price applicable to
outstanding Stock Options, and the Fair Market
6
<PAGE>
Value of the Common Stock and other value determinations applicable to
outstanding Stock Options. Appropriate adjustments may also be made by the
Committee in the terms of any Stock Options granted under the Plan to
reflect such changes or distributions and to modify any other terms of
outstanding Stock Options on an equitable basis, including modifications of
performance targets and changes in the length of performance periods. In
addition, the Committee is authorized to make adjustments to the terms and
conditions of, and the criteria included in, Stock Options in recognition
of unusual or nonrecurring events affecting the Company or the financial
statements of the Company, or in response to changes in applicable laws,
regulations, or accounting principles. Notwithstanding the foregoing, (i)
any adjustment with respect to an ISO shall comply with the rules of Code
Section 424(a), and (ii) in no event shall any adjustment be made which
would render any ISO granted hereunder other than an incentive stock option
for purposes of Code Section 422.
6.0 STOCK OPTIONS
6.1 IN GENERAL. The Committee is authorized to grant Stock Options to
Employees and Non-employee Directors on or after the Effective Date. The
Committee shall, in its sole discretion, determine the Employees and the
Non-employee Directors who will receive Stock Options and the number of
shares of Common Stock underlying each Stock Option. Stock Options may be
ISOs or Nonqualified Stock Options. The Committee, in its sole discretion,
may grant to any Participant one or more ISOs, Nonqualified Stock Options,
or both types of Stock Options. Each Stock Option granted under the Plan
shall be evidenced by a Stock Option Agreement which shall be signed by the
Committee and the Participant; provided, however, that in the event of any
conflict between any provision of the Plan and any provision of a Stock
Option Agreement, the provision of the Plan shall prevail. Each Stock
Option shall be subject to such terms and conditions consistent with the
Plan as the Committee may impose from time to time. In addition, each
Stock Option shall be subject to the following terms and conditions set
forth below in this Section 6.
6.2 EXERCISE PRICE. The Committee shall specify the exercise price of each
Stock Option in the Stock Option Agreement; provided, however, that the
exercise price of any Stock Option shall not be less than 100 percent of
Fair Market Value of the Common Stock on the date of grant.
6.3 TERM OF STOCK OPTION. The Committee shall specify the term of each Stock
Option in the Stock Option Agreement; provided, however, that (i) no ISO
shall be exercised after the 10th anniversary of the date of grant and (ii)
no Stock Option shall be exercised after the 11th anniversary of the date
of grant. Each Stock Option shall terminate at such earlier times and upon
such conditions or circumstances as the Committee shall in its discretion
set forth in the Stock Option Agreement on the date of grant.
6.4 EXERCISE SCHEDULE. The Committee shall specify the exercisability schedule
of each Stock Option in the Stock Option Agreement. The Committee may
grant Stock Options that are immediately exercisable. If the Committee
fails to specify an exercisability schedule in the Stock Option Agreement,
20 percent of such Stock Option shall become exercisable on each of the
first 5 anniversaries of the date of grant. The exercisability schedule
may be subject to such other terms and conditions as shall be determined by
the Committee, including, without limitation, accelerated exercisability if
certain performance goals are achieved.
7
<PAGE>
6.5 EXERCISE OF STOCK OPTIONS. The Stock Option exercise price may be paid in
cash or, in the discretion of the Committee, by the delivery of shares of
Common Stock then owned by the Participant, by the withholding of shares of
Common Stock for which a Stock Option is exercisable, or by a combination
of these methods. In the discretion of the Committee, payment may also be
made by delivering a properly executed exercise notice to the Company
together with a copy of irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds to pay the
exercise price. To facilitate the foregoing, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
The Committee may prescribe any other method of paying the exercise price
that it determines to be consistent with applicable law and the purpose of
the Plan, including, without limitation, in lieu of the exercise of a Stock
Option by delivery of shares of Common Stock then owned by a Participant,
providing the Company with a notarized statement attesting to the number of
shares owned by the Participant, where upon verification by the Company,
the Company would issue to the Participant only the number of incremental
shares to which the Participant is entitled upon exercise of the Stock
Option. In determining which methods a Participant may utilize to pay the
exercise price, the Committee may consider such factors as it determines
are appropriate; provided, however, that with respect to ISOs, all such
discretionary determinations by the Committee shall be made at the time of
grant and specified in the Stock Option Agreement.
6.6 RESTRICTIONS RELATING TO ISOS. In addition to being subject to the terms
and conditions of this Section 6, ISOs shall comply with all other
requirements under Code Section 422. Accordingly, ISOs may be granted only
to Participants who are employees (as described in Treasury Regulation
Section 1.421-7(h)) of the Company or of any "Parent Corporation" (as
defined in Code Section 424(e)) or of any "Subsidiary Corporation" (as
defined in Code Section 424(f)) on the date of grant. The aggregate market
value (determined as of the time the ISO is granted) of the Common Stock
with respect to which ISOs (under all option plans of the Company and of
any Parent Corporation and of any Subsidiary Corporation) are exercisable
for the first time by a Participant during any calendar year shall not
exceed $100,000. For purposes of the preceding sentence, (i) ISOs shall be
taken into account in the order in which they are granted and (ii) ISOs
granted before 1987 shall not be taken into account. ISOs shall not be
transferable by the Participant otherwise than by will or the laws of
descent and distribution and shall be exercisable, during the Participant's
lifetime, only by such Participant. The Committee shall not grant ISOs to
any Employee who, at the time the ISO is granted, owns stock possessing
(after the application of the attribution rules of Code Section 424(d))
more than 10 percent of the total combined voting power of all classes of
stock of the Company or of any Parent Corporation or of any Subsidiary
Corporation unless the exercise price of the ISO is fixed at not less than
110 percent of the Fair Market Value of the Common Stock on the date of
grant and the exercise of such ISO is prohibited by its terms after the 5th
anniversary of the ISO's date of grant. In addition, no ISO shall be issued
to a Participant in tandem with a Nonqualified Stock Option issued to such
Participant.
6.7 ADDITIONAL TERMS AND CONDITIONS. The Committee may, by way of the Stock
Option Agreements or otherwise, establish such other terms, conditions,
restrictions and/or limitations, if any, of any Stock Option, provided they
are not inconsistent with the Plan.
6.8 INITIAL STOCK OPTIONS. Notwithstanding any provision contained in the Plan
to the contrary, during the 90-day period following the Effective Date the
Committee shall grant Stock
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Options (the "Initial Stock Options") to those individuals selected by the
Board to receive Initial Stock Options. The Initial Stock Options shall be
subject to the following terms and conditions:
(a) Exercise Price. The exercise price of each Initial Stock Option shall
be the Fair Market Value of the Common Stock on the date of grant.
(b) Term. Each Initial Stock Option shall expire on, and shall not be
exercised on and after, the 11th anniversary of the date of grant.
(c) Exercisability. Each Initial Stock Option shall become exercisable on
the 10th anniversary of the date of grant.
(d) Performance-Based Accelerated Exercisability. Notwithstanding Section
6.8(c) above, a percentage of each Initial Stock Option shall become
exercisable earlier than the 10th anniversary of the date of grant (and
shall remain exercisable until such Initial Stock Option is scheduled
to expire or is otherwise terminated under the terms of the Plan or the
Stock Option Agreement) if, during the period beginning on the date
that the Common Stock first becomes readily tradeable on a national
securities exchange or other market system and ending on December 31,
2002, the daily closing price of the Common Stock is equal to or
greater that (i) $10, (ii) $15, (iii) $20, (iv) $25, or (v) $30, for 80
out of 100 consecutive trading days (each individually a "Stock Price
Hurdle"). The percentage of each Initial Stock Option that shall become
exercisable as each Stock Price Hurdle is reached is set forth in the
matrix below. The "Vesting Start Date" shall be (i) January 24, 1997 or
(ii) any other date selected by the Committee and which is specified in
the Stock Option Agreement.
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<TABLE>
<CAPTION>
================================================================================================================
| MATRIX OF PERFORMANCE-BASED ACCELERATED |
| EXERCISABILITY OF INITIAL STOCK OPTIONS |
================================================================================================================
| | If the daily closing price of the Common Stock is equal |
| | to or greater than the prices listed below for at least 80 |
| | out of 100 consecutive trading |
| TIME PERIOD | days prior to December 31, 2002: |
| =====================================================================
| (based on the | $10 $15 $20 $25 $30 |
| 1st 5 anniversaries of the |====================================================================|
| Vesting Start Date) |Then the corresponding percentage of the Initial Stock |
| |Option listed below will become exercisable during the |
| |specified Time Period: |
===============================================================================================================|
| <S> | <C> <C> <C> <C> <C> |
| Before 1st anniversary: | 0% 0% 0% 0% 0% |
- ----------------------------------------------------------------------------------------------------------------
| On or after 1st anniversary | |
| but before 2nd anniversary: | 2% 5% 9% 14% 20% |
- ----------------------------------------------------------------------------------------------------------------
| On or after 2nd anniversary | |
| but before 3rd anniversary: | 4% 10% 18% 28% 40% |
- ----------------------------------------------------------------------------------------------------------------
| On or after 3rd anniversary | |
| but before 4th anniversary: | 6% 15% 27% 42% 60% |
- ----------------------------------------------------------------------------------------------------------------
| On or after 4th anniversary | |
| but before 5th anniversary: | 8% 20% 36% 56% 80% |
- ----------------------------------------------------------------------------------------------------------------
| | |
| After 5th anniversary: | 10% 25% 45% 70% 100% |
================================================================================================================
</TABLE>
7.0 CHANGE IN CONTROL.
7.1 Accelerated Vesting. Notwithstanding any other provision of this Plan to
the contrary, if there is a Change in Control of the Company, the
Committee, in its sole discretion, may take such actions as it deems
appropriate with respect to outstanding Stock Options, including, without
limitation, accelerating the exercisability, vesting and/or payout of all
or a portion of such Stock Options.
7.2 Cashout. The Committee, in its sole discretion, may determine that, upon
the occurrence of a Change in Control of the Company, all or a portion of
certain outstanding Stock Option shall terminate within a specified number
of days after notice to the holders, and each such holder shall receive,
with respect to each share of Common Stock subject to such Stock Option, an
amount equal to the excess of the Fair Market Value of such shares of
Common Stock immediately prior to the occurrence of such Change in Control
over the exercise price per share of such Stock Option; and such amount
shall be payable in cash, in one or more kinds
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<PAGE>
of property (including the property, if any, payable in the transaction) or
in a combination thereof, as the Committee, in its sole discretion, shall
determine.
8.0 TERMINATION OF EMPLOYMENT
8.1 TERMINATION OF EMPLOYMENT DUE TO DEATH OR DISABILITY. Subject to any
written agreement between the Company and a Participant (including the
Stock Option Agreement), if a Participant's employment is terminated due to
death or Disability:
(a) all unexercisable Stock Options held by the Participant on the date of
the Participant's death or the date of the termination of his or her
employment, as the case may be, shall immediately be forfeited by such
Participant as of such date; and
(b) all exercisable Stock Options held by the Participant on the date of
the Participant's death or the date of the termination of his or her
employment, as the case may be, shall remain exercisable until the
earlier of (i) the end of the 12-month period following the date of the
Participant's death or the date of the termination of his or her
employment, as the case may be, or (ii) the date the Stock Option would
otherwise expire.
8.2 TERMINATION OF EMPLOYMENT DUE TO RETIREMENT. Subject to any written
agreement between the Company and a Participant (including the Stock Option
Agreement), if a Participant's employment is terminated due to retirement:
(a) all unexercisable Stock Options held by the Participant on the date of
the termination of his or her employment due to retirement shall
immediately be forfeited by such Participant as of such date;
(b) all exercisable ISOs held by the Participant on the date of the
termination of his or her employment due to retirement shall remain
exercisable until the earlier of (i) the end of the 90-day period
following the date of the termination of his or her employment due to
retirement, or (ii) the date the ISO would otherwise expire; and
(c) all exercisable Nonqualified Stock Options held by the Participant on
the date of the termination of his or her employment due to retirement
shall remain exercisable until the earlier of (i) the end of the 36-
month period following the date of the termination of his or her
employment due to retirement, or (ii) the date the Nonqualified Stock
Option would otherwise expire.
8.3 TERMINATION OF EMPLOYMENT FOR CAUSE. Subject to any written agreement
between the Company and a Participant (including the Stock Option
Agreement), if a Participant's employment is terminated by the Company for
Cause, all exercisable and all unexercisable Stock Options held by a
Participant on the date of the termination of his or her employment for
Cause shall immediately be forfeited by such Participant as of such date.
8.4 OTHER TERMINATIONS OF EMPLOYMENT. Subject to any written agreement between
the Company and a Participant (including the Stock Option Agreement), if a
Participant's employment is
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<PAGE>
terminated for any reason other than for Cause or other than due to death,
Disability or retirement:
(a) all unexercisable Stock Options held by the Participant on the date of
the termination of his or her employment shall immediately be forfeited
by such Participant as of such date; and
(b) all exercisable Stock Options held by the Participant on the date of
the termination of his or her employment shall remain exercisable until
the earlier of (i) the end of the 90-day period following the date of
the termination of the Participant's employment or (ii) the date the
Stock Option would otherwise expire.
8.5 COMMITTEE DISCRETION. Notwithstanding anything contained in the Plan to
the contrary, the Committee may, in its sole discretion, provide that:
(a) any or all unexercisable Stock Options held by the Participant on the
date of the Participant's death and/or the date of the termination of
his or her employment shall immediately become exercisable as of such
date and, except with respect to ISOs, shall remain exercisable until a
date that occurs on or prior to the date the Stock Option is scheduled
to expire; and
(b) any or all exercisable Nonqualified Stock Options held by the
Participant on the date of the Participant's death and/or the date of
the termination of his or her employment shall remain exercisable until
a date that occurs on or prior to the date the Stock Option is
scheduled to expire.
8.6 ISOS. Notwithstanding anything contained in the Plan to the contrary, (i)
the provisions contained in this Section 8 shall be applied to an ISO only
if the application of such provision maintains the treatment of such ISO as
an ISO and (ii) the exercise period of an ISO in the event of a termination
of the Participant's employment due to Disability provided in Section 8.1
above shall be applied only if the Participant is "permanently and totally
disabled" (as such term is defined in Code Section 22(e)(3)).
9.0 TAXES
9.1 WITHHOLDING TAXES. The Company, or the applicable Subsidiary, may require
a Participant who exercises a Stock Option granted hereunder to reimburse
the corporation or entity which employs such Participant for any taxes
required by any governmental regulatory authority to be withheld or
otherwise deducted and paid by such corporation or entity in respect of the
issuance or disposition of such shares. In lieu thereof, the corporation
or entity which employs such Participant shall have the right to withhold
the amount of such taxes from any other sums due or to become due from such
corporation or entity to the Participant upon such terms and conditions as
the Committee shall prescribe. The corporation or entity that employs such
Participant may, in its discretion, hold the stock certificate to which
such Participant is entitled upon the exercise of a Stock Option as
security for the payment of such withholding tax liability, until cash
sufficient to pay that liability has been accumulated. In addition, at any
time that the Company, Subsidiary or other entity that employs such
Participant becomes subject to a withholding obligation under applicable
law with respect to
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<PAGE>
the exercise of a Nonqualified Stock Option (the "Tax Date"), except as set
forth below, a holder of a Stock Option may elect to satisfy, in whole or
in part, the holder's related personal tax liabilities (an "Election") by
(i) directing the Company, Subsidiary or other entity that employs such
Participant to withhold from shares issuable in the related exercise either
a specified number of shares or shares of Common Stock having a specified
value (in each case not in excess of the related personal tax liabilities),
(ii) tendering shares of Common Stock previously issued pursuant to the
exercise of a Stock Option or other shares of the Common Stock owned by the
holder, or (iii) combining any or all of the foregoing Elections in any
fashion. An Election shall be irrevocable. The withheld shares and other
shares of Common Stock tendered in payment shall be valued at their Fair
Market Value on the Tax Date. The Committee may disapprove of any Election,
suspend or terminate the right to make Elections or provide that the right
to make Elections shall not apply to particular shares or exercises. The
Committee may impose any additional conditions or restrictions on the right
to make an Election as it shall deem appropriate, including conditions or
restrictions with respect to Section 16 of the Exchange Act.
9.2 NO GUARANTEE OF TAX CONSEQUENCES. No person connected with the Plan in any
capacity, including, but not limited to, the Company and any Subsidiary and
their directors, officers, agents and employees makes any representation,
commitment, or guarantee that any tax treatment, including, but not limited
to, federal, state and local income, estate and gift tax treatment, will be
applicable with respect to amounts deferred under the Plan, or paid to or
for the benefit of a Participant under the Plan, or that such tax treatment
will apply to or be available to a Participant on account of participation
in the Plan.
10.0 AMENDMENT AND TERMINATION
10.1 TERMINATION OF PLAN. The Board may suspend or terminate the Plan at any
time with or without prior notice.
10.2 AMENDMENT OF PLAN. The Board may amend the Plan at any time with or
without prior notice; provided, however, that no action authorized by this
Section 10.2 shall reduce the amount of any outstanding Stock Option or
change the terms and conditions thereof without the Participant's consent.
No amendment of the Plan shall, without approval of the stockholders of the
Company, (i) increase the total number of shares which may be issued under
the Plan or the maximum number of shares with respect to all Stock Options
that may be granted to any individual under the Plan or (ii) modify the
requirements as to eligibility for Stock Options under the Plan. In
addition, the Plan shall not be amended without the approval of such
amendment by the Company's stockholders if such amendment will disqualify
any ISO granted hereunder.
10.3 AMENDMENT OR CANCELLATION OF STOCK OPTION AGREEMENTS. The Committee may
amend or modify any Stock Option Agreement at any time by mutual agreement
between the Committee and the Participant or such other persons as may then
have an interest therein. In addition, by mutual agreement between the
Committee and an Employee or Non-employee Director or such other persons as
may then have an interest therein, Stock Options may be granted to an
Employee or Non-employee Director in substitution and exchange for, and in
cancellation of, any Stock Options previously granted to such Employee or
Non-employee
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<PAGE>
Director under the Plan, or any award previously granted to such Employee
or Non-employee Director under any other present or future plan of the
Company.
11.0 MISCELLANEOUS
11.1 OTHER PROVISIONS. Stock Options granted under the Plan may also be subject
to such other provisions (whether or not applicable to the Stock Option
granted to any other Participant) as the Committee determines on the date
of grant to be appropriate, including, without limitation, for the
installment purchase of Common Stock under Stock Options, to assist the
Participant in financing the acquisition of Common Stock, for the
forfeiture of, or restrictions on resale or other disposition of, Common
Stock acquired under any Stock Option, for the acceleration of
exercisability or vesting of Stock Options in the event of a change in
control of the Company, for the payment of the value of Stock Options to
Participants in the event of a change in control of the Company, or to
comply with federal and state securities laws, or understandings or
conditions as to the Participant's employment in addition to those
specifically provided for under the Plan.
11.2 TRANSFERABILITY. Each Stock Option granted under the Plan to a Participant
shall not be transferable otherwise than by will or the laws of descent and
distribution, and shall be exercisable, during the Participant's lifetime,
only by the Participant. In the event of the death of a Participant, each
Stock Option theretofore granted to him or her shall be exercisable during
such period after his or her death as the Committee shall in its discretion
set forth in the Stock Option Agreement on the date of grant and then only
by the executor or administrator of the estate of the deceased Participant
or the person or persons to whom the deceased Participant's rights under
the Stock Option shall pass by will or the laws of descent and
distribution. Notwithstanding the foregoing, the Committee, in its
discretion, may permit the transferability of a Stock Option (other than an
ISO) by a Participant solely to members of the Participant's immediate
family or trusts or family partnerships for the benefit of such persons,
and subject to such terms, conditions, restrictions and/or limitations, if
any, as the Committee may establish and include in the Stock Option
Agreement.
11.3 LISTING OF SHARES AND RELATED MATTERS. If at any time the Committee shall
determine that the listing, registration or qualification of the shares of
Common Stock subject to any Stock Option on any securities exchange or
under any applicable law, or the consent or approval of any governmental
regulatory authority, is necessary or desirable as a condition of, or in
connection with, the granting of a Stock Option, or the issuance of shares
of Common Stock thereunder, such Stock Option may not be exercised, in
whole or in part, unless such listing, registration, qualification, consent
or approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
11.4 NO RIGHT, TITLE, OR INTEREST IN COMPANY ASSETS. Participants shall have no
right, title, or interest whatsoever in or to any investments which the
Company may make to aid it in meeting its obligations under the Plan.
Nothing contained in the Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind, or
a fiduciary relationship between the Company and any Participant,
beneficiary, legal representative or any other person. To the extent that
any person acquires a right to receive payments from the Company under the
Plan, such right shall be no greater than the right of an unsecured general
creditor of the Company. All payments to be made hereunder shall be
14
<PAGE>
paid from the general funds of the Company and no special or separate fund
shall be established and no segregation of assets shall be made to assure
payment of such amounts except as expressly set forth in the Plan. The Plan
is not intended to be subject to the Employee Retirement Income Security
Act of 1974, as amended.
11.5 NO RIGHT TO CONTINUED EMPLOYMENT OR GRANTS. A Participant's right, if any,
to continue to serve the Company as a director, officer, employee, or
otherwise, shall not be enlarged or otherwise affected by his or her
designation as a Participant under the Plan, and the Company or the
applicable Subsidiary reserves the right to terminate any Employee at any
time. In addition, other than as provided in Section 6 above, the adoption
of the Plan shall not be deemed to give any Employee or any other
individual any right to be selected as a Participant or to be granted a
Stock Option.
11.6 AWARDS SUBJECT TO FOREIGN LAWS. The Committee may grant Stock Options to
individual Participants who are subject to the tax laws of nations other
than the United States, and such Stock Options may have terms and
conditions as determined by the Committee as necessary to comply with
applicable foreign laws. The Committee may take any action which it deems
advisable to obtain approval of such Stock Options by the appropriate
foreign governmental entity; provided, however, that no such Stock Options
may be granted pursuant to this Section 11.6 and no action may be taken
which would result in a violation of the Exchange Act, the Code or any
other applicable law.
11.7 GOVERNING LAW. The Plan, all Stock Options granted hereunder and all
actions taken in connection herewith shall be governed by and construed in
accordance with the laws of the State of Texas without reference to
principles of conflict of laws, except as superseded by applicable federal
law.
11.8 OTHER BENEFITS. No Stock Option granted under the Plan shall be considered
compensation for purposes of computing benefits under any retirement plan
of the Company or any Subsidiary nor affect any benefits or compensation
under any other benefit or compensation plan of the Company or any
Subsidiary now or subsequently in effect.
11.9 NO FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued
or delivered pursuant to the Plan or any Stock Option. The Committee shall
determine whether cash, Common Stock, Stock Options, or other property
shall be issued or paid in lieu of fractional shares or whether such
fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.
15
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<PAGE>
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<NAME> LOOMIS, FARGO & CO.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
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0
0
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